:.^  %. 


'Fi'NiVFr  iOVMFirr.v         .j.r,r-rA!!rnp.;'. 


^    %. 


m 


u 


IS). 


^     ^ 


^,-,„„ 


<^IV 


'^Wh 


.AS^HmORi:, 


L 


'Uu 


riF.rAitrnD,, 


^F-"*^'-''^'^^ 


THE 


LAW  OF  BANKRUPTCY 


INCLUDING  THE 


NATIONAL  BANKRUPTCY  LAW  OF  1898 

AS   AMENDED 


THE 


RULES,  FORMS    AND    ORDERS   OF   THE   UNITED    STATES 
SUPREME  COURT,  THE  ACT  OF  1867,  ETC.,  ETC. 


CITATIONS  TO  ALL  RELEVANT  DECISIONS 


THIRD    EDITION 


BY 


EDWIN  C.  BRANDENBURG,  LL.M. 

Author  of  The  Digest  ok  Bankruptcy  Decisions;  Professor  of  Procedure 

IN  Bankruptcy  at  Columbian  University:  in  Charge  of 

Bankruptcy  Matters  for  the  United  States 


CHICAGO 

CALLAGHAN    AND    COMPANY 

1903 


Copyright  1903 

BY 

EDWIN    C.    BRANDENBURG. 


BROWN-COOPER   TYPESETTING   CO., 
CHICAGO 


PREFACE  TO  THE  THIRD  EDITION 


Such  radical  changes  have  been  made  in  the  Federal  Bank- 
ruptcy Law  by  the  act  approved  February  5,  1903,  that  no 
treatise  on  the  statute  as  originally  enacted  is  a  safe  guide 
in  the  interpretation  of  the  law  as  it  now  exists.  A  new 
edition  of  this  work  is  therefore  indispensable.  For  the  pur- 
pose of  aiding  in  the  interpretation  of  the  text  and  avoiding 
the  necessity  for  frequent  cross  references,  the  method  pur- 
sued in  the  earlier  editions  of  this  work  has  been  followed  by 
treating  throughout  the  text,  whenever  applicable,  the  rules 
and  orders  of  the  Supreme  Court,  as  well  as  each  section  and 
subdivision  of  the  law  separately,  and  accompanying  them 
with  similar  provisions  of  the  act  of  1867.  The  decisions  ren- 
dered since  the  prior  edition  of  this  work  have  been  incor- 
porated wherever  applicable,  while  owing  to  the  great  value 
of  many  of  the  cases  under  the  act  of  1867,  frequent  citations 
thereto  are  found  in  the  foot-notes.  Much  of  the  work  has 
been  entirely  rewritten,  while  other  portions  have  been  re- 
arranged so  as  to  make  it  more  lucid  and  easier  of  reference. 

E.  C.  B. 

Washington,  D.  C,  May,  1903. 


ili 


■f^i 


7vl84 


CONTENTS. 


TITLE  I. 

THE  LAW   OF   BANKRUPTCY. 
In  general §§    1-24 

TITLE  II. 

THE  NATIONAL  BANKRUPTCY  LAW. 

CHAPTER   L 

DEFINITIONS. 
Meaning  of  words  and  phrases 25 

CHAPTER   II. 

CREATION    OF   COURTS    OF   BANKRUPTCY  AND   THEIR  JURIS- 
DICTION. 

District  Courts,  Supreme  Court,  D.  C,  Territorial  Courts — ^juris- 
diction        26-63 

CHAPTER    III. 

ACTS  OF  BANKRUPTCY. 

Acts  of  bankruptcy  defined ^ 64-83 

Time  of  filing  petition 84,  85 

Defense  of  solvency  ^^ 86-89 

Testimony  on  denial  of  insolvency 90,  91 

Provisional  seizure  of  property — bond 92-94 

Costs  on  dismissal  of  petition 95 

CHAPTER    IV.  *^ 

WHO  MAY  BECOME  BANKRUPTS. 

Voluntary   bankrupts 96-107 

Involuntary  bankrupts 108-129 

CHAPTER    V. 

PARTNERS. 

Partners -   130-149 

Administration  of  estates  - 150, 151 

V 


vi  CONTENTS. 

Jurisdiction  over  partners   §§  152, 153 

Accounts 154 

Payment  of  expenses - 155, 15G 

Distribution  of  proceeds 157-172 

Marshalling  of  assets 173-17G 

Settling  business  where  all  not  adjudged  bankrupt 177, 178 

CHAPTER   VI. 

EXEMPTIONS. 
Bankrupt's  exemptions  fixed  by  law  of  domicile 179-208 

CHAPTER    VII. 

DUTIES  OF  BANKRUPTS. 
Duties  of  bankrupts  209-225 

CHAPTER    VIII. 

DEATH  OR  INSANITY  OF  BANKRUPT. 
Effect  of  death  or  insanity  of  bankrupt 226-230 

CHAPTER    IX. 

PROTECTION  AND  DETENTION  OF  BANKRUPT. 

Protection  of  bankrupt  from  arrest 231-239 

Detention  of  bankrupt  for  examination 240,  241 

CHAPTER   X. 

EXTRADITION  OF  BANKRUPTS. 

Extradition  of  bankrupts 242-244 

CHAPTER    XI. 

SUITS  BY  AND  AGAINST  BANKRUPTS. 

Stay  of  suits  against  bankrupts 245-274 

Trustee  to  defend  pending  suits 275-280 

Trustee  to  prosecute  suits 281-283 

Time  for  bringing  suits  by  and  against  trustee 284-286 

CHAPTER    XII. 

WHEN  COMPOSITIONS  CONFIRMED. 

When  compositions  may  be  offered 287-291 

When  application  for  confirmation  may  be  filed 292-303 

Hearings  upon  confirmation  of  composition 304-306 

Confirmation  of  compositions 307-315 

Distribution  of  consideration  on  confirmation 316-329 


CONTENTS.  vii 

CHAPTER   XIII. 

WHEN  COMPOSITIONS  SET  ASIDE. 
When  compositions  set  aside §§330-340 

CHAPTER   XIV. 

WHEN  DISCHARGE  GRANTED. 

Application  for  discharge   341-345 

Hearing  and  grounds  for  refusing  discharge 346-392 

Confirmation  of  composition,  operates  as  discharge 393-395 

CHAPTER   XV. 

DISCHARGE.  WHEN  REVOKED. 
Discharge,  when  revoked 396-410 

CHAPTER   XVI. 

CO-DEBTORS  OF  BANKRUPT. 
Liability  of  co-debtors 411-417 

CHAPTER    XVII. 

DEBTS  NOT  AFFECTED  BY  DISCHARGE. 

Debts  not  affected  by  discharge 418-448 

CHAPTER   XVIII. 

PROCESS,  PLEADINGS  AND  ADJUDICATIONS. 

Process  and  petitions  449-466 

Appearance  and  plea  467-475 

Matters  of  fact  to  be  verified  476-481 

Decision  of  issue  with  or  without  jury 482-487 

Adjudication  or  dismissal  on  failure  to  plead 488,  489 

When  clerk  to  refer  involuntary  petition 490 

Action  on  voluntary   petition 491-499 

CHAPTER   XIX. 

JURY  TRIALS. 

Jury  trials 500-504 

When  jury  not  in  attendance 505,  506 

Rule  governing  submission  to  jury 507-511 

CHAPTER    XX. 

OATHS  AND  AFFIRMATIONS. 

Who  may  administer  oaths 512-516 

Affirmations  ^ 517 


Vlll  CONTENTS. 

CHAPTER   XXI. 

EVIDENCE. 

Compulsory  attendance  of  witnesses §§  518-549 

Rules  governing  taking  of  depositions 550-554 

Notice  of  taking  depositions 555,  556 

Certified  copies  of  records : 557,  558 

Copy  of  order  approving  trustee's  bond 559,  560 

Copy  of  order  of  composition  or  discharge 561,  562 

Order  confirming  composition,  evidence  of  title 563 

CHAPTER   XXn. 

REFERENCE  OF  CASES  AFTER  ADJUDICATION. 

Reference  of  case  to  referee 564,  565 

Transfer  of  case  from  one  referee  to  another 566,  567 

CHAPTER    XXni. 

JURISDICTION  OF  UNITED  STATES  AND  STATE  COURTS. 

Jurisdiction  of  circuit  courts 568-570 

Jurisdiction  over  suits  of  trustee 571-585 

Concurrent  jurisdiction  over  offences 586,  587 

CHAPTER   XXIV. 

JURISDICTION  OF  APPELLATE  COURTS. 

Appellate  courts  588-595 

Circuit  courts  of  appeals,  jurisdiction 596-602 

CHAPTER    XXV. 

APPEALS  AND  WRITS  OF  ERROR. 

Appealable  cases  and  time  of  appeal 602-612 

Appeal  to  the  Supreme  Court  from  circuit  courts  of  appeals. . . .  613-615 

No  bond  required  of  trustee 616 

Certification  of  cases  and  certiorari 617,  618 

CHAPTER   XXVI. 

ARBITRATION  OF  CONTROVERSIES. 

Arbitration   of  controversies 619 

Arbitrators,  mode  of  choosing 620 

Effect  of  findings 621-624 

CHAPTER   XXVII. 

COMPROMISES. 

Compromises  of  controversies 625-629 


CONTENTS.  ix 

CHAPTER   XXVIII. 

DESIGNATION  OF  NEWSPAPERS. 
Court  to  designate  newspapers §§  630,  631 

CHAPTER    XXIX. 

OFFENCES. 

Offence  by  trustee 632-635 

Of  bankrupt  or  others 636-640 

Offence  by  referee 641 

Indictment  must  be  within  a  year 642-644 

CHAPTER    XXX. 

RULES,  FORMS  AND  ORDERS. 
U.  S.  Supreme  Court  to  make  orders  and  forms 645-650 

CHAPTER    XXXI. 

COMPUTATION  OF  TIME. 
Rule  for  computing  time 651-655 

CHAPTER    XXXII. 

TRANSFER  OF  CASES. 

Transfer  of  cases  for  convenience  of  parties 656-658 

CHAPTER    XXXIII. 

CREATION  OF  TWO  OFFICES. 
Offices  of  referee  and  trustee 659,  660 

CHAPTER    XXXIV. 

REFEREE'S  APPOINTMENT,  REMOVAL  AND  DISTRICTS. 
Referee's   appointment,  term,   district 661-667 

CHAPTER    XXXV. 

QUALIFICATIONS  OF  REFEREE. 
Qualifications   of   referee 668-670 

CHAPTER   XXXVI. 

REFEREE'S  OATH  OF  OFFICE. 
Oath  of  office  of  referee 671,  672 


X  CONTENTS. 

CHAPTER   XXXVII. 

NUMBER  OF  REFEREES. 
Number  of  referees §§        673 

CHAPTER   XXXVIII. 

JURISDICTION  OF  REFEREE. 
Jurisdiction  in  general   ^    674-685 

CHAPTER   XXXIX. 

DUTIES  OF  REFEREE. 

Referee's  duties  detailed  686-699 

Referee  not  to  act  if  interested,  or  practice 700,  701 

CHAPTER   XL. 

COMPENSATION  OF  REFEREES. 

Compensation  of  referees 702-709 

Fee  when  case  transferred 710 

Fee  when  reference  revoked 711 

CHAPTER   XLI. 

CONTEMPTS  BEFORE  REFEREES. 

Contempts  defined  712-717 

Proceedings  on  contempt  718-720 

CHAPTER    XLII. 

RECORDS  OF     REFEREES. 

Manner  of  keeping  referees'  records 721-723 

Cases  to  be  kept  In  separate  books 724,  725 

Record  books  to  be  returned  to  clerk's  office 726,  727 

CHAPTER    XLIII. 

REFEREES'  ABSENCE  OR  DISABILITY. 
Referees'  absence  or  disability 728-730 

CHAPTER    XLIV. 

APPOINTMENT  OF  TRUSTEES. 
Trustees'  appointment  731-745 

CHAPTER    XLV. 

QUALIFICATIONS  OF  TRUSTEES. 

Qualifications  of  trustees 746-749 


CONTENTS.  Xi 

CHAPTER   XLVI. 

DEATH  OR  REMOVAL  OF  TRUSTEES. 
Death  or  removal  of  trustees §§  750, 751 

CHAPTER   XLVIl. 

DUTIES  OF  TRUSTEES. 

Duties  in  general  752-766 

Concurrence  of  majority  necessary 767,  768 

Record  of  trustees'  title 769,  770 

CHAPTER    XLVm. 

COMPENSATION  OF  TRUSTEES. 

Compensation  of  trustees   771-774 

Compensation  apportioned  when  several  trustees 775 

Compensation    withheld 776 

CHAPTER   XLIX. 

ACCOUNTS  AND  PAPERS  OF  TRUSTEES. 
Inspection  of  trustees'  accounts  and  papers 777,  773 

CHAPTER   L. 

BONDS  OF  REFEREES  AND  TRUSTEES. 

Referees'  bonds  779 

Trustees'  bonds 780 

Amount  of  bond  to  be  fixed 781 

Value  of  sureties'  property 782 

Number  of  sureties 783 

Property  required  in  sureties 784 

Corporations  as  sureties   ^ 785,  786 

Bonds  to  be  filed 787 

Trustees  not  liable  for  bankrupt's  acts 788 

Joint  and  several  bonds 789 

Failure  to  give  bond 790,  791 

Limitation  of  suits  on  referees'  bonds 792 

Limitation  of  suits  on  trustees'  bonds 793,  794 

CHAPTER   LI. 

DUTIES  OF  CLERKS. 
Duties  in  general 795-799 

CHAPTER   LH. 
CLERKS'  COMPENSATION. 

Compensation  of  clerks  800,  801 

Marshals'  fees  802-807 


xii  CONTENTS. 

CHAPTER   LIII. 

DUTIES  OF  ATTORNEY-GENERAL. 
Statistics  of  bankruptcy  proceedings  for  Congress §§        808 

CHAPTER    LIV. 

STATISTICS  OF  BANKRUPTCY  PROCEEDINGS. 

Officers  to  furnish  Attorney-General  information 809,  810 

CHAPTER   LV. 

MEETINGS  OF  CREDITORS. 

Time  and  place  of  creditors'  meetings .^ 811-814 

Business  at  first  meeting  815-819 

Duties  of  creditors  at  meetings 820 

Subsequent  meetings    821, 822 

Called  meetings    823 

Final  meetings  824-826 

CHAPTER    LVI. 
VOTERS  AT  MEETINGS  OF  CREDITORS. 

Voters  at  meetings  of  creditors 827-835 

When  secured  creditors  can  vote 836-838 

CHAPTER   LVII. 

PROOF  AND  ALLOWANCE  OF  CLAIMS. 

What  constitutes  proof  of  claims 839-856 

Claim  founded  on  instrument  in  writing 857,  858 

Proved  claims  may  be  filed  for  allowance 859,  860 

Allowance  of  claims 861-863 

Proportion  of  secured  claims  allowed 864-867 

Early  hearing  of  objections  868-872 

Preferences  must  be  surrendered 873-878 

Securities,  determination  in  value  of 879-884 

Proof  when  claim  is  secured  by  individual  undertaking 885,  886 

Penalties  or  forfeitures  accrued  to  governments 887 

Allowed  claims  reconsidered  for  cause 888-890 

Recovery  of  dividend  paid  891 

Proof  of  claim  of  one  bankrupt  estate  against  another 892,  893 

Claims  to  be  proved  within  one  year 894,  895 

CHAPTER    LVni. 
NOTICES  TO  CREDITORS. 

Steps  requiring  notice  - 896,  907 

Publication  of  notices 908,  909 

Referee  to  give  notices 910,  911 


CONTENTS.  xiii 

CHAPTER   LIX. 

WHO  MAY  FILE  AND  DISMISS  PETITIONS. 

Who  may  file  a  voluntary  petition §§  912-914 

Who  may  file  an  involuntary  petition 915-926 

Petitions  to  be  in  duplicate 927-930 

Number  of  creditors  included 931^  932 

Relatives  and  employes  not  counted  as  creditors 933,  934 

Creditors  may   intervene 935-942 

Dismissal  of  petition  by  petitioner 943-945 

CHAPTER   LX. 

PREFERRED  CREDITORS. 

Preference    946-960 

Voidable  preference   961-967 

New  credit  after  preference 968-969 

Court  determines  reasonableness  of  attorney's  fee 970,971 

CHAPTER    LXI. 

DEPOSITORIES  FOR  MONEY. 

Court  to  designate  depositories 972,  973 

CHAPTER    LXII. 

EXPENSES  OF  ADMINISTERING  ESTATES. 
Report  and  approval  of  expenses 974-976 

CHAPTER    LXm. 

DEBTS  WHICH  MAY  BE  PROVED. 

Provable  debts   977-1003 

Liquidation  of  claims 1004, 1005 

CHAPTER    LXIV. 

DEBTS  WHICH  HAVE  PRIORITY. 

Taxes  entitled  to  priority 1006-1015 

Order  of  priority  1016-1051 

Disposition  of  property  on  setting  aside  composition  or  dis- 
charge    1052, 1053 

CHAPTER    LXV. 

DECLARATION  AND  PAYMENT  OF  DIVIDENDS. 

Dividends  on  unsecured  claims  1054-1062 

Time  of  declaring  dividends  1063 


xiv  CONTENTS. 

Dividends  received  unaffected  by  subsequently  allowed  claims 

§§  1064, 1065 

Dividends  in  case  of  foreign  bankrupt 1066, 1067 

Claimant's  right  to  collect  limited 1068 

CHAPTER   LXVI. 

UNCLAIMED  DIVIDENDS. 

Dividends  unclaimed  for  six  months 1069-1071 

Dividends  unclaimed  for  a  year 1072 

CHAPTER   LXVn. 

LIENS. 

Unrecorded  liens  1073-1081 

Trustee  to  enforce  creditor's  rights 1082-1085 

Liens  through  suit,  etc 1086, 1087 

Bona  fide  liens  for  a  present  consideration 1088-1096 

Transfers  within  four  months  void;  bona  fide  purchasers 1097-1108 

Liens  obtained  through  legal  proceedings 1109-1124 

CHAPTER   LXVin. 

SET-OFFS  AND  COUNTERCLAIMS. 

When   set-off  allowed 1125-1134 

When  set-off  not  allowed 1135-1139 

CHAPTER   LXIX. 

POSSESSION  OF  PROPERTY. 
Provisional  seizure  of  property 1140-1145 

CHAPTER    LXX. 

TITLE  TO  PROPERTY. 

Time  title  vests  in  trustee  and  property  affected 1146-1188 

Appraisal — sale    of    property 1189-1199 

Conveyance  of  bankrupt's  property 1200,  1201 

Title  on  setting  aside  composition  or  discharge 1202,  1203 

Avoidance  of  transfers  1204-1220 

Title  on  confirmation  of  compositions 1221, 1222 

CHAPTER   LXXI. 

TIME  WHEN  ACT  WENT  INTO  EFFECT. 

Time  of  taking  effect— filing  petitions 1223-1226 

Pending  State  Insolvency  proceedings 1227, 1228 


CONTENTS.  XV 

CHAPTER   LXXII. 

CLERKS  TO  KEEP     INDEXES. 
Indexes  to  be  kept  §§  1229, 1230 

CHAPTER   LXXm. 

LIMIT   TO    COMPENSATION  OP  REFEREES   AND  TRUSTEES. 
Compensation  limited 1231, 1232 

CHAPTER    LXXIV. 

TIME  WHEN  AMENDMENTS  TOOK  EFFECT. 

When  amendments  take  effect 1233, 1234 

TITLE  III. 

General  Orders  in  Bankruptcy 1235-1273 

Forms  in  Bankruptcy  1274-1349 

TITLE  IV. 

The  National  Bankruptcy  Law  of  1898  with  amendments...     1350-1423 

TITLE  V. 

The  National  Bankruptcy  Law  of  1867  and  amendments page  899 


TABLE  OF  CASES  CITED. 


415, 


Abbe,  In  re,  133,  178,  374,  414. 
Abbott  V.  Summers,  1018,  1036 
Abendroth  v.  Van  Dolsen,  412, 

444. 
Ablowich,  In  re,  366,  637. 
Ablowicb  et  al.  v.  Stursburg  et  al., 

366. 
Abraham,  In  re,  577,  581,  599,  600, 

627,  1100,  1152,  1207. 
Abrahamson  &  Bretstein,  45,  898, 

907. 
Abraham  Steers  Lumber  Co.,  In  re, 

875,  877,  878,  950,  969. 
Abram,  In  re,  737,  761,  1034. 
Acker,  In  re,  59. 
Adams,    In    re,    249,   256,    348,    354, 

358,   361,   520,   533,   544,  578,   637, 

683,  760,  764,  1079,  1085, 1099, 1148, 

1161,  1168,  1210. 
Adams  v.  Ferrell,  227. 
Adams  v.  Myers,  866,  1159. 
Adams  v.  Riley,  1103. 
Adams  Sartorial  Art  Co.,  806. 
Addis  V.  Knight,  171. 
Adler,  In  re,  589,  598,  599,  605. 
Adler  v.  Hammond,  329,  604. 
Adler  v.  Jones,  310. 
Agins,  In  re,  250,  1123. 
Ahl  V.  Thorne,  1104. 
Aiken  v.  Edrington  et  al.,  184,  760, 

765,  1155,  1188. 
Aiken,  Lambert  v.  Haskins,  425. 
Ala.  &  Chattanooga  R.  R.  Co.,  118. 
Ala.  &  Chattanooga  R.   R.  Co.   v. 

Jones,  118,  452,  458,  600. 
Albert   Goodman   Shoe  Co.,  In  re, 

1001. 
Albrecht,  In  re,  349,  415,  424,  444. 
Alden,  In  re,  1191. 
Alderdice  v.  Bk.,  963. 


[REFERENCES    ARE    TO    SECTIONS] 

Alderson,  In  re,  421,  993. 

Aldred,  In  re,  1103. 

Aldrich  v.  Campbell,  1132. 

Alexander,  In  re,  70,  599,  875,  953. 

Alfred,  In  re,  198. 

Alleman  v.  Booth,  575. 

Allen,  In  re,  61,  331,  714,  720,  985, 

1017,  1018,  1122. 
Allen  V.  Ferguson,  391. 
Allen  V.  Massey,  77, 
Allen  V.  Montgomery,  36,  267,  1148. 
Allen  V.  Mussey,  760. 
Allen  V.  Oxnard,  1007. 
Allen  V.  Thompson,  677. 
Allen  V.  Ward,  853. 
Ailing  V.  Eagan,  448. 
Alsberg,  In  re,  233,  239,  434,  1219. 
Alston    V.    Robinett,    42,    397,    398, 

399. 
Altenheim,  In  re,  828. 
Altman,  In  re,  133,   137,   138,   139, 

158,  414,  497. 
Ambler,  In  re,  1014. 
American  Brewing  Co.,  In  re.  78, 

489,  494. 
American  Waterproof  Cloth  Co.,  In 

re,  739. 
Ames,  ex  p.,  996,  1090. 
Ames  V  Moir,  434,  435. 
Amly  V.  Lyle,  162. 
Amsinck  v.  Bean,  134,  151,  158,  174, 

176,  178,  374. 
Anderson,  In  re,  16,  54,  78,  182,  188, 

190,   422,    430,   535,   609,   882,   979, 

1030,  1043,  1163,  1228. 
Anderson  v.  Hampton,  239. 
Anderson  v.  How,  437. 
Anderson  v.  Strassberger,  949. 
Andial  Co.,  In  re,  1050. 
Andrae  Co.,  In  re,  1079,  1100,  1115, 

1149. 


XVll 


XVlll 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Andrews  &  Jones,  In  re,  1029. 

Andrews  v.  Mather,  1210. 

Andrews  v.  Pond,  1217. 

Andrews  v.  Thum,  609. 

Angier,  In  re,  1166. 

Ankeny,   In  re,  213,  218,  840,  862, 

869,  889,  986. 
Anketell,  In  re,  115,  368. 
Anon,  In  re,  214,  675,  738,  798,  900. 
Anson,  In  re,  842,  1042. 
Ansonia   Brass    &    Copper    Co.    v. 

New  Lamp  Chimney  Co.,  853. 
Antisdel,  In  re,  349,  367.  380,  900, 

1103. 
Antrim  v.  Kelly,  73,  1103. 
Appel,  In  re,  25,  32,  44,  85,  452,  461, 

1162. 
Appleton  V.  Bowles,  582. 
Appleton  V.  Stevers,  1114. 
Appold,  In  re,  1093,  1148. 
Achenbrawn,    In   re,   36,    220,    273, 

363,  387,  494,  905,  1003,  1033. 
Arledge,  In  re,  1162. 
Armstrong,  In  re,  67. 
Armstrong   v.    Rickey    Bros.,    963, 

1119. 
Arnat  v.  Wright,  458. 
Arndt,  In  re,  875,  877,  953. 
Arnett,  In  re,  640,  1034,  1173. 
Arnold,  In  re,  949,  1003,  1087,  1114. 
Arnold  v.  U.  S.,  655. 
Arnstein,  In  re,  427,  442,  978,  999, 

1005. 
Arnstein  &  Brown,  In  re,  1093. 
Arrinton  Co.,  In  re,  297,  308,  310. 
Ash,  In  re,  519. 
Ashley,  In  re,  1212. 
Aspinwall,  In  re,  547,  922. 
Asten,  In  re,  308. 
Atkins  V.  Equitable  Life  Assurance 

Society,  1167. 
Atkins    V.    Wilcox,    764,    869,    999, 

1171. 
Atkinson  v.  Kellog,  151,  156,  1060. 
Atlantic    Mutual    Ins.    Co.,    In    re, 

496. 
Attorney   General   v.   Alston,   416, 

421. 


Attorney  General  v.  Chelsea  Water 

Wks.,  1112. 
Audubon  v.  Shufeldt,  389,  419,  422, 

979. 
Augenstein,  In  re,  402,  406,  900. 
August,  In  re,  325,  1222. 
Augustine  v.  McFarland,  262. 
Austin,  In  re,  938,  942. 
Austin  V.  Markham,  391. 
Austin  V.  O'Reilly,  1046. 
Averill,  In  re,  1031,  1034. 
Avery  v.  Hackley,  1104. 
Avery  v.  Johnson,  36. 
Azule  Nat.   Seltzer  Water  Co.,   In 

re,  1193. 

B. 
Babbitt  v.  Burgess,  599,  1152,  1157. 
Babbitt  v.  Kelly,  964. 
Babbitt  V.  Walbrun.  70,  545,  1107, 

1218. 
Babcock,  In  re,  842. 
Baber,  In  re,  761. 
Backman,  In  re,  1216. 
Backus  V.  Fort  Steel  Co.,  592. 
Bacon  v.  Heathcote,  1149. 
Badger  v.  U.  S.,  666. 
Baerncopf,  In  re,  348,  351,  477,  481. 
Baginsky,  Michel  &  Co..  In  re,  976. 
Bailey,  In  re,  33,  513. 
Bailey  v.  Comings,  195. 
Bailey  v.  Lock,  427. 
Bailey  v.  Loeb,  1093. 
Bailey  v.  Nicholas,  983. 
Bailey  Ass'n  v.  Comings,  191. 
Baird,  In  re,  572,  577,  762. 
Baker,    In    re,    22,    185,    202,    232, 

239,   257,   422,   437,   600,    601,  876, 

949,  952,  953,  962,  966,  993,  1014, 

1015,  1085. 
Baker-Ricketson  Co.,  In  re,  80,  82, 

83. 
Baldwin,  In  re,  842. 
Baldwin  v.  Hall,  15,  20. 
Ball,  In  re,  253. 
Ballou,  In  re,  570. 
Bait.  Co.  Dairy  Ass'n,  In  re,  496. 
Bamberg  v.  Stern,  238. 
Bamberger,  In  re,  78,  364,  368. 


TABLE    OF    CASES. 


XIX 


[REFERENCES    ARE    TO    SECTIONS] 


Bank  v.  Bank,  262,  440. 

Bank  v.  Blackmore,  1047. 

Bank  v.  Campbell,  81. 

Bank  v.  Carpenter,  205. 

Bank  v.  Cass,  139. 

Bank  v.  Cook,  963. 

Bank  v.  Cooper,  869. 

Bank  v.  Fowler,  282. 

Bank  v.  McKey,  1173. 

Bank  v.  Manchester,  472. 

Bank  v.  Warren,  81. 

Bank  of  Commerce  v.  Elliott,  277. 

Bank  of  Madison,  In  re,  1180. 

Bank   of    North    Carolina,    In    re, 

1061. 
Bank  of  U.  S.  v.  Mass.,   60,   416, 

421. 
Barber,  In  re,  688,  707,  1009.  1055, 

1056. 
Barbour  v.  Priest,  963,  1090. 
Barbusch,  In  re,  833. 
Barclay  v.   Barclay,   232,  239,   422, 

979. 
Bard,  In  re,  532. 
Barden,  In  re,  137,  145,  797. 
Bardes  v.  Hawarden  Bk.,  569,  572, 

575,  580,  582,  762,  1144,  1207. 
Barker,  In  re,  528,  703. 
Barker  v.  Barker,  1148. 
Barker  v.  Bankers'  Ass'n,  760, 1084. 
Barker  v.  Franklin,  1205. 
Barker  v.  Smith,  73,  950,  1080,  1104. 
Barman,  In  re,  1091. 
Barnard  v.  N.  &  W.  R.  R.,  1105. 
Barnard  v.  R.  R.  Co.,  1155. 
Barnes  v.  Moore,  216,  446. 
Barnes  v.  Rattew,  1100. 
Barnes  v.  U.  S.,  1013. 
Barnes'  Appeal,  In  re,  1046,  1093. 
Barnes   Mfg.   Co.   v.   Norden,   256, 

1205. 
Barnwell  v.  Jones,  495,  1208. 
Barrett,  In  re,  744,  748,   749,   835, 

953,  1090. 
Barrett  Pub.   Co.,  In  re,  919,  934, 

944. 
Barron  v.  Morris,  609,  1119. 


Barrows,  In  re,  36,  582,  1017,  1181. 

1195. 
Barry  v.  Abbott,  472. 
Bartenbach,   In   re,  984,   990,   1050, 

1096,  1166. 
Bartey,  In  re,  969. 
Bartholow  v.  Bean,  1104. 
Bartholmew  v.  West,  183,  186,  192, 

201. 
Bartlett,  In  re,  643. 
Bartlett  v.  Bramhall,  1018. 
Barton  v.  Barbour,  510,  862. 
Basch,  In  re,  429. 
Bashford,  In  re,  360. 
Bashinski  v.  Talbott,  187. 
Bashline,  In  re,  875,  956. 
Bashore  v.  Rhoads,  1137. 
Bass.  In  re,  184,  185,  189,  193. 
Bassett,  In  re,  115. 
Bassett  v.  Baird,  844. 
Bassett  v.  Parsons,  1168. 
Batchelder,  In  re,  950,  957. 
Batchelder  v.  Low,  446. 
Batchelder  v.  Putnam,  1118. 
Bates,    In    re,    159,    161,    165,    856, 

1059,  1228. 
Bates  Machine  Co.,  In  re,  83,  114. 
Battey,  In  re,  224. 
Baudoine,  In  re,  182,  510,  576,  580, 

637.  763,  1151,  1153,  1207. 
Baum,  In  re,  526. 
Baumann,  In  re,  67. 
Bauman  v.  Feist,  361,  365,  638. 
Bausman  v.  Dixon,  592. 
Baxter,  In  re,  163,  650,  761, 
Bayly,  In  re.  299. 
Bazinsky,   Mitchell   &   Co.,   In  re, 

755. 
Beach  v.  Macon  Grocery  Co.,  93, 

248,  1191. 
Beale,  In  re.  366,  1187. 
Beall  V.  Harrell,  1118. 
Beals,  In  re,  33,  1114. 
Bean,  In  re,  205,  206.  218.  798. 
Bean  v.  Amsinck,  312. 
Bean  v.   Brookmire,  286,  294.  312, 

313. 
Bean  v,  Laflin,  1104,  1179. 


XX 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Bear,  In  re,  461,  842,  1167. 

Bear  v.  Chase,  248,  251,  1114,  1123, 

1212. 
Beardsley,  In  re,  348,  458,  1157. 
Beams,  In  re,  1219. 
Beattie  v.  Gardner,  70,  256,  949. 
Beauchamp,  In  re,  201,  208. 
Beaver  Coal  Co.,  In  re,  1044,  1114, 

1116. 
Beck,    In    re,    151,    401,    733,    1027, 

1031. 
Beck    Provision    Co.,    In    re,    263, 

1045,  1077,  1094. 
Becker,    In    re,    45,    189,    358,    638, 

1152,  1182. 
Becker  v.  Torrance,  256,  1123. 
Beckerford,  In  re,  22,  180,  203. 
Becket,  In  re,  320. 
Beddingfield,  In  re,  919,  945. 
Beebe,  In  re,  348. 
Beebe  v.  Pyle,  218,  222,  290. 
Beecher  v.  Clark,  1104. 
Beede,  In  re,  203. 
Beerman,  In  re,  218,  446,  950,  996. 
Beers  v.  Hanlin,  71,  920,  994,  1005. 
Beers  v.  Place,  1212. 
Beeson  v.  Howard,  387. 
Beiber,  In  re,  875,  876. 
Belcher,  In  re,  33. 
Belden,  In  re,  252.  377,  387,  519. 
Belden  v.  Smith,  1116. 
Belding,  In  re,  875. 
Bell  V.  Carey,  1126. 
Bell  V.  Leggett,  355,  402. 
Bellah,  In  re,  70,  81,  461.  465,  466, 

477,  478,  637,  913,  929. 
Bellamy,  In  re,  520. 
Bellingham  Bay  v.  New  Whatcom, 

592. 
Bellis,  In  re,  367,  368.  535,  547. 
Bemis,  In  re,  348,  363. 
Bemis  v.  Smith,  1134. 
Bender,  In  re,  1144. 
Benedict,  In  re.  429,  1113,  1116. 
Benham,  In  re,  510. 
Benjamin  v.  Hart,  609. 
Benjamin  v.  New  Orleans,  591. 
Bennett,  In  re,  68,  142,  144,  1175. 


Bennett  v.  Alexander,  415. 

Bennington  v.  Loenstein,  1114. 

Benson,  In  re,  1164. 

Bergman,  In  re,  145,  148,  201. 

Berkholder  v.  Stump,  1018. 

Berner.  In  re,  31,  32,  351,  358,  359, 
378,  496,  637,  1178. 

Bernes,  In  re,  358. 

Bernhisel  v.  Firman,  951, 

Berry  v.  Hanks,  187. 

Berryman  v.  Allen,  69. 

Berthold  v.  Goldsmith,  131. 

Beswick,   In  re,   875,   877,  878,  953, 
969. 

Betterlein,  In  re,  1013. 

Betts,  In  re,  181. 

Beutel's  Sons,  In  re,  902,  1192. 

Bickford  v.  Barnard,  433. 

Bidwell,  In  re,  133,  374,  414. 

Biesenthal,  In  re,  1100. 

Bigelow,   In  re,   163,   164,   882,   883, 

988,  1031,  1095,  1133. 
Big  Meadow  Gas   Co.,    In   re,   920, 

1005. 
Bill  V.  Beckwith,  510,  579. 
Bingham,    In    re,    886,    987,    1058, 

1130,  1136. 
Bingham  v.  Claflin,  581. 
Bingham    v.    Richmond    &    Gibbs, 

876. 
Bininger,  In  re,  25,  80,  1100. 
Bishop  V.  Hart,  1018. 
Bjournstad,  In  re,  201. 
Bank,  In  re,  990. 
Bk.  v.  Bk.,  1155,  1201. 
Bk.  V.  Brady's  Bend  Iron  Co.,  45. 
Bk.  V.  Campbell,  952. 
Bk.  V.  Comstock,  844. 
Bk.  V.  Conway,  960,  1187. 
Bk.  V.  Cooper,  602,  765,  597,  599. 
Bk.  V.  Dewey.  982. 
Bk.  V.  Graham,  55. 
Bk.  V.  Harris,  960. 
Bk.  V.  Hunt,  963,  1091. 
Bk.  V.  Jones,  952. 
Bk.  V.  Ober,  765,  1199. 
Bk.  V.  Overstreet,  1114. 
Bk.  V.  Pierce,  846. 


TABLE    OF    CASES. 


XXI 


[REFERENCES    ARE    TO    SECTIONS] 


Bk.  V.  Porter.  986. 

Bk.  V.  Rome  Iron  Co.,  1149. 

Bk.  V.  Shuler,  1123. 

Bk.  V.  Slagle,  597.  598. 

Bk.  of  Madison,  In  re,  1156. 

Black,  In  re,  67,  81,  360,  949,  1003, 

1212. 
Black  et  al..  In  re,  25. 
Black  V.  Blayo,  42. 
Black  V.  McClelland,  992. 
Blackwell  v.  Claywell,  134. 
Blair,  In  re,  68,  144,  146,  153,  158. 

178,  459,   465,   538,   539,   577,   963, 

967,  1114,  1116. 
Blair  v.  Allen,  509. 
Blaisdell,  In  re,  756. 
Blake  v.   Ala.   &  Chat.  R.  R.  Co., 

580. 
Blake  v.  Francis,  Valentine  Co.,  16, 

519,  1224. 
Blakely  v.  Bk.,  875,  953,  962,  966. 
Blalock,  In  re,  348,  358,  361,  365. 
Blandin,  In  re,  988. 
Blankfein,  In  re,  742,  814,  835. 
Blasdel  v.  Fowle,  355,  402. 
Bleek,  In  re,  427. 
Bliss,  In  re,  734. 
Bloch,  In  re,  67,  81,  295.  308. 
Blodgett,  In  re,  200,  201,  744. 
Bloomer  v.  Statly,  180. 
Bloomingdale    v.    Empire    Rubber 

Mfg.  Co.,  1219. 
Bloomingdale  v.  Rubber  Mfg.  Co., 

1158. 
Bloss,  In  re,  268,  842,  844,  921.  922. 
Blue  Ridge  R.  R.  Co..  In  re,  1194. 
Blumberg,  In  re,  440. 
Blumberg  v.  Bryan,  581. 
Blumenthal,    In    re,    131,    348,    361, 

367,  368. 
Blydenburg  v.  Catheal,  655. 
Boardman,  In  re.  1168. 
Boasberg,  In  re,  351,  364,  366. 
Boese  v.  King,  1100. 
Bogert,  In  re.  748. 
Bolinger,  In  re,  203,  248,  249,  1116. 
Bolton,  In  re,  838,  842. 
Bond,  In  re,  679. 


Bonesteel,  In  re,  528,  579,  1207. 

Bonner  v.  Bonner,  448. 

Book,  In  re,  347, 

Boonville    Nat.    Bank    v.    Blakey, 

578,  591,  593,  606,  609,  1205. 
Boorstin,  In  re,  186,  695. 
Booth,  In  re,  576,  580,  581,  683,  760. 

883.   1075,   1079,   1085,    1148,   1161, 

1188. 
Booth  V.  Meyer,  1152. 
Booth  V.  Nickerson,  252.  256,  1123. 
Boothe  V.  Brooks,  963. 
Boothroyd,  In  re,  201. 
Borden,  In  re,  137. 
Borst,  In  re,  232,  347, 
Boston,  In  re,  186. 
Boston  H.  &  E.  R.  R.  Co.,  In  re, 

36,  258,  658,  917,  938. 
Bostwick  V.  Foster,  1214. 
Bothwell,  In  re,  969. 
Bound,  In  re,  363. 
Bonsfield,  In  re,  582,  1198. 
Bonsfield   &   Poole  Mfg.   Co.,   962, 

990,  1002. 
Boutelle,  In  re,  347,  854. 
Bowie,  In  re,  37. 
Bowne,  In  re,  1093. 
Bowne  Ten  Eyck,  In  re,  999. 
Boyce  v.  U.  S.  Fidelity  &  Guaranty 

Co.,  919. 
Boyd,  In  re,  283,  1156. 
Boyd   V.   Glucklich.   54,   57,    59,   62, 

510,  715,  716,  719. 
Boyd  V.  Lemon  &  Gale  Coal  Co., 

69. 
Boyle  V.  Zacharie.  20. 
Boynton,  In  re,  637. 
Boynton  v.  Ball,  252,  269,  439,  994. 
Bozeman,   In  re,   1075,   1077,    1157, 

1161,  1214. 
Bracken  v.  Johnson,  273. 
Bracken  v.  Milner,  429. 
Bradford,  In  re,  435. 
Bradshaw  v.  Klein,  760,  1083,  1148. 
Braentigan,  In  re,  1183. 
Bragassa,  In  re,  364. 
Bragassa   v.   St.    Louis  Cycle  Co., 

352,  365,  703. 


XXII 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Bragg,  In  re,  181,  189,  984. 

Braley  v.  Boomer,  387,  415. 

Braman  v.  Snyder,  439. 

Brand,  In  re,  842,  843. 

Brandon  Nat.   Bk.   v.   Hatch,   237, 

387. 
Brands,  In  re,  520. 
Brandt,  In  re,  526,  1166. 
Brass  Crosby,  In  re,  59. 
Bratton  v.  Anderson,  256. 
Bray,  In  re,  697. 
Bray  v.  Cobb,  82,  88,  91,  427,  442, 

471,   473,   489,   492,    499,   501,    502, 

567,   665,   670,   701,   730,    796,   895. 

907,  984,  999,  1171. 
Brent,  In  re,  349. 
Breck,  In  re,  1020. 
Brett  V.  Carter,  951. 
Brice,  In  re,  25,  32,  105,  136,  364, 

365,  366. 
Brick,  In  re,  374,  414,  1156. 
Brick  &  Schermerhorn,  In  re,  1171. 
Bridgeman,  In  re,  842,  1062. 
Brigham   v.    Home    Life   Ins.    Co., 

1168. 
Brightman,  In  re,  344. 
Briggs,  In  re,  148,  402,  1145. 
Briggs  V.  Walker,  592. 
Brinker,  In  re,  761. 
Brinckmann,  In  re,  262,  267,  920. 
Brisco,  In  re,  828. 
Brisenden  v.  Chamberlain,  31. 
Bristol  V.  Sanford,  1058. 
Brock  V.  Terrell,  950. 
Brockway,  In  re,  367. 
Brodbine,  In  re,  261,  576,  762.  1144, 

1182,  1207. 
Broich,  In  re,  866,  920,  921,  937,  962, 

990. 
Bromley,  In  re,  524,  526. 
Bromley  v.  Goodrich,  581.  583. 
Bromley  v.  Smith,  1148. 
Brooke,  In  re,  151,  738. 
Brooke  v.  McCraken,  963. 
Brookmire  v.  Bean,  313,  1003. 
Brooks,  In  re,  577,  580,  581. 
Brooks  V.  Aherns,  1220. 
Brooks  V.  Davis,  965. 


Broome,  In  re,  193. 
Browley,  In  re,  523. 
Brown,  In  re,  89,  151,  184,  192,  203, 

260,   399,    477,   695,   742,   744,    748, 

749,   828,   835,   842,   920,    938,   984, 

1043,  1092,  1098,  1113,  1115,  1214, 

1224. 
Brown  v.  Bk.,  1134. 
Brown  v.  Barker  et  al.,  1187. 
Brown  v.  Case,  1113. 
Brown  v.  Gibbons,  440,  581. 
Brown  v.  Guichard,  963. 
Brown  v.  Mortgage  Co.,  472. 
Brown  v.  Smart,  15. 
Brown  v.  Treat,  433. 
Brownlee  v.  Fenwick,  535. 
Bruce,  In  re,  295,  1175. 
Brumelkamp,   In  re,   216,   218,  462, 

465,  480,  516,  690,  695,  849. 
Brundage,  In  re,  521,  528,  529. 
Brundin,  In  re,  1025,  1030,  1031. 
Brunquest,  In  re,  895,  1078. 
Bruss-Ritter  Co.,  In  re,  16,  36.  248, 

1100,  1224,  1228. 
Bryan,  ex  p.,  1199. 
Bryan  v.  Bernheimer,  53,  572,  577, 

578,  582,  1144,  1172.  1207. 
Bryant,   In  re,   358,  359,  361.  1188, 

1206,  1207. 
Bryant  v.  Kinyon,  415,  429. 
Bryce,   In  re,  331. 
Buchanan,  In  re.  468,  484,  941. 
Buchanan  v.  Smith,  949.  963. 
Buchstein,  In  re,  369,  399,  401.  403. 
Buck,  In  re,  377. 
Buck  V.  Winters,  722. 
Buckingham,   In  re,   182,   187,    199, 

203. 
Buckingham  v.  McLain.  364. 
Bucknam    v.    Dunn.    36.    40.    1000, 

1196. 

Bucknam  v.  Goss,  963. 
Buckner  v.  Jewell.  510,   1020. 
Buckner  v.  Street,  984. 
Bucyrus  Machine  Co..  In  re.  162. 
Buder  v.   Columbia  Distilling  Co., 
967. 


TABLE    OF    CASES. 


XXlll 


[references  are  to  sections] 
Buelow.   In   re,   180,   190,   198.   207,     Butterfield.  In  re.  348,  458.  481. 


208,  1168. 
Buffum  V.  Seaver,   138. 
Buffum's  Case,  423. 
Bugbee,  In  re,  852,  867,  1058. 
Building  &    Loan   Ass'n   v.    Price, 

590. 
Bullis.  In  re,  ^29,  432.  433. 
Bullock,  In  re,  875. 
Bullwinkle.  In  re,  358,  361. 
Bunster,  In  re,  344. 


Byers  v.  McAuley,  250. 

Byrd  v.  Harrold.  36. 

Byre,  In  re.  1007. 

Byrne,  In  re,  37,  40.  158,  1008,  1010, 

1042.  1045,  1046,  1095,  1104. 
Byrns,  In  re,  160. 


Cain,  In  re.  922,  953. 
Calendar,  In  re,  250. 


Buntrock  Clothing  Co.,  In  re.  577,     California  Bk.  v.  Stateler,  592. 


1144,  1207. 
Burbank  v.  Bigelow.  570. 
Burdick  v.  Jackson.  1090,  1149. 
Burfee  v.  Bk.,  963. 
Burgess.  In  re,  367,  953. 
Burk,  In  re,  347. 
Burka,  In  re,  453.  978. 
Burke,  In  re.  229,  469,  854,  1022. 
Burkle,  In  re.  1075. 
Burk's  Case,  1220. 
Burlingame  v.  Parse,  581,  762. 


Cal.  Pac.  R.  R.  Co.,  In  re,  25,  30, 
33,  99,  118,  458.  921,  922. 

Cameron  Town  Mut.  Fire,  Light- 
ning &  Windstorm  Ins.  Co.,  In 
re,  115,  116. 

Camp,  In  re,  169,  184,  189,  201,  208, 
250. 

Camp  V.  Zellars,  577. 

Campbell,  In  re,  531,  535,  579,  736, 
829,  897.   1043,   1163. 

Campbell  v.   Boyreau.  509. 


Burlington  Malting  Co..  In  re,  920,  Campbell  v.  Finck,  116. 

921.  Campbell  v.  Waite,  1090,  1107. 

Burnett  v.  Mercantile  Co.,  577.  581.  Campbell's  Case,    1220. 

Burnett  v.   Morris  Mercantile  Co.,  Canby     v.     McLear,    526,    545,    889, 

627.  988. 


Burnham  v.  Pldcock,  432,  433. 
Burns,  In  re,  1114. 
Burr.  In  re,  309. 
Burrell,  et  al.,  In  re,  80. 
Burrill  v.  Lawry.  145.  1104. 


Canfleld,  In  re,  461. 
Capelle  v.  Trinity,  984. 
Cap.  Pub.  Co.,  In  re,  119.  458. 
Carey    v.   Houston    &   T.   Ry. 
59L 


590, 


Burrus,  In  re.  949,  1027,  1031,  1085,     Carey  v.   Mayer,  443. 


1087. 
Burt.  In  re,  1100. 
Bart  &  Lowne.  In  re,  1095. 
Burton,  In  re,  153.  427,  937. 
Busey.  In  re.  980,  1036. 
Bush,  In  re,  940. 
Bush  V.  Crawford,  162. 
Bush  V.  Lester,  et  al.,  180,  193. 
BusJiey,  In  re,  904. 
Bushnell.  In  re,  358.  359,  361,  638. 
Butler,  In  re.  1020.  1046,  1093. 
Butler,  ex  p.,  1182. 
Butler  V.  Coreley,  16. 
Butler  V.  Ives,  862. 


Cardwell  v.  Ins.  Co.,  989. 
Carleton,  In  re,  139,  468. 
Carley.  In  re.  465,  521,  539,  598. 
Carling   v.    Seymour   Lumber  .Co., 

16,  251,  1228. 
Carmichael,  In  re.  162,  164.  190,  360, 

364.  366,  436. 
Carolina  Cooperage  Co.,  In  re,  684, 

705.  717.  1017.  1024,  1026,  1030. 

1034,  1041. 
Carow,  In  re,  36,  45.  280,  1170. 
Carpenter,  In  re.  201,  210,  716. 
Carpenter  v.  Dexter,  515. 
Carpenter  Bros.  v.  O'Connor,  36. 


XXIV 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Carr,  In  re,  692.  755,  757,  973,  976, 

1025,  1027,  1029. 
Carr  v.  Fife,  '670. 
Carr  v.  Phillips,  45,  1145. 
Carriage  Co.  v.  Stengel,  576. 
Carrier,  In  re,  402,  497. 
Carriger  v.  Mackey,  1007. 
Carson,  In  re,  905. 
Carson,   Pirie,  Scott  v.   Trust  Co., 

69,  875,  950,  953. 
Carter,  In  re,  479,  577.  675,  681,  764, 

1210. 
Carter  v.   Hobbs,   36,   42,   250,   267. 
390,   460,   495,    496,  576,   580,   581, 
627,  1104,  1152. 
Carver,  In  re,  695. 
Cary,  In  re,  527. 
Casey,  In  re,  239,  600. 
Cashman,  In  re,  351.  365. 
Cash   Register   Co.    v.    Woodbury, 

1080. 
Cass,  In  re.  1175. 
Castillo  V.  McConnico.  592. 
Castle,  In  re,  875.  877,  953,  967. 
Catlin  V.  Foster,  1018,  1129,  1136. 
Catlin  V.   Hoffman,   950,  952,   1105, 

1108,  1119. 
Cavan,  In  re,  287,   296. 
Cent.  Bk..  In  re,  583. 
Cent.  Nat.  Bk.,  In  re,  581. 
Cent.  Nat.  Bk.  v.  Graham,  582. 
Central    Bank    of    Washington    v. 

Hume,  1167. 
Central  Trust  Co.  v.  R.  R.,  1007. 
Central  Trust  Co.  v.  Wabash  R.  R., 

1007. 
Challon,  In  re,  422. 
Challoner,  In  re,  232.  239. 
Chamberlain,   In  re,  298,  833,  919, 

1044. 
Chambers,  In  re,  250,  259,  1150. 
Chambers,  Calder  &  Co.,  In  re,  37, 

239,  696,  889,  890.  978,  986. 
Champion,  In  re,  875. 
Chandler.  In  re,  25,  115,  984. 
Chandler  v.  Siddle,  16,  18. 
Chapin  v.  James,  250. 
Chaplin,  In  re,  312,  313.  953.  1210. 


Chapman,  In  re.  78. 

Chapman,  et  al..  In  re.  988. 

Chapman  v.  Brewer,  42,  248. 

Chapman  v.  Forsyth,  429. 

Chappel,  In  re,  458,  948. 

Charman  v.  Charman,  1183. 

Chase,  In  re,  999. 

Chasnoff,  In  re,  6^,  841,  1031. 

Chatfield  v.  O'Dwyer,  607. 

Chat.  Nat.  Bk.  v.   Rome  Iron  Co.. 

250,  569,  577,  1102,  1148,  1149. 
Chemy,  In.  re,  814. 
Chequasset  Lumber  Co.,  In  re,  478, 

479. 
Chesapeake  Oyster  &  Fish  Co.,  In 

re,  116. 
Chetwood.  In  re,  618. 
Chicago  Joplin   Lead  &   Zinc  Co., 

In  re,  117. 
Chi.  &  N.  W.  R.  V.  Chicago,  592. 
Chi.  Ry.  Equip.  Co.  v.  Bk.,  1080. 
Chiles,  In  re,  58,  61. 
Chisholm  v.  Cowles,  132. 
Chism  V.  Bank.  967. 
Chism  V.  Bank  of  Friars  Point,  762. 
Challoner,  In  re,  979. 
Chicago  Title  &  Trust  Co.  v.  John 

A.  Roebling's  Sons  Co.,  952. 
Christensen.    In    re,    510.    846.   862, 

875,  878,  886.  953,  969,  1126,  1218. 
Christley,  In  re,  835. 
Christman  v.  Haynes,  949. 
Christy.  In  re,  248,  682,  1195. 
Christy,  ex  p.,  883. 
Citizens  Bk.  v.  Ober,  1192. 
Citizens  Bank  of  Salem  v.  De  Paw 

Co.,  70,  358,   637. 
Citizens  Nat.  Bk.  v.  Cass,  139,  940. 
Citizens  Sav.  Bk.,  In  re,  16.  270. 
City  Bk.,  In  re,  1136. 
City  National  Bank  v.  Bruce,  1090. 
City  Nat.  Bank  of  Dallas  v.  Doolit- 

tle,  305.  309,  329.  331,  333. 
City    of    Harrisburg    v.    Sherlock, 

1129. 
Claff,  In  re,  386. 
Claflin  V.  Eason,  429,  1051,  1057. 
Claflin  V.  Houseman,  575,  580.  581. 


TABLE    OF    CASES. 


XXV 


[REFERENCES 

Claiborne,  In  re,  234,  237. 

Clairmont,  In  re,  744,  748,  749. 

Clancy,  In  re,  999. 

Clap,  In  re,  171. 

Clapp,  In  re,  324. 

Clapp  V.  Otol  Co.,  Nebr.,  250. 

Clark,  In  re,  140,  203,  248,  283,  344 

360,  380,  529,  688,  755.  863,  953. 
Clark,  et  al.,  In  re,  843. 
Clark  V.  Am.  Man'g  Co.,  492. 
Clark  V.  Binniger,  598,  851,  870. 
Clarke  v.  Hawkins,  1132. 
Clark  V.  Hezediah,  1166. 
Clark  V.  Iselin,  76,  77,  81,  960,  1081, 

1090,   1105. 
Clark  V.  Kansas  City,  592. 
Clark  V.  Marks,  1018. 
Clark  V.  Mfg.  Co.,  82. 
Clark   V.    Mfg.   &   Enameling   Co., 

565. 

Clark  V.  Sawyer,  1018. 
Clarke,  In   re,  435. 
Clarke  v.  Ray,  17. 
Claugh.  In  re,  1005. 
Clausen  v.  Schoeneman,  391,  434. 
Clay  V.  Smith,  20,  428. 
Cleland  L.  R.,  In  re,  115. 
Clemens,  In  re,  126. 
Clemmons  v.  Brinn,  415,  419. 
Clews,  In  re,  853. 

Cliffe,   458,   465,   483,  503,  538.    539, 
949,  1155. 

Clinton  v.  Foster,  263. 
Clinton  v.  Mayo,  210,  502,  532,  922, 
941. 

Clisdell,   In  re,   30,   31.   33.   34,   42, 

373,   377,   677. 
Clothier,  In  re,  349. 
Clough,  In  re,  220. 
Clute,  In  re,  1152,  1211. 
Clute  V.  Clute,  655. 
Coan  &  Ten  Broeke  Car  Mfg.  Co., 

In  re,  866. 

Coan  Carriage  Mfg.  Co.,  In  re,  1095. 
Cobb,  In  re,  40.  519,  541,  580,  581, 

646,  757,  966.  973,  1032.  1102,  1104, 

1187,  1218. 


ARE    TO    SECTIONS] 

Cochran,  In  re,  862. 

Cocks,  In  re,  115. 

Coddington,  In  re,  67,  91. 

Coe,  et  al..  In  re,  865. 

Coe,  Powers  &  Co.,  In  re,  837. 

Coffin,    In    re,    707,    880,    881,    1007, 

1056,  1149,  1173,  1201. 
Coffman,  In  re.  194,  1181. 
Cogley,  In  re,  1194,  1195. 
Cohn,  In  re,  359,  363,  535.  577,  637, 

762,  1018,  1157,  1207. 
Cole,  In  re,  261. 
Coleman,  In  re,  876. 
,     Collier,    In   re,    135,    159,    160,    198, 

206.   798. 
Collignon,  In  re,  442,  999,  1005. 
Collins,    In    re,   128,    376,    541,    798, 

949,    1044,    1084,   1087,    1113,   1144, 

1161. 

Collins  V.  Bell,  965,  1107. 

Collins  V.  Hood,  72,  158. 

Colt  V.  Sears,  1205. 

Col.  Bank  v.  Birkett,  446. 

Columbia  Metal  Works,  In  re,  1177. 

Columbia  Real   Estate  Co.,   In  re, 

36,  42,  43,  120,  495,  496,  498.  591, 

913,  938. 

Columbia     Water    Power    Co.     v. 

Railway  Co.,  592. 
Colwell,  In  re,  761,  1034. 
Colwell  V.  Tinker,  437. 
Com.  V.  Slifer,  667. 
Com.  V.  Williams,  437. 
Commercial  Bank  of  Manchester  v. 

Bachner,   397. 

Comp.  Bk.  V.  Cooper,  600. 

Comstock,  In  re,  55,  541,  803,  1029. 

Comstock  &  Co.,  In  re,  25,  876. 

Comstock  V.  Becktel,  186. 

Condict,  In  re,  348. 

Condon,  In  re,  1173. 

Conhaim,   In  re,  875.  922,  947,  953, 

955,  956.  966,  1014.  1015. 
Conn,  In  re,  351,  358. 
Connell,  In  re,  358. 
Connolly,  In  re,  576,  578. 
Connor  v.  Long,  1207,  1212. 


XXVI 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Connor  v.   Southern   Express   Co., 

272. 
Conover  v.  Dumahaut,  325. 
Conrader,  In  re.  155. 
Continental  Bk.  v.  Katz,  261. 
Cook,  In  re,  160,  1094. 
Cook  V.  Rogers.  1226. 
Cook  V.  Shearman,  391. 
Cook  V.  Tullis,  77,  951. 
Cook  V.  Waters,  36,  583,  1207,  1210. 
Cook  V.  Whipple.  1084,  1148. 
Cooke,  In  re,  354. 
Cooke  V.  U.  S.,  1012. 
Cookingham  v.  Morgan,  1104. 
Cooley  V.  Cook,  653. 
Cooper,  In  re.  460,  1149. 
Corbett,  In  re,  580,  581,  971. 
Corey  v.  Perry,  374,  414. 
Corey  v.  Ripley.  42.  397,  398.  399. 
Corn.  In  re,  351,  363,  365. 
Cornell.  In  re,  351,  353,  637. 
Corner  v.  Miller,  1118. 
Corn  Ex.  Bk.,  In  re,  1044. 
Cornforth    v.    Rivett,    1132. 
Cornwall.  In  re,  475.  920,  983,  995. 
Cornwell,  In  re,  71,  1103. 
Corse,  In  re,  504. 
Corwin,  In  re.  403. 

Cote.  In  re,  363. 

Cotton,  In  re,  125,  422.  437,  875. 

Cottrell  V.  Pierson.   1013. 

Coltur,  In  re,  1094. 

Counselman   v.   Hitchcock,   523. 

Courier    Journal    Co.    v.    Schaefer 
Br'g  Co.,  598,  600,  604,  605.  1090. 

Courier  Journal   Co.    v.    Schaeffer- 
Myer  Co.,  896.  1149. 

Covington,  In  re,  352,  695. 

Cowley  V.  Railroad  Co.,  1035. 

Cowles,  In  re.  70,  115. 

Cox  V.  Wall.  37,  576,  581. 

Cox  V.  Wilder,  186.  192,  230,  1166. 

Coxe  V.  Gardner.   1214. 

Coxe  V.  Hale,  81,  914,  1040. 

Cozart.  In  re,  1049,  1119. 

Craft.  In  re.  81,  364,  465.  949. 

Craff  V.   Pyke,  171. 

Cragin  v.  Thompson,  82. 


Craig,  In  re,  529,  535. 

Cram,  In  re,  842. 

Cramer,  In  re,  876. 

Crane,  In  re,  558.  725. 

Crawford,  In  re,  413. 

Creditors    v.    Williams,    347,    544, 

835. 
Crenshaw,  In  re,  358,  361,  637. 
Crist,  In  re,  348,  350,  351.  378. 
Criterion  Watch  Case  Mfg.  Co..  In 

re,  310. 
Crittenden  v.  Barton,  963. 
Crockett,  In  re,  133,  143. 
Croft  Brothers,  In  re,  82.  201. 
Crompton    v.    Coakling,    178,    374, 

414. 
Cromwell,  In  re,  920. 
Cronin.  In  re,  487. 
Cronson,  In  re,  442.  999,  1046.  1093. 
Crooks    V.     Bank,    951,    964,    1090, 

1104. 
Cross,  In  re,  344. 
Crossette,  In  re,  921. 
Crouch  V.  Kerr,  472. 
Crump  V.  Chapman,  1107. 
Crystal  Spring  Bottling  Co.,  In  re, 

576,   580,   763.   1127,    1130,   1216. 
C.    S.    Morey     Mercantile     Co.    v. 

Scheffer,  969. 
Cumming  v.  Clegg.  193. 
Cunningham  v.  Bk.,  605. 
Cunningham  v.  Cady,  842. 
Cunningham  v.   German  Ins.   Bk., 

1001. 
Currier,  In  re.  876,  920.  922. 
Curry  v.  McCauley,  1090. 
Curtis,   In  re,   12,  16.   82,   605,   607, 

923,    981,    1003,    1026,    1027,    1029, 
1162,  1171,  1224,  1226. 
Cutter  V.  Dingee,  262. 
Cutter  V.  Evans,  273,  383. 

D. 

Daggett.  In  re,  133,  137,  178. 
Daggett  V.  Emerson,  412. 
Dambmann  v.  White.  282. 
Damon,  In  re.  804,  806. 
Dana.  In  re,  244. 


TABLE    OF    CASES. 


XXVil 


[REFERENCES    ARE    TO    SECTIONSj 


Daniels,  In  re.  165.  1001,  1044. 

Darby,  In  re,  136,  766. 

Darby  v.  Boatman's  Sav.  Inst.,  951, 

1090,  1217. 
Darby's  Tr.  v.  Lucas.  959. 
Darling  v.  Berry,  181. 
Darsey  v.  Mumford,  184. 
Darwin,  In  re,  1116. 
Daubmann  v.  White.  581. 
Daubner,  In  re,  194,  1181. 
Dauglish  v.   Tennent,  312. 
Davenport,  In  re,  761,  1034. 
Davidson,  In  re,  270,  876.  950,  1090. 
Davis,  In  re,  581,  1092.  1161. 
Davis  v.  Anderson,  852. 
Davis  V.  Armstrong,  965. 
Davis  V.  Bohle.  16,  82.  519,  576,  580, 

582.  598,  1100,  1162,  1226. 
Davis  V.  R.  R.  Co.,  1102,  1199. 
Davis  V.  Stevens.   68,   80,   112,   135, 

144,  146. 
Dawley,  In  re,  190,  195. 
Day   v.    Beck   &   Gregg   Hardware 

Co.,  82,  471,  501,  502,  734. 
Dayville  Woolen  Co..  In  re,  734. 
Deady,  In  re,  854,  1145. 
Dean,  In  re,  386.  520,  526. 
Dean  v.  Justices,  386. 
Deane,  In  re.  1107. 
Deane  v.  Garret,  77. 
Deckert,  In  re.  21,  22,  180,  193. 
Deford  v.  Hewlet,  386. 
De  Forrest,  In  re,  4.  504. 
De  Gottardi.  In  re,  54,  358.  548.  679, 

1206. 
Deighton  v.  Kelsey,  438. 
De  Leeuw,  In  re,  359,  365.  637. 
De  Long,  In  re,  256.  412,  415,  416. 
De  Lue.  In  re,  1113.  1114. 
Demarest,  In  re,  201. 
Deming.  In  re,  160. 
Denning,  In  re,  158,  161. 
Denny  v.  Bennett,  15,  20. 
Dept.  Store,  In  re.  16. 
Derby,  In  re,  125.  136,  452.  468,  497. 
Detert,  In  re,  186,  192,  1166. 
Deuell,  In  re.  53,  54.  716.  1206, 
Devoe,  In  re,  233,  239,  543. 


Devore.  In  re,  581.  1035,  1195. 
Deweese  v.  Reinhard,  259. 
Dewey,  In  re,  744. 
Dewey  v.  Des  Moines,  592.  ^ 
Dewey  v.  Mayer,  386,  391,  477. 
Dews,  In  re,  358.  361,  366,  546,  638, 

1167. 
Dey,  In  re,  1094. 
Doan  V.  Compton,  145,  494. 
Dobson,  In  re,  27,  161,  549,  856,  858, 

983,  1113. 
Dockery's  Case,  1220. 
Dodge,  In  re.  1044. 
Dol  V.  Goodbelien.  1171. 
Dole.  In  re,  386,  399.  408.  520,  526, 

539,  717,  1175. 
Doll  V.  Harlow.  1145. 
Donaldson   v.   Farwell,    1149,   1157, 

1158,  1219. 
Donohoe.  In  re,  806. 
Doody,  In  re,  360.  435. 
Doty.  In  re,  889,  995. 
Dougherty  Co..  In  re.  1114. 
Douglas,  In  re,  402. 
Douglass,  In  re,  355. 
Dow.  In  re,  612,  638.  960,  1132,  1148, 

1149. 
Downing,  In  re.  135,  140.  158,  159, 

160,  178,  414. 
Doyle,  In  re,  375,  953.    1116, 
Downing  v.  Bk..  846. 
Diack.  In  re,  1168. 
Dibble,  In  re,  81.  952,  953. 
Dibblee,  In  re,  628,  949. 
Dickerson  v.  Spaulding,  583. 
Dickinson.  In  re,  814.  875. 
Dickinson,  v.  Adams,  77. 
Dickson,  In  re,  599,  875. 
Dickson  v.  Wyman,  878. 
Dietz,  In  re,  355,  402. 
Dietzsch  v.  Huidekoper,  248. 
Dillard,    In   re.   180,    192,   193,    495. 

1095. 
Diller,  In  re,  203. 
Dillon,  In  re.  164.  846.  886.  1136. 
Dimock  v.  Revere  Copper  Co..  326. 
Dingee  v.  Becker.  387,  426,  852. 
Dinglehoef,  In  re,  191. 


XXVlll 


TABLE    OF    CASES. 


[REFERENCES   ARE    TO    SECTIONS] 


Disler  v.  McCauley,  436. 

Dixon,  In  re,  705. 

Dixon  V.  Barnum,  440. 

Dixon's  Case,  59. 

Drake,  In  re,  123. 

Drake  v.  McQuade.  297,  315. 

Drake  v.  Rolls,  1136. 

Drayton  &  Sears'  Case,  59,  60. 

Dreeben,  In  re,  1027. 

Dressel  v.  North  State  Lumber  Co., 

30.  678,  695.  703,  869. 
Dresser,  In  re,  54,  716. 
Dreyer,  In  re,  348. 
Dreyfus.  In  re,  845. 
Driggs,   In  re,   355. 
Driggs  V.  Russell,  1163. 
Drlsco,  In  re,  461. 
Driske,  In  re,  461. 
Drolesbaugh,  In  re,  263,  1050.  1077, 

1094,  1117. 
Drummond.  In  re,  70. 
Duddy  V.  Willis,  191. 
Duerson,  In  re,  21,  180,  182.  190. 
Duff  V.  Carrier,  614. 
Duffield  V.  Horton,  1114.  1152. 
Duffy,  In  re,  183,  186. 
Duguid,    In    re.    105,    125,   136.    169. 

1172. 

Duke,  In  re,  1078. 

Duke  V.  Clark,  655. 

Dunavant,    In   re,    964.    1118.    1157, 

1178. 
Duncan,   In   re,   234,   496,    760,    924, 

1038,   1084,   1148. 
Duncan  v.  Landis.  67.  78,  501.  502, 

605. 
Dundas,  In  re,  963. 
Dundore  v.  Coats,  94,  1031. 
Dunham,  In  re,  158. 
Dunkerson,  In  re,  162,  175,  986. 
Dunkle,  In  re,  162,  949. 
Dunn,  In  re,  39.  336,  1049. 
Dunnigan,  In  re,  125,  136,  986,  987. 
Dunning,  In  re,  176,  610. 
Dunshane  v.  Beall,  1209. 
Duplan  Silk   Co.   v.   Spencer.  1161. 

1188,  1219. 


Dupree,  In  re,  85,  369,  399,  456,  461, 

653,  929,  960. 
Durant  v.  Ins.  Co.,  185,  1187. 
Durham,  In  re,   188,  578.   801,  875, 

953.  1079,  1090. 
Durka,  In  re,  1152. 
Duryea,  In  re,  262,  267. 
Dusenbury  v.  Hoyt,  391,  419. 
Dushane  v.  Beall,  220. 
Dutcher  v.  Bk.,  766.  1148.  1216. 
Dutcher  v.  Wright,  85,  653,  762,  963. 
Dvorak,  In  re,  897,  900. 
Dwyer,  In  re,  461,  897,  1050. 

E. 

Eady,  In  re,  1003. 

Eagan  State  Bk.  v.  Rice,  1090. 

Eagles    &    Crisp.    In    re,    151,    210, 

605,   687,    725.   733,   742,   813,    828, 

830,  833,  835,  838,  870,  875,  901. 
Eames,  In  re,  16. 
Earle,  In  re,  521. 
Earle  v.  Library  Pub.   Co.,  160. 
Easley,  In  re,  256,  1113. 
Eastman,  In  re,  194,  1181. 
Eastman  v.  Hibbard,  424,  444. 
Eaton,  In  re,  637,  638. 
Ebersole  v.  Adams,  18. 
Ecfort  V.  Greeley,  67. 
Bcker  v.  McAllister,  510.  922. 
Edelstein,  In  re,  69,  85,  953. 
Edmondson  v.  Hyde,  1091,  1161. 
Ed  W.  Wright  Lumber  Co..  In  re, 

75,  950. 
Edwards,  In  re,  58,  203. 
Edwards  v.   Drake,   472. 
Edwards  v.  Kearyey,  20. 
Egan  V.  Hart.  592,  613. 
Egbert,  In  re,  964. 
Eggert,    In    re,    208,    599,    963,    966, 

1104. 
Ehle,  In  re,  1184,  1187. 
Eidemiller,  In  re,  125,  920. 
Eidom,  In  re,  348,  1033. 
Eisenberg,  In  re,  106,  127,  229. 
Eland  v.  Karr,  1132. 
Elder.  In  re.  847. 
Eldred,  In  re,  73. 


TABLE    OF    CASES. 


XXIX 


[REFERENCES    ARE    TO    SECTIONS] 


Eldridge,  In  re,  995.  1035,  1161. 

Electoral  College  Case,  233. 

Elfeldt  V.  Snow.  313,  334. 

Elk  V.  Wilkins,  104. 

Elk  Park  Mining  &  Milling  Co.,  In 

re,  117. 
Ellinger,  In  re,  223. 
Elliot.  In  re.  47,  133,  137.  139.  143, 

360,  374,  414. 
Elliot  &  Co.  V.  Toeppner,  501,  504, 

597,  605. 
Ellis.  In  re,  175, 187.  193, 1114.  1175. 
Ellithorpe,  In  re,  205. 
Ellerhorst,  In  re,  846,  886,  1092. 
EUerhorst  &  Co.,  In  re,  983,  1058. 
Ells,  In  re,  427.  442,  990,  1150,  1171. 
Elmira  Steel  Co..  In  re,  30,  78,  120. 

471,  658.  913,  1152. 
Elsasser,  In  re.  1131. 
Elsbree  v.  Bart,  417. 
Emery  v.  Bk.,  163,  174.  1058. 
Emison,  In  re,  858. 
Empire  Metallic  Bedstead  Co.,    In 

re,  80,  82,  83.  1100. 
Emerich,  In  re,  43,  695.  1182. 
Emslie,  In  re.  263,  582,  1045,  1075, 

1077,    1094. 
Endl,  In  re.  1206. 
Engle,  In  re,  1116. 
Epstein,   In  re.   774,  1158,  1186. 
Ecden,  In  re,  182. 
Erdman  v.  Moore  &  Co.,  1007. 
Erwin,  In  re,  131. 
Erwin  v.  U.  S.,  1220. 
Eschwege,  In  re,  1029,  1030. 
Ess,  In  re.  140. 
Etherbri^Ige  v.  Sperry.  1079. 
Etheridge  F^irniture  Co.,  In  re,  16, 

36,  45,  519.  580,  1226. 
Ethier,  In  re,  1199. 
Evans,  In  re,  186.  1031,  1034. 
Evans  v.  Carey.  391. 
Evans  v.  Eaton,  180. 
Evans  v.  Rounsaville,  440,  1095. 
Everitt.  In  re,  16,  23,  180,  181,  185, 

192,  193.  1111. 
Ewing,  In  re,  81. 
Ewing,  In  re,  81. 


Eyster 
1115. 


v.  Gaff,   262,   269,   577,  580, 


F. 


Fahey,  In  re,  344. 

Falconer,  In  re,  186. 

Falkner.  In  re,  151,  831. 

Fallon,  In  re,  863. 

Falls   City   Shirt  Mfg.   Co.,   In   re, 

895,  1042,  1044,  1045.  1046,  1078. 
Falter  v.  Reinhard,  744,  749,  835, 
Faneway,  In  re,  1159. 
Farish,  In  re.  185,  190. 
Farley.  In  re,  137. 
Farley  &  Co.,  In  re,  979. 
Farley  v.  Moog,  171. 
Farmer.  In  re,  169,  992,  995. 
Farmer  v.  Taylor.  185. 
Farmers  &  Mechanics  Nat.  Bk.  v. 

Bearing,  1217. 
Farnam  v.  Hefner,  1171. 
Farnsworth,  In  re,  1131. 
Farrar  v.  Walker,  1216. 
Farrell,  In  re.  344. 
Farrin  v.  Crawford,  82,  953. 
Farris  v.  Richardson,  125,  136. 
Fay,  In  re,  55. 
Feinberg.  In  re,  55,  538. 
Feigenbaum,  In  re,  374. 
Feldstein,  In  re,  363,  364,  365,  368. 
Fells.  In  re,  170. 
Fellerath,   In   re,   16,    85,   576,   580, 

883.  1085,  1113,  1115,  1212. 
Fellheimer  v.  Durham.  198. 
Fellows  V.  Blacksmith,  104. 
Fellows  V.  Freudenthal,    352.    358, 

361,  638,  678,  703,  953,  1163. 
Fellows  V.  Hall,  412. 
Felstein,  In  re.  523. 
Fendley,  In  re,  37,  579. 
Ferguson,  In  re.  78,  412,  960,  1116, 

1118. 
Ferguson  v.  Peckham.  1092. 
Ferris,  In  re,  353. 
Fidelity    Ins.    Trust    &    D.    Co.    v. 

Iron  Co.,  1007. 
Field  v.  Com.,  667. 
Field  V.  U.  S..  1013. 


XXX 


TABLE    OF    CASES. 


[references  are  to  sections] 


Fielding,  In  re,  707,  708,  1056.  1070. 

Fields  V.  Harter,  358. 

Fife,  In  re,  232,  234,  436,  992,  994. 

File  Co.  V.  Barrett,  1150. 

Filer,  In  re,  31,  70. 

Fillinger  v.  Thornton,  97,  250. 

Finan,  In  re,  351,  358,  361,  366. 

Finck.  In  re,  172. 

Findlay,  In  re,  506.  814,  831,  835. 

Fininger,  In  re,  798. 

Finkelstein,  In  re,  351,  358,  637. 

Finn,  In  re,  953. 

Finnegan  v.  Hall,  436. 

First  Nat.  Bank  v.  Shuler,  256. 

First  Nat.    Bk.    v.    Klug.    589.    590, 

595,  618. 
Fish  V.  Fiske,  1182. 
Fisher,    In    re,    598,    600,    606,    611, 

1149,  1168,  1182. 
Fisher  v.  Hayes,  60. 
Fisher  v.  Henderson,  1103. 
Fisher  v.  Tifft,  425. 
Fisk,  In  re,  57.  59.  60, 
Fitch  V.  McGie,  952. 

Fitch  V.  McGill,  949. 

Fitchard,  In  re,  351,  357,  358.  1164. 

Fite  V.  Fite,  422. 

Fitzpatrick  v.  Flannegan,  160. 

Fitzsimmons,  In  re,  190. 

Fixen,  In  re,  519.  520,  546,  576,  580, 
877,  953,  955. 

Fixen  &  Co.,  In  re,  53,  519,  521,  717, 
875. 

Flanagan,  In  re.  461,  925. 

Flanagan,  ex  p..  866. 

Flanagan  v.  Pearson,  261,  273,  429, 
432,  510. 

Flatt  V.  Stadler  &  Co.,  1164. 

Fleitas  v.  Mellen,  440. 

Fleitas  v.  Richardson,  429,  440. 

Flesh  V.  Lindsay,  1041. 

Fletcher  v.  Money,  1078. 

Flick,    In    re,    862,    875,    964,    1041, 
1042. 

Florcken,  In  re,  681. 

Fly.  In  re,  198. 

Foerst,  In  re,  521,  542,  679. 

Fogerty,  In  re,  30. 


Folb,  In  re,  838.  922,  960. 
Fonda,  In  re,  234. 
Foot,  In  re,  163,  867,  1218. 
Forbes,  In  re,  230,  1022. 
Ford,  In  re,  847,  983. 
Foreman  v.  Bigelow,  285. 
Foreman  v.  Burleigh,  607. 
Forsith  v.  Merritt,  134. 
Forsyth,  In  re,  161,  949,  953,  1033. 
Forsyth  et  al..  In  re,  842. 
Forsyth  v.  Hammond,  595. 
Forsyth  v.  Vehmeyer,  432.  433,  435. 
Forsyth  v.  Woods,  138. 
Fortune,  In  re,  845. 
Fort  Wayne  Electric  Corporation, 
In  re,  688,  707,  875,  895,  922,  953, 
963,  966,  1045,  1056. 
Foster.  In  re,  32,  74,  440,  953,  960, 

1091, 
Foster  v.  Ames,  1195. 
Foster  v.  Hackley,  950. 

Foster  v.  Inglee,  1014. 

Foster  v.  Rhodes,  1175. 

Fourth  Nat.  Bk.  of  Chicago  v. 
Bank,  1048. 

Fowler,  In  re,  400.  535,  577,  762, 
1144,  1163,  1207. 

Fox  et  al..  In  re,  297. 

Fox  V.  Eckstein,  71,  77. 

Foxall  V.  Levi,  239. 

Francis,  In  re,  131. 

Francis  Valentine  Co.,  In  re.,  78, 
250,  256,  576,  580,  598,  980.  1018, 
1112,  1114,  1122.  1172,  1207,  1212. 

Frank,  In  re,  829.  833,  863.  1172. 

Frankel,  In  re,  427,  442,  999,  1046, 
1171, 

Franklin,  In  re,  261. 

Franklyn,  In  re,  175. 

Franklin  Co.  Nat.  Bk.,  In  re,  842. 

Franklin  Syndicate.  In  re,  45,  523, 
524,  526,  675,  898. 

Franks,  In  re.  282,  577,  1212. 

Franks,  ex  p.,  1207. 

Frazier,  In  re,  1079,  1080. 

Frazier  v.  Barnum,  198. 

Frazier  v.  McDonald,  227. 


TABLE    OF    CASES. 


XXXI 


[REFERENCES    ARE    TO    SECTIONS] 


Frazier  v.  Southern   L.   &   T.    Co., 

1115. 
Frear,  In  re,  374.  414. 
Freche,  In  re,  437. 
Fredenburg,     In     re,    55,    526,    541, 

697. 
Frederick,  In  re,  1190. 
Freedmen's  Savings  &  Trust  Co.  v. 

Earle,  1118. 
Freedlander  v.  Holloman,  286, 1033, 

1035. 
Freemen,   In  re,  172,  198.  348,  361, 

637,  1153. 
Freischberg,  In  re,  489. 
Freund.    In   re.   133,    137.    139,    143, 

153,  358,  361,  365,  374,  414,  637. 
Frey  v.  Torrey.  426,  429. 
Frice,  In  re,  346,  349,  544. 
Frick,  In  re,  842,  1007,  1014,  1015, 

1022,  1038,  1092. 
Friedberg,  In  re,  367. 
Friederich,  In  re,  169,  182,  183,  184, 

200,  201. 
Friedman,  In  re,  54,  637,  716,  843, 

851,  1087,  1113,  1206. 
Frisbie,  In  re.  530,  938. 
Frischberg,  In  re,  454. 
Frizzelle,  In  re,  530. 
Frost,  In  re,  161,  921,  922,  978. 
Frostman  v.  Hicks,  273,  387. 
Fry,  In  re,  544. 
Fulton  V.  Hammond,  429. 
Fulton  Club,  In  re,  116. 
Funk,  In  re,  69.  127,  227,  229. 
Funckenstein,  In  re,  496,  744,  749. 

G. 

Gage  V.  Gage,  497. 
Gainey,   In  re,  185. 
Gallagher,  In  re.  1182. 
Galland  v.  Galland,  63. 
Gallinger,  In  re,  465.  949. 
Galvin,  In  re,  1100. 
Gammon,  In  re,   361. 
Cans  V.  Ellison,  878,  969. 
Gany,  In  re,  434,  1158. 
Garcewick,  In  re.  1081,  1186. 
Garden,  In  re,  183,  189. 


Gardner,  In  re,  707,  1008,  1184, 1187. 
Gardner  v.  Cook,  1044,  1095. 
Garner  v.  Second  Nat.  Bk.  of  Prov- 
idence, 248. 
Garlington,  In  re,  986. 
Garner,  In  re,  183,  189. 
Garrett,  In  re,  193,  422. 
Garrison,  In  re,  115,  367. 
Garrison  v.  Markley,  55. 
Gaskin's  Case,  667. 
Gasser,  In  re,  347,  470,  479. 
Gattman  v,   Honea,   71,   545,   1090, 

1107. 
Gay,  In  re,  137,  368,  374,  797,  953. 
Gaylord,  In  re,   351,   354,  361,   429, 

544,  638,  1182. 
Gebhardt,  In  re,  502. 
Gee  V.  Gee,  429. 
Geery,  In  re,  17. 
Geisreiter  v.  Sevier,  675. 
Geist,  In  re,  232. 
Geister,  In  re,  247.  248,  251,  269. 
Genther  v.  Wright,  472. 
Geo.  M.  West  Co.  v.  Lea  Bros.,  24, 

474. 
Georgia  Handle  Co.,  In  re,  1094. 
Gerdes,    In    re,    762,    572,    581.    582, 

1153,  1173. 
Gerry,  In  re,  1196. 
Gerson,  In  re,  25,  442,  684,  708,  807, 

983,  986,  997,  999,  1042,  1046,  1056, 

1093.  1195. 
Gettleston,  In  re,  714,  720. 
Ghiglione,  In  re,  94,  1031. 
Ghirardelli,  In  re,  267. 
Gibbs,  In  re,  190.  1173. 
Gibson  v.  Davil,  1090. 
Gibson  v.  Lewis,  1001. 
Gies,  In  re,  103L 
Gifford  V.  Helms,  1191. 
Gilbert,   In  re,  69,  70,   80,   81,  523, 

525,  533,  535,  897,  898. 
Gilbert  v.  Priest,  580,  581. 
Gilblom,  In  re,  1018. 
Gilblom  &  King,  In  re,  980. 
Gillett,  In  re,  914,  922,  923,  964. 
Gilman  v.  Lockwood,  20. 
Githens  v.  Shiffler,  71,  77. 


xxxu 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Glaser,  In  re,  233,  234. 

Glass,  In  re,  347,  348,  477. 

Glassburner,  In  re,  983,  1104. 

Glassner,  In  re,  523. 

Glenny  v.  Langdon,  764. 

Glicman,  In  re.   1090. 

Globe  Cycle  Wks.,   In  re,  248.  256, 

266,  683,  1212. 
Globe  Ins.  Co.  v.  Ins.  Co.,  1100. 
Glover  Grocery  Co.  v.  Dome,  319. 
Goddard  v.  Weaver.  256. 
Godsin  v.  Sanctuary.  655. 
Goedde,  In  re,  159. 
Goldberg,  In  re,  268,  479,  577.  581. 
Goldenberg,  In  re,  470. 
Goldman,  In  re.  1172. 
Goldman  v.  Smith,  69.  472.  473,  765, 

895,  1076.  1077,  1078,  1104. 
Gold    Mountain    Min.    Co.,    In    re, 

1116. 
Goldschmidt,  In  re,  364.  1100. 
Goldsmith,  In  re,  544.  638.  865. 
Goldstein,  In  re,  442,  999,  1044,  1046, 

1093. 
Golson  V.  Neihoff,  952. 
Good,  In  re,  597,  599,  600,  605. 
Goodall,  In  re,  342.  348.  358.  638. 
Goodall  V.  Tuttle,  21,  575,  579,  583, 

1182. 
Goodier  v.  Barnes,  587. 
Goodfellow,  In  re,  32,  111,  359,  495, 

637. 
Goodman,  In  re,  128. 
Goodman  v.  Brenner,  606. 
Goodman  Shoe  Co.,  In  re,  983,  1128. 
Goodrich  v.  Wilson,    532,   580,   581, 

971. 
Goodrich  v.  Hunton,  412. 
Goodrich  v.  U.  S..  59. 
Goodridge.  In  re,  545.  637. 
Goodwin,  In  re,  971,  1026. 
Goodwin  v.  Sharkey,  232,  256. 
Gorham,  In  re,  133,  148.  160. 
Gose,  In  re,  1171. 
Gottardi,  In  re,  675,  695.  715,  716. 
Goyer  v.  Jones,  415. 
Grace  v.  Smith.  131. 
Grady.  In  re,  143. 


Graham,  In  re,  192,  198,  239,   257, 

964. 
Graham  v.  Stark,  963,  964,  965, 1090, 

1104,  1149. 
Grahs,  In  re.  1099,  1103,  1168,  1210. 
Grand,  In  re,  889. 
Granger,  In  re,  842,  1185. 
Granger  &  Sabin,  In  re,  986. 
Grant,  In  re.  69.  73,  744,  749. 
Grant  v.  Bank,  963. 
Grant  Co.  v.  Dawson,  474. 
Graves,  In  re,  189,  348,  623,  995. 
Graves  v.  U.  S.,  540. 
Graves  v.  Winter,  122. 
Gray,  In  re,  171,  760. 
Gray  v.  Chiswell,  171. 
Gray  v.  Rolls,  991,  1130. 
Grefe,  In  re.  349. 
Gregg,  In  re,  1017. 
Green,  In  re,  82,  160,  164,  681,  984, 

1014. 
Green  v.  Elgie,  61. 
Green  Pond  Railroad  Co.,  In  re,  41. 
Green  v.  Sarmento,  431. 
Greenberg,  In  re,  54,  351,  363. 
Greenfield,  In  re.  133. 
Green  River  Deposit  Bank  v.  Craig, 

82,  120,  477,  480. 
Greenwald,  In  re,  1041. 
Greth,  In  re,  876. 
Griffin,  In  re,  187,  193.  542. 
Griffin    Pants    Factory    v.    Nelmo 

Racket  Store  Co.,  956. 
Griffith,    In   re,    192,    196,    496,   535, 

760,  1144,  1148.  1164,  1207,  1210. 
Griffiths,  In  re,  1091. 
Grimes,  In  re,  31,  169,  183,  184,  185, 

201,  206. 
Grimes  Bros.,  In  re,  203,  1020. 
Grinnell.    In   re,    1044,    1089,    1102, 

1194,  1199. 
Grist,  In  re,  257. 
Griswold  v.  Hazard,  241. 
Griswold  v.  Pratt,  16. 
Groetzinger,  In  re,  161,  169,  1176. 
Groom  v.  West,  1132. 
Groosman,  In  re,  358,  703. 
Grover  v.  Clinton,  232,  429. 


TABLE    OF    CASES. 


XXXIU 


[REFERENCES    ARE    TO    SECTIONS] 


Groves,  In  re.   183,  282,  901.   1019. 

1033,  1198. 
Grow  V.  Ballard,  957,  963. 
Grubbs  Wiley  Grocery  Co.,  In  re, 

1041. 
Guardineer,  In  re,  355,  366. 
Guild  V.  Butler,  413. 
Gunike,  In  re,  227. 
Guras  v.  Porter,  1079. 
Gurney,  In  re,  74.  1091,  1210. 
Gutman,  In  re,  248.  252,  1173. 
Gutman  &  Wenk,  In  re.  248. 
Gutwilllg,  In  re,  19.  36.  45.  82,  250, 

255,  576,  580,  582,  1100,  1162,  1226. 

H. 

Haake,  In  re.  192,  193,  984.  1092. 

Haas.  In  re,  738,  749. 

Haber  v.  Klauberg,  273. 

Hadden  v.  Dooley,  983,  1080; 

Hadley,  In  re.  458. 

Haensell.  In  re.  282.  437,  1156. 

Hafer,  In  re,  201. 

Hagan,  In  re,  990,  1061. 

Hagardine-McKitrick    Dry     Goods 

Co.  V.  Hudson,  433. 
Hager  v.  Comstock.  987. 
Haggerty  v.  Morrison,  415. 
Haight  V.  Love,  667. 
Hale,  In  re.  144.  241,  374. 
Hale  V.  Allison,  1216. 
Hale  V.  Hardon,  1216. 
Hale  V.  Taylor,  1216. 
Haley,   In   re,    849. 
Hall,  In  re,   43.  133,   197,  812,  875, 

877,  909,  956. 
Hall  v:  Allen,  598,  602. 
Hall  v.  Kincell,  36.  43.  576,  580. 
Hall  V.  Suydam.  639. 
Hall  V.  Wager,  67.  69. 
Halliburton  v.  Carter.  424,  429. 
Halliburton  v.  Clarke,  416. 
Hamburger.  In  re,  1046. 
Hamburger  &  Frankel,  In  re.  1020. 
Hamilton,  In  re.  989,  1170. 
Hamilton  v.  Bryant.  415.  424. 
Hamilton  Furniture  Co.,  In  re.  890. 

1158. 


Hamlin,   In  re,    134.   149,  313,   317, 

331,  336,  339,  1203. 
Hamlin,  ex  p.,  899. 
Hamlin  v.   Bridge,  448. 
Hammond.    In    re,    573.    576,    580, 

1087,  1114,  1163.  1212. 
Hammond  v.  Coolidge,  368. 
Hamper,  In  re,  140. 
Hancock  v.  Singer  Mfg.  Co.,  1014. 
Handell,  In  re,  1031. 
Handlin,  In  re,  201. 
Hanna.  In  re.  865,  1149. 
Hanna  et  al..  In  re,  1075,  1188. 
Hannibal,  In  re,  458,  465,  478. 
Hanover  Nat.  Bank  v.  Moyses,  14, 

15,   16,   22,  99,   180,   900,   909,   917, 

1228. 
Hansen,  In  re,  348,  403.  1152. 
Hanson  v.  Paige,  144,  146. 
Harbaugh,  In  re.  137,  914. 
Harber.  In  re.  184,  189,  198. 
Harding,  In  re,  995. 
Hardt  v.   Schuylkill   Plush  &  Silk 

Co.,  256,  1114.  1124. 
Hardy  v.  Bininger,  465. 
Hardy  v.  Clark  et  al.,  952. 
Hare,  In  re,  25,  738,  739. 
Hargardine-McKittrick  Dry  Goods 

Co.  V.  Hudson,  995. 
Hargreaves,  In  re.  131. 
Harke  v.  U.  S..  1012. 
Harmanson  v.  Bain.  579. 
Harmanson,   Ass.,    v.    Bain  et  al., 

112. 
Harmon  v.  Clark.  138. 
Harper,  In  re,  78,  1100. 
Harper  Bros..  In  re,  80,  82. 
Harrell  v.  Beall.  1218. 
Harrington.  In  re,  183,  191.   198. 
Harris,  In  re,  25,  137,  140,  178,  215. 

218,  297,  462,  465,  840,  1152,  1153. 
Harrison,    In    re,    842,    1078,    1079, 

1084,  1208.  1210.  1214. 
Harrison    Mercantile    Co.,    In    re, 

1029. 
Harrison  v.  McLaren.  67. 
Harrison  v.  Sterry,  1002. 
Harry  Dickinson,  In  re,  877. 


XXXI V 


TABLE  OF  CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Harthill,  In  re,  1144. 

Harthorn,  In  re,  1043. 

Hartman,  In  re,  139,  144,  465. 

Hart  Mfg.  Co.,  In  re,  1020,  1080. 

Hartough,   In  re,  133. 

Harvey  v.  Crane,  1091. 

Harwood,  In  re,  843. 

Haskell.  In  re,  222,  290,  310. 

Haskell  v.  Ingalls,  949. 

Haskell  v.  Jones,  695. 

Haskin,  In  re,  203. 

Haslett.  In  re,  1187. 

Hastings  v.  Spencer,  1018. 

Hatch,  In  re'^  185,  190. 

Hatch  V.  Seeley,  1118. 

Hatcher,  In  re,  494. 

Hatcher  v.  Jones,  193. 

Hathorn,  In  re,  133,  523.  1100, 

Hatje,  In  re,  468,  532,  984. 

Hauck,  In  re,  963. 

Haughey  v.  Albin,  81,  952. 

Havens,  In  re.  747. 

Havens  v.  Bank,  973. 

Hawes  v.  Cooksey.  422. 

Hawk,  In  re,  399. 

Hawk  V.  Hawk,  250,  988,  1163. 

Hawkeye  Smelting  Co..  In  re,  88, 

89,  506. 
Hawkins,  In  re,  82. 
Hawkins  v.  Bk.,  609. 
Hawkins  v.  Learned,  18. 
Hawley,  In  re,  695,  889,  1199. 
Haworth  v.  Travis.  193,  1116. 
Hay  et  al.,  In  re.  198. 
Hayden,  In  re,  521,  528,  546,  1152. 
Hayden  v.  Buddensick,  655. 
Hayes  v.  Comstock,  986. 
Hayes  v.  Dickinson,  1155. 
Hayes  v.  Ford,  387. 
Hayes  v.  Nash,  433. 
Haynes,  In  re,  735,  1062,  1071. 
Hays,  In  re,  1171. 
Hays  v.  Dickinson,  1175. 
Hays  V.  Fischer,  57. 
Hays,  Foster  &   Ward  Co.,   In  re, 

1171. 
Hazelton.  In  re,  237,  239. 
Hazelton  v.  Valentine.  234. 


Head,  In  re,  201,  1104. 

Headley,   In   re,   37,    198,   348,   359, 

528,   637,  639,   842,    844,    850.  862, 

889,  1049. 
Heard  v.  Arnold,  446. 
Heard  v.  Jones,  842. 
Heard  v.  Sturgis.  1220. 
Heath,  In  re,  386.  408,  520,  523,  526. 
Heath  v.  Shaffer,  262,  277,  577.  581, 

763,  1007,  1173. 
Hebbert,  In  re,  487. 
Hebbart,  In  re,  945. 
Heffron,  In  re,  487,  945. 
Hegerty,  In  re,  1059,  1065. 
Heinsfurter,    In    re,    322.    471,    875, 

920,  1005. 
Heirschberg,  In  re,  1031. 
Heirs  of  Emerson  v.  Hall,  1220. 
Heller,  In  re,  218,  949. 
Hemby-Hutchinson  Pub.  Co..  In  re, 

578. 
Hempner,  In  re,  54. 
Hemstreet.  In  re,  717. 
Hendricks  v.  Fitzpatrick.  423,  511. 
Henley  v.  Lanier,  185,  391. 
Hennequin  v.  Clews,  429. 
Henry.  In  re,  137.  149.  216. 
Henry  C.  King  Co..  In  re,  953. 
Henry  Zeltner  Brewing  Co..  In  re, 

67,  80. 
Henschel,  In  re,  515,  523,  734,  735, 

738,  832,  835. 
Hepburn  v.  Grlswold.  180. 
Herdic,  In  re,  351,  365,  367. 
Herman,  In  re.  331. 
Herndon  v.  Howard,  282. 
Herman,  In  re,  331,  342,  833. 
Hernich.  In  re,  1168. 
Herpich,  In  re.  952. 
Herrick,  In  re,  162,  402. 
Herrick  et  al.,  In  re,  1060. 
Herrman,  In  re,  377,  438,  850. 
Herron  Co.  v.  Superior  Court,  16, 

17.  117.  1228. 
Hersey  v.  Elliot,  1155. 
Hertzog,  In  re,  995. 
Heryford  v.  Davis,  1080. 
Herzikopf,  In  re,  470,  479,  481. 


TABLE    OF    CASES. 


XXXV 


[REFERENCES    ARE    TO    SECTIONS] 


Hesseltine  v.  Prince,  1165. 

Hester,  In  re,  185,  1166. 

Hewitt  V.  Norton,  582. 

Heyman,  In  re,  358,  484,  502,  626, 

627,  846,  886. 
Hicks,  In  re.  228,  537,  745.  755,  986. 
Hiclis  V.  Knost,   569,  572,  575,  577, 

578,  581,  627,  762,  1207. 
Hicks  V.  Longhorst,  963. 
Higgins,  In  re.  85,  1113,  1114. 
Higgs  V.  Tea  Co.,  1134. 
High  et  al.,  In  re,  40. 
Highland  Ave.  R.  R.  v.  Equipment 

Co.,  591. 
Hilberg,  In  re,  1014. 
Hilborn,   In  re,   288,   293,   295,  306, 

678. 
Hill,  In  re,  185,  189.  348,  365,  553. 

637,  828. 
Hill  V.  Harding.  269,  415,  417,  424. 
Hill  V.  Levy.  473,  920,  983. 
Hill  V.  Simpson.  963. 
Hills  V.  McRae,  171. 
Hilton,  In  re,  252,  895,  1005. 
Hindman,  In  re,  198. 
Hinds,  In  re,  165,  175. 
Hines,  In  re,  206,  798. 
Hinsdale,  In  re,  321,  327. 
Hirsch,    In    re.    133.    178,    348,   353, 

358,   359.   363.   364,    366,   386,   414, 

544,  637,  638. 
Hirschman,  In  re,  1005. 
Hiscock  V.  Jaycox.  169,  230,  844. 
Hitchings,  1191. 
Hixon,  In  re,  348,  351,  375,  544. 
Hoadley,  In  re,  358,  637,  1153,  1184, 

1187. 
Hoag,  In  re,  194. 
Hoagland,  In  re,  1046. 
Hobson  V.  Markson,  1100. 
Hodeman  v.  Dewey,  982. 
Hodgkinson,  In  re,  164. 
Hoffman,  In  re.  347.  351,  875,  878, 

953.  969,  1178. 
Holbrook.  In  re,  162. 
Holden,  In  re,  1167.  1168. 
Holden  v.  Sherwood,  273. 
Holland,  In  re.  250.  922,  1144. 


Holland  v.  Martin,  426. 
Hollenfeltz,  In  re,  1175. 
Hollister,  In  re,  846. 
Holloway,  In  re,  262,  267,  763,  1007, 

1173. 
Holman,  In  re,  348,  351,  364,  544. 
Holmes,  In  re,  534. 
Holmes,  ex  p.,  1044. 
Holstein,  In  re,  358,  364. 
Holt,  In  re,  529. 
Holtz,  In  re,  357,  364. 
Holyoke   v.    Adams,   384,   415,    424, 

473. 
Home  Ins.  Co.  v.  Hollis,  283. 
Home,  The,  In  re,  300,  301,  412.  415, 

1095. 
Honestro,  In  re,  979. 
Hook,  In  re,  986. 
Hoover,  In  re,  189,  403,  1044. 
Hoover  v.  Wise.  964. 
Hopkins,    In   re,   36,   133,    189,    193, 

496,  1081,  1087,  1113. 
Horgan,    In   re,   358,   366,   521,  546, 

582,  598,  599. 
Horner  v.  U.  S.,  244. 
Hosie,  In  re,  866,  1159. 
Hoskins  v.  Wall.,  192. 
Hosmer  v.  Jewett,  1159. 
Hough  V.  Bk.,  982. 
Houghton,  In  re,  347,  349,  465,  940, 

949,  1171. 
House,  In  re,  357,  358. 
Houseberger,  In  re,  1212. 
Houston.  In  re,  232,  239,  422. 
Houston  V.  Bk..  682.  1195. 
Hovey,  In  re,  1065. 
Hovey  v.  Home  Ins.  Co.,  1137. 
Howard,    In   re,   55,    163,    520,    538, 

540,  541,  858.  867,  889. 
Howard,  Cole  &  Co.,  In  re,  847. 
Howard  Nat.  Bk.,  In  re.  302. 
Howard  Nat.  Bk.,  ex  p..  982,  1127, 

1129. 
Howe  V.  Sheppard.  1013. 
Howell.   In  re,  348,  358. 
Howell  V.  Jones,  1164. 
Howland,  In  re,  128,  1081. 
Howland  v.  Carson,  398,  435,  992. 


XXXVl 


TABLE    OF    CASES. 


Hoyt,  In  re.  1071. 

Hubbard,  In  re,  422,  437. 

Hubbel,  In  re,  755. 

Huber,  In  re,  358,  638. 

Ruber  v.  Huber,  637. 

Hubert  v.  Horter.  273,  424. 

Huddell,  In  re,  1010. 

Huddleston,  In  re,  36,  249.  267,  675. 

Hudgins  v.  Lane,  133,  134,  166,  374, 

414. 
Hudson  V.  Mercantile  Nat.  Bk.  of 

Pueblo,  Colo.,  351. 
Hudson  V.  Schwab,  570. 
Hufnagel,  In  re,  256,  386,  1020,  1120. 
Huffman,  In  re,  949,  1116. 
Hughes,  In  re,  201,  1049. 
Huglll,  In  re,  1090,  1091. 
Hull,  In  re,  1091,  1174.  1212. 
Hulse,  In  re,  538. 
Humbert,  In  re,  471. 
Humble  v.  Carson,  386,  419. 
Hummitsch,  In  re,  348. 
Hunergardt  v.  Dry  Goods  Co.,  190. 
Hunt,  In  re,  77,  185,   193.  479,   733, 

876,  881,  922,  965. 
Hunt  V.  Holmes,  302,  1134,  1137. 
Hunt  V.  Poole,   133,    135,    141,   227, 

481. 
Hunter,  In  re,  348,  401,  532,  901. 
Hunter  v.  Byng,  1018. 
Huntington  v.  Saunders,  599. 
Hurley  v.  Smith,  965. 
Hurst,  In  re,  296,  321. 
Hurst  V.  Tifft,  1188. 
Hussman,  In  re,  358,  359,  637. 
Huston.  In  re,  1094. 
Hutchins  v.  Briggs,  598. 
Hutchins  v.  Iron  Wks.,  1175. 
Hutchinson,    In   re,    598,   851,   1051, 

1182,  1215. 
Hutchinson  v.  Otis,  851. 
Hutton,  In  re,  193. 
Hyde  v.  Corrigan,  949. 
Hyde  v.  Gload  Mfg.  Co.,  In  re,  465, 
.   487. 

Hyde  v.  Woods,  1182. 
Hyman,    In   re.   324.    358,   365.   637, 

675,  813. 


[REFERENCES    ARE    TO    SECTIONS] 

Hymes,  In  re. 


216. 


Hyslop  V.  Hoppock,  30,  452. 
I. 

Idzall,  In  re,  351,  363,  637. 
Imp.  Co.  V.  Bradbury,  600. 
Ind.  Cin.  &  Laf.  R.  R.  Co.,   In  re, 

37,  487. 

Independent  Thread  Co.,  In  re,  920. 
Independent  Ins.  Co.,  In  re,  16, 

38,  251. 

Indianapolis  Water  Co.  v.  Ameri- 
can Strawboard  Co.,  58. 

Ingalls,  In  re,  158. 

Institution  v.  Sprague,  1216. 

Insurance  Co.  v.  Comstock,  605, 
610. 

Ins.  Co.,  In  re,  88,  989. 

Ins.  Co.  V.  Ins.  Co.,  82,  1162. 

Irons,  In  re.  1122. 

Irons  V.  Bank,  443. 

Irons  &  Coon,  In  re,  1018. 

Irving,  In  re,  161,  273. 

Irving  V.  Hughes,  250. 

Isaacs,  In  re,  162. 

Isador,  In  re,  520,  526,  530,  533. 

Isett  V.  Stuart.  452,  581,  598. 

Israel,  In  re,  922. 

Ives,  In  re,  28,  60,  377,  399,  468, 
496,  497,  606,  1201,  1020. 

Ives  V.  Tregent,  1201. 


Jack,  In  re,  468. 

Jackson,   In  re,   183,   189,   261,  744, 

818,  848. 
Jackson  v.  Billings,  423. 
Jackson  v.  McCulloch,  67.  82. 
Jackson  &  Pearce,  In  re,  185. 
Jacobs,  In  re.  312,  323,  591,  597,  599, 

962,  963,   1090,  1099. 
James,  In  re,  1062,  1071. 
James  v.  Alt.  Delaine  Co.,  82,  145, 

949.  1001. 
James  v.  Central  Trust  Co..  248. 
Jamison  Mercantile  Co..  In  re,  598. 
Jaquith  v.  Alden,  969. 
Jaquith  v.  Rowley.  572.  578,  585. 


TABLE  OF  CASES. 


XXXVll 


Jarecki    Mfg.    Co. 

374,  414. 
Jay  Cooke,  167,  529. 
Jaycox,  599,  843,  1031. 
Jaycox,  et  al.,  In  re,  842. 
Jaycox  &  Green,  In  re,  851,  982. 
J.  B.  McFarlan  Carriage  Co.  v.  So- 

lanas,  569. 
Jefferson.  In  re,  427,  442,  522,  535, 

999,  1020,  1046,  1093,  1171. 
Jehu,  In  re,  473,  519. 
Jelsh,  In  re,  510. 
Jelsh,  et  al..  In  re,  89. 
Jemison  Mercantile  Co.,  In  re,  28, 

60,  945. 
Jenison  Mercantile  Co.,  In  re,  906. 
Jenkins  v.  Armour,  1128,  1216. 
Jenkins  v.  Mayor,  1102. 
Jenks.  In  re.  985,  1044. 
Jenks  V.  Opp,  383.  539. 
Jennings,  In  re,  1044.  1116,  1122. 
Jennys  v.  Brennan,  30. 
Jerome  v.  McCarter,  262. 
Jersey  City  Window  Glass  Co.,  In 

re,  465. 
Jervis  v.  Smith.  987. 
Jewett,  In  re.  158,  159.  165. 
Jewett  V.  Phillips.  171. 
Jobbins  v.  Montague.  36,  454,  579. 
Johann,  In  re,  40,  71,  73,  1103,  1105. 
Johnson,  In  re,  250,  1114. 
Johnson  v.  Bishop,  581,  1212. 
Johnson  v.  Collins,  415. 
Johnson  v.  May,  185.  1164. 
Johnson  v.   Rogers,  256.   765,  1115, 

1123. 
Johnson  v.  Wald,  81,  1104. 
Johnson  v.  Worden,  624. 
Jones,  In  re,  158.  161.  187,  198,  208, 

386,   465,    526,   591,    736.   850,    852, 

875,   877,   897,   938,   941,.  950,    953, 

988,   1079.   1103.   1104.   1157. 
Jones  V.  Clifton.  82,  1163. 
Jones  V.  Cooper,  415. 
Jones  V.  Horsey,  428. 
Jones  V.  Knox.  416,  444. 
Jones  V.  Lawson,  1214. 
Jones  V.  Leach,  36,  256. 


[REFERENCES    ARE    TO    SECTIONSi 

.    McElwaine,     Jones  v.  Stevens,  655,  1118. 

Jordan,  In  re,  22.  23,  163,  180,  951. 

1111. 
Jordan  v.  Downey,  283,  473,  581. 
Jordan  v.  Taylor,  250. 
Joseph,  In  re,  598,  607. 
Joseph  V.  Makley.  282. 
Joseph  V.  Raff,  282. 
Josephson,  In  re,  1079. 
Joslyn,  In  re,  1046. 
Jourdan,  In  re,   611,  875.  877,   878, 

953. 
Judson  V.  Kelty,  75,  965. 
Judson  V.  Courier  Co.,  609. 


K. 


Kahley,  In  re,  158,  965,  1195. 

Kahn.  In  re,  300,  310. 

Kahn  v.  Cone  Export  &  Commis- 
sion Co.,  878,  969. 

Kaiser,  In  re.  348,  352,  354,  544, 
548,  678,  679. 

Kaiser  v.  Richardson.  1114. 

Kai  Y.  Chung,  In  re,  101. 

Kalter,  In  re,  786,  982,  987,  1129, 
1131. 

Kamsler,  In  re,  364,  366,  531,  638, 
953. 

Kane  v.  Rice,  1091. 

Kanpisch  Creamery  Co..  In  re, 
1114. 

Kansas  City  S.  &  Mfg.  Co.,  In  re, 
960,  1161. 

Kanter,  In  re.  523. 

Karr  v.  Whittaker,  228,  942. 

Kassard  v.  Kroner,  16. 

Kasson.  In  re,  82. 

Katz.  In  re.  252. 

Kaufman,  In  re,  876,  988,  1161. 

Kavanaugh,  1115,  1116. 

Kesch.  In  re,  115. 

Kean  et  al..  In  re.  180,  183. 

Kean  v.  White.  180. 

Kearney,  In  re,  57,  59,  60. 

Kearney  v.  Case,  509. 

Keating  v.  Keefer,  192,  1104. 

Keefer,  In  re.  77.  348,  1106. 


XXXVUl 


TABLE    OP    CASES. 


519. 


463, 


Keegan  v.  King, 

683,  1152. 
Keller,  In  re,  515. 
Keenan  y.  Shannon,  270 
Kehr  v.  Smith,  1103. 
Keller,  In  re,  36,  268,  308,  458, 

466,  477,  584. 
Keim  v.  Graff.  429. 
Keller,  In  re,  160,  164,  295,  306,  310, 

863,  875,  876,  969,  1014,  1195. 
Kellogg,   In  re,  48,   540,  682,   1148, 

1152,  1173,  1174,  1188,  1217. 
Kelly,  In  re.  473,  1141,  1144. 
Kelly  V.  Strange.  1156. 
Kelly  Dry  Goods  Company,  In  re, 

83,  114.  267,  682,  695,  696,  733,  828, 

834,  1037,  1194. 
Kemmemer  v.  Tool,  581. 
Kemp,  In  re,  1087,  1114. 
Kennedy,  In  re,  53. 
Kennedy  et  al.,  In  re,  650. 
Kenney,   In  re,   140,   248.   256,   576, 

580,    598,    980,    1018,    1085,    1116, 

1118,  1162,  1172,  1205,  1212. 
Kenyoh,  In  re,  365,  458,  953. 
Kenyon  et  al..  In  re,  119. 
Kerby,  Denis  Co.,  In  re,  440.  1007, 

1008,  1045,  1077,  1094. 
Kerosene  Oil  Co.,  In  re,  262,  267. 
Kerr,  In  re,  190. 
Kerr  v.  Hamilton,  1013. 
Kerr  &  Roach,  In  re,  25. 
Kerske  Bros.,  In  re,  576. 
Kerski,  In  re,  260.  683. 
Kersten,  In  re,  83,  153. 
Ketchum,  In  re,  53,  241.  243,  1182. 
Keyes  v.  McKirrow,  1032. 
Keyser,  In  re,  516,  849. 
Keystone  Coal  Co.,  In  re, 
Kidder  v.  Horrabin,  580, 
Kiker.  In  re,  920. 
Killian,  In  re,  683. 
Kimball.   In   re,    82,    232, 

248,   433.    516,   576.    580, 

1032. 
Kimberling  v.  Hartley,  1208. 
Kindt.  In  re,  36,  470,  479,  487,  516, 


[REFERENCES    ARE    TO    SECTION.S] 

36,  250,  576,  580,         680,    760,    960,    1075,    1080.    1099, 


117. 

1207. 

233. 

234. 

849. 

862, 

1151. 
King,  In  re,  81,  866,  1159. 
King  V.  London,  1114. 
Kingman.  In  re,  980,  1018. 
Kingman  &  Co.   v.  Western  Mfg. 

Co.,  609. 
Kingon,  In  re,  765. 
Kingsbury,  In  re,  67,  876. 
Kingsbury  v.  Mattocks,  1220. 
Kingsbury  v.  Thorp,  132. 
Kingsley,  In  re,  419,  441,  519,  523, 

995. 
Kinkead,  In  re,  128. 
Kinmouth  v.  Braentigam,  1116. 
Kinott,  In  re,  44. 
Kirkland,  In  re,  1013. 
Kitchen  v.  Lawry,  256.  1123. 
Kitzinger,  In  re.  279,  992,  1061. 
Klapholz,  In  re,  1051. 
Klein,    In   re,    248,    578,    762,    1018, 

1212. 
Klein  v.  U.  S.,  1220. 
Kleinhaus,  In  re,  1188. 
Kletchka,  In  re,  256,  576,  580.  1123. 
Klingaman,  In  re,  875. 
Knapp  V.  Anderson,  In  re,  384,  415, 

444. 
Knapp  V.  Hoyt,  391. 
Knight,  In  re,  158,  584. 
Knight  V.  Cheney,  1207. 
Knoepfel,  In  re,  835. 
Knost  &  Wilhelmy.  In  re,  875,  922. 
Knott,  In  re,  1001. 
Knott  V.  Putnam,  232,  252,  429,  432, 

1001. 
Knox,  In  re,  312,  1003. 
Koch,  In  re,  523,  529,  679.  720. 
Kohlsaat,  In  re,  296,  322. 
Kohlsart  v.  Hognet,  962. 
Kohn,  In  re,  875,  953. 
Kreuger,  In  re.  521, 
Krinsky,  In  re.  255. 
Krogman,  In  re,  579,  866. 
Kross,  In   re,  971,   981.    1025,  1027, 

1030,  1031. 
Kruegar,  In  re.  137,  140.  163.  354. 
Krum,  In  re,  965. 


TABLE    OF    CASES. 


XXXIX 


[refekences  are  to  sections] 


Kuffler,  In  re.  738,  744. 
Kuntz,  In  re,  54,  637,  716,  1206. 
Kuntzler  v.  Kohaus,  3. 
Kurth,  In  re,  1018. 
Kyler,  In  re,  551. 


L.  &  N.  R.  R.  V.  Louisville,  592. 
Lacey.  In  re,  458,  484. 
Lachem^er,  In  re,  422. 
Laclede  Gas  Co.  v.  Murphy,  592. 
Lacy.  In  re.  941.  1050,  1096. 
Lady  Bryan  Lin  Co.,  In  re,  268. 
Lafleche,   In  re.  352.  365. 
Lains,  1018. 

Laird,  In  re,  1045,  1094. 
Lake,  In  re.  176.  1108.  1218. 
Lake,  ex  p.,  999. 
Lake  Erie  &  W.  R.  Co.  v.  Bank, 

1044. 
Lake  Superior,  In  re,  833. 
Lake  Superior  Ship  Canal,   In  re, 

736. 
Lake  Superior  Ship  Canal,  R.  R.  & 

Canal  Co..  In  re.  833.  850.  986. 
Lamb  v.  Brown,  216,  446. 
Lambert,  In  re,  185,  193,  763.  1009, 

1095.  1173. 
Lammer,  In  re,  190. 
Lamoille    County    Nat.     Bank    v. 

Stevens  Estate,  165. 
Landy  v.  Kansas  City.  535. 
Lane,  In  re,  158.  174,  1022. 
Lang,  In  re,  653,  960. 
Langdon,  In  re.  296. 
Lange.  In  re.  60,  207,  466.  532,  953, 

1168. 
Lange,  ex  p.,  618. 
Langley,  In  re,  16.  82,  1107. 
Langley  v.  Perry,  82. 
Langslow,  In  re.  137. 
Langslow  et  al..  In  re,  797. 
Lanier.  In  re.  520,  548,  591. 
Lansing  v.  Manton,  45.  519. 
Lapeyre  v.  U.  S..  655. 
Lapsley.  In  re,  843. 
Laskaris,  In  re,  33,  458. 


Last    Chance    Min.    Co.    v.    Tyler 

Min.  Co.,  489, 
Lathrop,  In  re.  162,  377,   521.  539, 

717. 
Lathrop  v.   Drake,   234,   580,   1112, 

1182. 
Laughlin,  In  re,  139,  144,  164,  178, 

374,  414. 
Laundry  v.  Andrews,  950. 
Laurie.  In  re.  763.  1171. 
Lavender  v.  Gosnell,  16,  1228. 
Lawler,  In  re,  1044. 
Lawrence,  In  re,  82,  1121. 
Lawrence  v.  Graves,  504,  553. 
Lawson,  In  re,  185.  203.  748. 
Lazarovic,  In  re,  840,  1003. 
Lazzari  v.  Havens,  1094. 
Lea  Bros.  v.  Geo.  M.  West  Co.,  82, 

88,   248,   255,  494.  582.   1100,   1225. 
Leach  v.  King,  191. 
Leachman,  In  re.  541. 
Leaf,  In  re.  171. 

Leavenworth  Sav.  Bk.,  In  re,  919. 
Lee,  In  re,  876. 
Leeds,  In  re,  81. 
Leeman,  In  re,  875. 
Legg,  In  re,  1075,  1077,  1080,  1182, 

1157,  1161. 
Leggett  V.  Allen.  597. 
Lehman  v.  Corsby.  576,  577.  580. 
Lehman  v.  Strassberger.  506. 
Leibowitz,  In  re,  895,  994. 
Leicester  v.  Hoadley.  436. 
Leidigh    Carriage    Co.    v.    Stengel. 

22,  82.  99,  473,  474,  481,  494.  480, 

582,  655.  923,  1162.  1224,  1226. 
Leigh,  In  re.  1214. 
Leigh  Bros..   In  re,   25,   1075,  1077, 

1079,  1091.  1157,  1161. 
Leigh  Lumber  Co..  In  re.  161. 
Leighton.  In  re,  32.  454. 
Leipziger,  In  re,  321. 
Leiter  v.  Payson,  470. 
Leland.  In  re,  144.  172,  175,  216,  414. 

658.  760.  1083.  1148. 
Lemmel.  In  re,  637,  638. 
Lemmon  &  Gale  Co.,  In  re.  580. 
Lemont,  In  re,  734. 


xl 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Lengert  Wagon  Co.,  In  re,  41,  1212. 

Lenke  v.  Booth,  429. 

Lentz,  In  re,  134,  169,  200,  201. 

Lentz,  et  al.,  In  re,  208. 

Leonard,  In  re,  465,  466. 

Leslie,  In  re,  351.  358,  543,  544,  637, 

638. 
Lesser,  In  re,  41,  256,  274,  358,  361, 

599,  637,  638,  851,  980.  1018,  1113, 

1114,  1115,  1118,  1122.  1207.  1212, 

1214. 
Leszynsky,  In  re.  348,  637,  678. 
Levin,  In  re,  54,  349,  372,  716. 
Levor  v.  Seiter,  963,  1116. 
Levy,  In  re,  133,  295,  412.  415,  444, 

741,  774,  798,  854,  889,  995. 
Lewensohn,  In  re,  151,  232,  237,  238, 

239,   426,   433,    734,  739,  740,   744, 

749,  791,  1094. 
Lewin.  In  re,  36L  638,  675,  692,  971. 
Lewis,  In  re.  25,  44,  67,  85,  139,  163, 

293,   296,  461,    649,    950,   962.  985, 

1010,  1018,  1022,  1042.  1044. 
Lewis  V.  U.   S.,  164.  416,  421.   570, 

1000,  1002,  1010,  1013. 
Lewis  V.  Hawkins,  440. 
Lewis,  Tr.,  v.  U.  S.,  416. 
Leyson  v.  Davis,  592. 
L.  Humbert  Co.,  In  re.  121,  492. 
Libby,  In  re,  198. 
Libby  v.  Hopkins,  1126,  1131. 
Libbey  v.  Strassburger.  435. 
Lieber,  In  re.  357,  360.  364,  435. 
Linforth.  In  re,  1000,  1186. 
Lingan  v.  Bagley,  239. 
Linkenbroker  v.  Detrick,  189. 
Linn  v.  Smith,  920. 
Linton,  In  re,  869. 
Lipke.  In  re,  53,  241. 
Lipman.  In  re,  219,  995,  1148. 
Lipset,  In  re,  679. 
Lissberger,  In  re.  295. 
Liszynsky,  In  re,  352. 
Litchfield,  In  re,  25,  227,  377,  981. 
Little,  In  re,  33.  189.  294,  414,  454, 

465,  677,  880,  881,  1114.  1131. 
Little  v.  Alexander,  952.  1085. 
Littlefield,  In  re,  368. 


Littlefield  v.  Gray,  16,  1228. 
Little  River  Lumber  Co..  In  re,  737, 
761,    869,    872,    1033,     1034,    1102, 
1149. 
Livergood  v.  Greer,  437. 
Lloyd,  In  re,  165.  866,  919,  923. 
Lloyd  V.  Chapman,  610. 
Lloyd  V.  Strobridge,  963,  1090. 
Lockerby,  In  re,  145,  148,  201. 
Lockett  V.  Hoge,  765,  1092. 
Lockhardt,  In  re,  123. 
Lockmeyer,  In  re,  979. 
Locks,  In  re,  358,  875. 
Lock-Stub  Check  Co.,  In  re,  980. 
Lockwood,  In  re,  629. 
Lockwood  V.  Sakter,  448. 
Loder,  In  re,  747,  983,  986. 
Lodge,  In  re,  174. 
Lodge  V.  Pritchard,  17. 
Logan,  In  re,  350,  544,  638. 
Long,  In  re,  135,  160,  163,  164,  186, 

348. 
Long  V.  Conner,  1212. 
Longis  V,  Creditors,  24. 
Longstreth  v.  Pennock,  1046.  1093. 

1171. 
Lookout  Lumber  Co.  v.  Hotel,  1007. 
Lord,  In  re,  81,  429,  527,  54L  949. 
Lorillard,  In  re,  995. 
Lott  V.  Young,  131,  140. 
Louchheim  Bros.  v.   Henzey,  81. 
Loud.  In  re,  1079,  1085. 
Loudon  V.  Bk.,  963. 
Louis  &  Bros.,  In  re,  752. 
Louisville  Trust  Co.  v.  Cominger, 

572,  578,  916,  980. 
Louisville  Tr.  Co.  v.  Marx,  580. 
Lount,  In  re,  889. 
Lovell  V.  Beauchamp,  136. 
Lowe,  In  re,  158,  162,  168. 
Lowenstein,  In  re.  358,  637,  803. 
Lowrie,  In  re,  761. 
Lucius  Hart  Mfg.  Co.,  In  re,  1046. 
Ludeling  v.  Chaffee,  584. 
Ludeling  v.  Felton,  412. 
Ludowici   Roofing  Tile  Co.   v.   Pa. 

Inst,  for  Blind,  172.  1094. 
Luckins  v.  Aird,  77,  1104. 


TABLE    OF    CASES. 


xli 


[REFERENCES    ARE    TO    SECTIONS] 


Lumpkin  et  al.  v.  Eason,  181. 

Lymond  v.  Barnes,  397. 

Lynch,  In  re,  535. 

Lynde  v.  McGregor,  1165. 

Lyon,    In    re,    548,    875,    889,    1157, 

1193. 
Lyons  &  Co.,  In  re,  1020. 
Lyon  V,  Clark,  575. 

M. 

Mabin  v.  Raymond,  1209. 
MacDonald  v.  Moore,   1018,  1162. 
Mack  V.  Woodruff.  138. 
Mackel  v.  Rochester,  523. 
Mackellar.  In  re,  735.  738,  739,  740, 

832. 
Mackey,  In  re,  32,  123,  216,  218,  367, 

368,  938,  960. 
Macon  Sash,  Door  &  Lumber  Co., 

In  re,  16,  54.  1228. 
Macy  V.  Jordan,  993. 
Madison,  In  re,  1131. 
Magata,  In  re,  186. 
Magid  V.  Hope   Silk  Mfg.  Co.,  30, 

452. 
Magle,  In  re,  33. 
Magnus,  In  re,  875. 
Mahler,    In   re,   427,   442,   920.    999, 

117L 
Mahoney  v.  Ward,  28,  121,  137.  214. 

375,  456,  648,  797,  928. 
Main  v.  Glen,  965. 
Maine  v.  Gillman,  655. 
Maisner  v.  Maisner,  422. 
Major,  In  re.  1199. 
Malder,  In  re,  999. 
Malino,  In  re,  733,  834. 
Mall  V.  Ullrick,  399. 
Mallery,  In  re,  744. 
Mallory,  In  re,  271,  1040. 
Malot,  In  re.  137,  145.  919. 
Maltbie  v.  Hotchklss,  16. 
Mammoth  Pine  Lumber  Co.,  In  re, 

684,  705,  707,  938. 
Manchester  Bk.,  In  re,  171. 
Manhattan  Ice  Co.,  In  re,  984. 
Mann,  In  re,  919. 
Mannheim.  In  re,  581. 


Manning,  In  re,  180,  184,  203. 

Mansfield,  In  re,  403. 

Many,  In  re,  986. 

Maples,  In  re,  97,  437,  497,  913. 

March  v.  Heaton,  1199. 

Marcus,  In  re,  232,  425. 

Marcus  et  al.,  985. 

Marden  v.  Phillips,  1104. 

Marine  Machine  &   Conveyor  Co., 

In  re,  30,  83,  114. 
Markham  v.  U.  S.,  643. 
Marks,    In    re.    133,    178,    414,    986, 

1145. 
Marks  v.  Barber,  1132,  1136. 
Markson  v.   Heaney,  250,  253,  267, 

570,  1155,  1195. 
Markson  &  Spalding  v.  Heaney,  30, 

1148. 
Marquette,  In  re,  190. 
Marrett  v.  Atterbury.  1059. 
Marrett  v.  Murphy,  158,  169. 
Marrioneaux,  In  re,  403,  545. 
Marsh,  In  re,  348,  349,  350,  351,  358, 

36L  363.  366,  367,  544,  599,  1187. 
Marsh  v.  Armstrong,  45,  1108,  1145. 
Marshall     v.   Knox,   570,    577,    580, 

1144. 
Marshall  Paper  Co.,  In  re.  342,  381, 

389,  390.  417,  419,  443,  1005,  1042. 
Marter,  In  re,  82,  579,  1207. 
Martin,  In  re,  67,  193,  386,  683. 
Martin  v.  Bank,  205. 
Martin  v.  Berry,  14,  17,  24. 
Martin  v.  Bigelow,  948. 
Martin  v.  Hunter's  Lessee,  575,  583. 
Martin  v.  Toot  67. 
Marvin,  In  re,  229. 
Marwick,  In  re,  158. 
Marx,  In  re,  361,  364,  365,  544,  638. 
Marx  V.  Hart,  415. 
Mason,  In  re,  42.  43,  131,  172,  454, 

495,  677. 
Mason  &  Hamlin  Organ  Co.  v.  Ban- 
croft.  323. 
Mason  &  Son,  In  re,  886. 
Mason  v.  Warthen,  261.  581. 
Massachusetts  Brick  Co.,  In  re,  66. 

82,  923. 


xlii 


TABLE    OF    CASES. 


[REFERENCES    A 

Masey  v.  Allen,  1161. 

Mather   v.    Coe,    80,    145,    265,    459, 

460,  648,  762,  949. 
Mathers,  In  re,  855. 
Matthers,  In  re,  295. 
Matthews.  In  re,  682,  683,  695,  797, 

1031. 
Matthews  v.  Tufts,  232. 
Matthews  v.  Westphall,  960. 
Mattock  V.  Farrington,  1095. 
Mauran  v.  C.  L.  Co.,  41,  980,  1162. 

Maurer  v.  Frantz,  953. 

Mawson,  In  re,  345,  355,  458.  526. 

Maxwell  v.  Faxton,  495. 

May,  In  re,  164.  166,  351,  1182,  1183. 

May  V.  Breed,  5. 

May  V.  Harper,  465. 

May  &  Merwin,  In  re.  999. 

Maybin,  In  re.  429.  995,  1058. 

Maybin,  v.  Raymond,  427.  761,  981. 

Mayer,   In  re,   52,   53,   54,   191.  298, 

535,  681,  716,  720.  1030,  1031,  1041, 

1206. 
Mayer  v.  Hellman,  18,  1100. 
Mayer  v.  Hermann.  964. 
Mayer  v.  Nias,  1132. 
Mayers,  In  re,  1161. 
Mayo,  In  re,  980. 
Mayor  v.  Walker,  429. 
Mays  V.  Bk.,  1152. 
Mays  V.  Fritton,  1085. 
McAdam,  In  re.  358,  637. 
McAdoo  V.  Loomis,  429. 
McBachron,  In  re,  363,  366. 
McBride,   In   re,   55.    197,   994,   995, 

1013. 
McBrien,  In  re,  520,  528. 
McBryde,  In  re,  358. 
McCallum,  In  re,  1186. 
McCann  v.  Randall,  423. 
McCarthy,  In  re,  361,  419. 
McCartney.  In  re,  1114.  1123,  1212. 
McCarty,  In  re,  386. 
McCauley,  In  re.  436.  858,  980,  986, 

992,  1018. 
McCauley  &  Sons,  In  re.  983. 
McCollough  V.  Goodhart.  18. 


RE    TO    SECTIONS] 

McConnell,    In    re.    842,   851,   1045, 

1046,  1093. 
McCormick,  In  re,  53,  54,  716,  1206. 
McCutcheon,  In  re,  184,  195. 
McDanlel  v.  Stroud,  160,  607,  1090. 
McDonald,    In    re,    347.    412,    1154, 

1168,  1177. 
McDonald  v.  Duskam.  950. 
McDonald  v.  Matney,  132. 
McDonald  v.  Moore,  82. 
McDonald  v.  Willis,  516,  849. 
McDonough,  In  re,  963. 
McDuff,  In  re,  352,  678,  695. 
McEwen,  In  re,  158,  159,  174. 
M«Farland,  In  re,  133,  134. 
McFarland   v.    Goodman,    186,    192, 

1166. 
McFaun,   In  re,   139,   143,  178.  374, 

465. 
McGahan  v.  Anderson,  52,  188,  759. 
McGee,  In  re,  69. 
McGehee  v.  Hentz,  252. 
McGill.  In  re,  687,  734.  736,  818,  832. 
McGilton,  In  re,   1196. 
McGivin,  In  re,  544. 
McGlynn,  In  re,  744,  749. 
McGowmey  v.  Ry.  Co.,  1080. 
McGrath  &  Hunt,  In  re,  1020. 
McGuire,  In  re.  361,  366. 
McGurn,  In  re.  348,  351,  353,  364. 
McHarry,   In  re,  1187. 
McHenry  v.  Alford.  594. 
McHenry  v.  La  Societe  Francaise, 

581,  853. 
Mclntire,  In  re,  348.  401.  403,  520. 
McKay,  In  re,  1075,  1077,  1080, 1132, 

1148,  1157,  1161,  1214. 
McKay  v.  Funk,  253,  262. 
McKay's  Case,  In  re,  1220. 
McKean  v.  Rackey,  1095. 
McKee,  In  re,  16,  18,  255,  582. 
McKee  v.  Lee,  878,  969. 
McKee  v.  Spiro,  535. 
McKenna,  In  re,  1165. 
McKenna  v.  Simpson.  581. 
McKeon,  In  re,  321. 
McKibben.  In  re.  74,  241.  465,  553. 
McKinney,  In  re,  995. 


TABLE    OF    CASES. 


xliii 


[REFERENCES    A 

McKinsey  v.  Harding.  39,  840. 
McLam,  In  re,  624.  966,  1085,  1104. 
McLane,  In  re,  1090. 
McLaren  v.  Pennington,  1132. 
McLean,  In  re.  158,  176. 
McLean   v.   Cadwalader,   763,  1173, 

.1185. 
McLean  v.  Mayo,  764,  766. 
McLean  v.  Rackey,  1121. 
McMillan  v.  McNeill,  20,  431. 
McNab,  In  re,  296. 
McNalr,  In  re,  542,  554,  727. 
McNair  v.  Mclntyre.  160,  963,  1022, 

1090,  1195. 
McNally  v.  Mulherin,  et  al.,  186. 
McNamara,  In  re,  49.  256.  350.  358, 

439,    637.    760,     1075.    1084.    1148, 

1208,  1210,  1214. 
McNamara  v.  Helena  Coal  Co..  117. 
McNat,  etc..  Mfg.  Co..  In  re,  906. 
McNaughton,  In  re.  454.  481.  483. 
McPeck,  In  re,  1219. 
McQuade  v.  Trenton,  592. 
McVey,  In  re,  348,  349,  922. 
Mead,  In  re,  610. 
Mead  v.  Bank.  158. 
Mead  v.  Piatt.  610. 
Meador  v.  Everett.  1171. 
Meador  v.  Sharpe.  429. 
Mebane,  In  re,  1195. 
Medberg  v.  Swan,  383. 
Medomac  Bank  v.  Curtis,  1132. 
Medsker  v.  Bonebrake,  137,  139. 
Meeks  v.  Whatley,  1089.  1196 
Meldaur,  In  re,  761.  774. 
Melick.  In  re,  178. 
Mellen,  In  re,  523. 
Mendelsohn,  In  re,  82,  220,  351,  358, 

365,  468,  637,  840,  862,  871.  937. 
Mendenhall,    In    re,    135.    137,    521, 

938,  942. 
Mercer,  In  re,  922. 
Merchants'  Bk.  v.  Cook.  67,  1104. 
Merchants'  Ins.  Co..  In  re,  16,  116, 

248.  251,  582,  953,  1100. 
Merchants'  Nat.  Bk.  v.  Truax.  67. 
Merchants'   Nat.   Bk.   of  Syracuse 

V.  Comstock,  413. 


RE    TO    SECTIONS] 

Mercur,  In  re,  82,  144,  172,  178,  465, 

919. 
Meridian  Nat.  Bank  v.   Gallaudet, 

132. 
Meriweather,  In  re,  201. 
Merrick,  In  re,  513,  840,  862.  863. 
Merrifield,  In  re,  1020,  1046. 
Merrill,  In  re,  135,  858.  1216. 
Merrill  v.  Schwartz,  433. 
Merriman,  In  re,  391,  320. 
Merriman's  Estate,  In  re,  983. 
Messengill,  In  re.  295. 
Metallic  Bedstead  Co.,  In  re.  80. 
Metcalf   V.    Barker.    261,   577,  1114, 

1115,  1116,  1118,  1207,  1218. 
Metcalf  V.  Officer.  140. 
Metcalf  Bros.  v.  Barker.  580. 
Metz  V.  R.  R.  Co.,  1005. 
Metzer,  In  re,  760,  1007,  1084,  1148, 

1173. 
Metzer  Toy  &  Novelty  Co.,  In  re, 

952. 
Meyer.  In  re,  82,  135,  136,  141,  144, 

145,   158,   178,   267.  489,   607,   875, 

939,  949.  1131. 
Meyer  v.  Richmond,  592. 
Meyers,  In  re,  78,  81.  133,  137,  138, 

139,   158,   178,   265,  351,   358,   365, 

374,   402,   405,  414,   465,   597,   637, 

1098. 
Mfg.  Co.  V.  Hamilton,  1100. 
Michaels  v.  Post,  42.  920,  992,  1003. 
Michel,  In  re.  318,  1030. 
Michener  v.  Payson,  545,  763.  1216. 
Michie.  In  re,  572,  578. 
Migel,  In  re,  233,  234.  239,  253,  257. 
Miller.   In  re.   68,    78,   81,   144,   162. 

182,   248,    466,   487,   681,   719,   922, 

996,  1044,  1065,  1206. 
Miller  v.  Bowles,  1115. 
Miller  v.  Chandler,  386. 
Miller  v.  Mackenzie.  301. 
Miller  v.  O'Kain.  852. 
Miller  v.  Sherry,  1118. 
Miller  v.  Tiffany,  1217. 
Miller  Electrical  Maintenance  Co., 

In  re,  1216. 


xliv 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 

Mills,  In  re,  158,  159,  160,  165,  845,     Morrill,  In  re,  983. 

939. 
Mills  V.  Lewis,  875. 
Milwain,  In  re,  818,  850. 
Miner,  In  re,  66,  351,  358,  361,  695, 

845,  920,  922,  923,  98L 
Mingo  Valley  Creamery  Ass'n,  In     Morrison,  In  re,  195.  842,  1090. 

re,  815.  Morrison's  Asslg.  v.  Bright,  1132 

Mininger  v.  Champlin,  77.  Morrow,  In  re,  358,  637. 

Minon  v.  Van  Nostrand,  239.  Morse,  In  re,  156,  158,  163,  744. 

Mitchell,  In  re,  133,  761,  774,  1020,     Morse  v.  Godfrey,  42. 

1040,  1046,  1095,  1188.  Morse,  et  al.,  v.  Kaufman,  429. 

Mitchell  V.  McClure,  569,  572,  575,     Morton,  In  re,  922,  1058. 


Morris,  In  re,  94,  186,  208,  295,  297, 

310,  312,  377,  515. 
Morris  v.  Davidson,  251,  1173,  1212. 
Morris  v.  Dodd,  1168. 
Morris  v.  Swartz,  42.  739. 


577,  581,  627,  1207. 
Mitchell  V.  U.  S.,  31,  32,  34. 
Mitteldorp,  In  re,  1029. 
Mobley  v.  Cureton,  448. 
Mock  V.  Market  St.  Nat.  Bank,  986. 
Moebins,  In  re,  851. 
Monroe,  In  re,  403,  446. 
Montgomery,   In   re,   168,   851,   876, 

1031. 
Montgomery     v.     Bucyrus     Mach. 

Works,   1159. 
Mooney,  In  re,  54. 
Moore,  In  re,  53,  138,  139,  357.  990, 

993,  1148,  1220. 
Moore  v.  Harley,  481. 
Moore  v.  Horton,  431. 
Moore  v.  Walton,  131. 
Moore  v.  Young.  965. 
Morales,  In  re.  913,  984. 
Morales,  et  al.,  In  re,  1005. 
Moran.  In  re,  183,  218,  1095. 
Moran  v.  Bogart,  1127. 
Moran  v.  Sturges,  248. 
Moran  v.  King.  183. 
Morey  Mercantile  Co.  v.  Scheffer, 

878. 
Morgan,  In  re,  77,  348.  349,  351.  365. 
Morgan,  et  al.,  In  re,  54. 
Morgan  v.  Allen.  1128. 
Morgan  v.  Campbell,  1078,  1093. 
Morgan  v.  Mordell.  1136. 
Morgan  v.  Thornhill,  510,  570,  580, 

598.  599.         '    ■ 
Morganthal.  In  re,  218. 
Morley,  In  re,  171. 


Morton    Boarding   Stables,    In   re, 

116. 
Moses.  In  re,  1155. 
Moses  Taylor,  In  re,  575. 
Mosier,  In  re,  165.  201.  1152. 
Moss,  In  re,  115,  116,  363. 
Mott.  In  re,  1199. 
Motion,  In  re,  172. 
Moyer,  In  re,  78,  79,  842,  949.  1112, 

1172,  1212. 
Moyer  v.  Dewey,  412. 
Mudd,  In  re,  218.  348.  349,  358. 
Mudd  V.  Burrows,  29. 
Mueller  v.  Brentano,  458. 
Mueller  v.  Brass,  575. 
Mueller  v.   Nugent,   53.  54.   56,   57, 

62,  248,  572,  577,  585,  597,  618,  662, 

675,   681,  685,  695,  714,  720,  1144, 

1206. 
Muhlhauser   Co.,    In   re,    707,    708, 

1056. 
Muirhead  v.  Aldridge,  1164. 
Mulee,  In  re,  59.  60. 
Mullen,  In  re.  1205,  1210,  1212. 
Muller,  In  re,  268.  1145. 
Mulligan,  In  re,  1085,  1187. 
Munger.  In  re.  1106. 
Munn,  In  re,  72,  1104. 
Munson  v.  R.  R.  Co.,  583. 
Murdock,  In  re,  247.  519,  983. 
Murphy,    In   re,    36,   127.    250,   569, 

580,  581,   582,  917. 
Murphy  v.  Young,  273. 
Murray,   In   re.   137,   139.   158.   401, 

453,  494,  502,  657,  984. 


TABLE    OF    CASES. 


sIy 


[REFERENCES    ARE    TO    SECTIONS] 


Murray  v.  Neal,  576,  580,  581. 

Murray  v.  Roberts,  428. 

Muse  V.  Hotel  Co.,  590. 

Muslin  V.  Creditors,  24. 

Mussey,    In   re,   249.   389,   398,   487, 

677,  683,  714,  1152,  1228. 
Musto,  In  re,  543.  1104. 
Mutual  Mercantile  Agency,  83,  116, 

119,  471.  936,  940,  1014. 
Mutual  Res.  Life  Ass'n  v.  Beatty, 

391. 
Myers,  In  re,  198,  218,  851,  875,  953, 

1046,  1116. 
Myers  v.  Davis,  1132. 
Myers  v.  Seeley,  763,  1216. 

N. 

Nachman,  In  re,  523. 

Nathan,  In  re,  250,  260,  575,  576, 
580,  953,   967,  1205. 

Nat.  Iron  Co.,  In  re,  1195. 

National  Bank  v.  Burkhart,  655. 

National  Bank  v.  Moyset,  343,  356. 

National  Bank  v.  Warren.  949. 

Nat.  Exc.  Bk.  v.  Pepperdine,  963. 

Nat.  Bank  of  So.  Reading  v.  Saw- 
yer, 413,  846,  858,  886. 

N.  C.  V.  University,  570. 

Neal  V.  Clark,  429,  435. 

Nebe,  In  re.  514,  516,  849,  1021. 

Needham,  In  re,  358. 

Neely,  In  re,  256,  985,  1049,  1188. 

Neff  V.  Barr,  655. 

Neilson,  In  re,  473,  479, 

Neiman,  In  re.  988.  1187. 

Neiman  v.  Shoolbraid,  279. 

Nelson.  In  re,  81,  201,  458,  465,  949. 
1116. 

New,  In  re.  886. 

Newberry,  In  re.  576.  580,  581. 

Newborg  v.  Louisville  Trust  Cp., 
966. 

New  Brunswick  Carpet  Co.,  In  re, 
984. 

Newcomber,  In  re,  876. 

New  Hope  Mining  Co.,  In  re,  1018. 

New  Lamp  Chimney  Co.  v.  Brass 
&  Copper  Co.,  38,  42. 


Newland.  In  re,  881,  989,  1169,  1185. 
Newman.  In  re,  363,  367,  368. 
New  Orleans  v.  Steamship  Co.,  59. 
Neustadler  v.   Chicago  Dry  Goods 

Co.,  906,  924,  936,  940.  944. 
Newton,  In  re,  50.  738.  740. 
New     York    Economical     Printing 

Co.,  In  re.   600,  1075,   1083,  1085, 

1148. 
New  York  v.  Eno,  234. 
New  York  Kerosene  Oil  Co.,  In  re, 

1007,  1173. 
New   York  Life  Ins.   Co.  v.   Arm- 
strong. 1168. 
New  York  Life  Ins.   Co.   v.  Flack, 

1168. 
New   York   &    Westchester   Water 

Co.,  In  re.  115.  116.  118. 
New  York  Mail   S.   S.   Co.,   In  re, 

1029,   1034,   1060. 
Nicholas  v.  Eaton,  1187. 
Nicholas  v.  Murray,  397,  995.  1214. 
Nickerson.  In  re,  862.  886.  888. 
Nicodemus.  In  re,  126,  920. 
Nigel,  In  re.  435. 
Nimick  v.  Coleman,  598. 
Nims,  In  re,  158. 
Nixon,  In  re,  95. 
Noakes,  In  re.  1157. 
Noble,  In  re.  734,  830. 
Noble  V.  Hammond,  429.  435. 
Noell.  In  re,  186,  187. 
Noesen,  In  re.  920,  995. 
Noonan,    In   re,    133.   135,   137.  139, 

145.  367,  374,  414,  461,  582. 
Noonan  v.  Orton,  282,  1156. 
Norcross,  In  re,  69.  922,  1003. 
Norcross    v.    Mercantile    Co.,    609, 

610. 
Norcross  v.  Nathan,   460,  569,  576, 

580,  581.  .  ,  . . 

Norfolk,  In  re,  164.. 
North  v.  House.  965. 
Northern  Iron  Co.,  In  re.  830. 
Northrop.  In  re.  248,  249,  683. 
Norton,  In  re,  813. 
Norton  v.  Billings,  1104,  1107. 
Norton  v.  De  La  Villeburn.  286. 


xlvi 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Norton  v.  Hood,  1154. 
Nounan  &  Co.,  In  re,  917. 
Novak.  In  re,  919,  1149. 
Nowell,  In  re.  232,  239,  422,  979. 
Noyes,  In  re,  534,  761. 
Nunn,  In  re,  183.  184,  189. 
Nuns,  In  re,  138. 


O'Bannon,  In  re,  363,  1104. 
Obbard,  In  re,  228. 
O'Brian,  In  re,  37,  137,  229. 
O'Brien,  In  re,  47,  141,  178. 
O'Brien  v.  Weld,  267. 
Oberhoffer,  In  re,  1051. 
Ockershausen,  In  re,  63. 
Oconee  Milling  Co.,  In  re,  1044. 
O'Connell,  In  re,  1026. 
O'Connor,    In   re,    276,    1087,    1113, 

1123,  1158,  1159,  1186,  1207. 
Odell.  In  re,  116,  320.  363. 
Odell  V.  Wooten,  415,  444. 
Oderkirk,  In  re,  190. 
O'Donnell,  In  re,  430. 
O'Donohoe,  In  re,  547. 
O'Gara,  In  re,  358,  637. 
Ogden  V.  Saunders,  16,  20. 
Ogden  V.  Redd,  391. 
O'Fallon,  In  re,  1198. 
O'Farrell,  In  re,  227. 
Ogles,  In  re,  54,  261,  265,  266,  465. 

473,  485,  716,  949,  1049,  1206. 
Ohio  Coop  Shear  Co.,  In  re,  1075, 

1077.  1079,  1091,  1148,  1157,  1161, 

1214. 
Oil  Co.  V.  Hawkins,  1158,  1173. 
O'Keel,  In  re,  542. 
Okell,  In  re,  351. 
Olcoot  V.  McLean,  634. 
Oleson,  In  re,  185,  401,   1179. 
Oliver,  In  re.  54,  403.  681,  875,  969, 

716,  1154,  1206. 
Oliver  v.  Cunningham,  276. 
O'Mara,  In  re,  234. 
Olmstead,  In  re,  349.  940. 
Olney  v.  Tanner,  256,  1123. 
O'Neil  V.  Dougherty,  261. 
Onslow  V.  Corrie,  1171. 


Opelousas  &  Great  West.  R.  R.  Co'., 

In   re,   118. 
Orcutt.  In  re,  351,  365. 
Ordway,  In  re,  377. 
Ordway  Bros.,  In  re,  495. 
Oregon  Bull.,  etc.,   Co.,   In  re,  25, 

67,  458,  486,  953,  984. 
Oregon  Iron  Works.  In  re,  579. 
Orem  v.  Harley,  458. 
Oriental  Society,  In  re,  115,  116. 
Osage,  In  re,  475. 
Osage  Valley,  etc.,  Co.,  In  re,  920, 

1005. 
Osborn,  In  re,  183.  198. 
Osborne,  In  re,  348,  349. 
Osborne  v.  McBride,  162,  169. 
Osborne  v.  Perkins,   356,   358,    605, 

606,  638. 
Otis  v.  Hadley,  963. 
Ott,  In  re,  420,  685,  1014. 
Otto,  In  re,  358. 
Overman  v.  Quick,  996. 
Overstreet,  In  re,  181. 
Overton,  In  re,  743. 
Owens,  In  re,  180,  193,  1167. 
Owings,  In  re,  876. 
Owsley  V.  Corbin,  429. 


Pacific  Mutual  L.  I.  Co.  v.  Fisher, 

1007. 
Packer  v.  Whittier,  386,  432,  509, 

591. 
Paddock,  In  re,  852,  1003. 
Page,  In  re,  1180. 
Page  v.  Edmunds,  1180. 
Paige,  In  re,  473.  648. 
Palmer,  In  re,  347,  355,  356.  402. 
Palmer  v.  Hussey,  429,  432. 
Paret  v.  Sticknor,  300. 
Parham,  In  re,  838. 
Park,  In  re,  186,  203. 
Parker,  In  re,  191,  198,  210,  228,  637, 

733,  1014. 
Parker  v.  Phillips,  143. 
Parkes,   In   re,   838,   842,   843,   851, 

1173. 
Parks,  In  re,  168,  185. 


TABLE    OF    CASES. 


xlvii 


Parmenter  Mfg.  Co. 

16.  1224,  1228. 
Parmenter  Mfg.  Co.  v.  Stoever,  78, 

85,  605. 
Parsons  v.  Topliff,  81.  1085. 
Patten  v.  Carley,  348,  1083,  1084. 
Patterson,  In  re,  239,  257,  432,  433, 

435,  524,  526,  862. 
Pattison  v.  Wilbur,  419,  431,  446. 
Patton  V.  Vaughan.  667. 
Patty  Joiner  Co.  v.  Cummins.  1100. 
Pauly,  In  re,  470,  742,  761,  835,  884, 

980,  1018,  1029,  1034.  1036. 
Payne  v.  Able,  358. 
Payson  v.  Dietz,  30.  570,  580. 
Peabody,  In  re,  184,  198,  755,  1020, 

1192.   1199. 
Peacock,  In  re.  348,  360,  373,  377. 
Pearce,  In  re,  637. 
Pearce  v.  Cooke,  171. 
Pearson,  In  re,  49,  54,  71,  716.  735, 

764,  953,  1144,  1206,  1210. 
Pease.    In    re,    158,    164,   845,    1116, 

1152. 
Peck  V.  Connell,  963. 
Peck  V.  Jenness,  577,  1115. 
Peck  V.  Mitchell,  1113,  1114. 
Peck  Lumber  Co.,  In  re,  1112. 
Peck  Lumber  Co.  v.  Mitchell,  1087. 
Peebles,  In  re,  1095,  1129. 
Pegues,  In  re.  761.  1023,  1034. 
Peirce.  In  re.  486. 
Peiper  v.  Harmer,  581. 
Peltashon,  In  re,  1164.  1206. 
Penn,  In  re,  139.  144,  145,  358.  454. 
Penn  Ins.  Co.  v.  Austin.  590. 
Pennewell,  In  re,  1171. 
Pennington  v.  Lowenstein,  1212. 
Penny,  In  re.  351,  354,  358,  361,  366, 

378,  544. 
Penny  v.  Taylor,  36,  186,  192.  252, 

273.  416. 
Penzansky,  In  re,  105. 
People  V.  Bartlett.  386. 
People  V.  Brennan,  36. 
Peo.  V.  Court  of  Oyer  &  Terminer, 

58. 
People  V.  Craft.  423. 


[REFERENCES    ARE    TO    SECTIONS] 

V.  Hamilton,     People  v.  Doty, 


112. 

Peo.  V.  Solomon,  63. 
People  V.  Spalding,  993. 
People  V.  Swartz,  523. 
People  V.  Tillman,  666. 

Peoples  Bank  of  Buffalo  v.  Brown, 

548. 
Pepperdine  v.  Headley,  577,  580. 
Percy  v.  Elliot,  1179. 
Perdu,  In  re,  185,  193. 
Perego  v.  Dodge,  509. 
Perm  &  Gaff  Mfg.  Co.  v.  Peale.  919. 
Perkins,    In  re.  444,   599,    744.   761, 

886,  1137. 
Perkins  v.  McCauley,  573,  577,  581. 
Perkins  v.  Smith,  112. 
Perkins  Plow  Co.,  In  re,  1079. 
Perry,  In  re,  218. 
Perry  v.  Langley,  16,  66,  82.  923. 
Peter  Paul  Book  Co.,  In  re,  83,  980. 

1018. 
Peters,  In  re,  386,  408,  520,  526. 
Petersen,  In  re,  198. 
Peterson,  In  re,  186. 
Peterson   v.   Nash   Bros..   609,   862, 

878,  969. 
Petrie,  In  re,  982,  1129. 
Petrim,  In  re,  180,  198. 
Pettis.  In  re.  238.  432,  435. 
Pevear,  In  re,  984. 
Pfromm,  In  re,  829. 
Phelan  v.  Bk.,  953,  1180. 
Phelps,  In  re,  49.  151,  628,  762.  813, 

830.  966,  1214. 
Phelps  V.  Clasen,  77. 
Phelps  V.  Curtis.  1205. 
Phelps  V.  Dudley,  876. 
Phelps  V.  McDonald,  1192,  1220. 
Phelps  V.  Rice.  1132. 
Phelps  V.  Sterns,  876. 
Philadelphia  &  Lewes  Transp.  Co., 

In  re,  116,  118. 
Phillips,  In  re,  351,  366.  514. 
Phillips  V.  Bowdoin,  1049.  1116. 
Phillips  V.  Dreher    Shoe    Co..    886, 

920,  986,  987. 
Phillips  V.  Turner.  578. 


xlviii 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Phillips  V.  Welch,  58. 

Phinney.  In  re,  367. 

Pickens  v.  Dent,  261,  1115,  1151. 

Pickett  V.  McGavick,  399. 

Pickens  v.  Roy,  572,  578. 

Pierce,  In  re,  47,  122,  137,  178,  348, 

351.   378,  379,  450,  692,  705,  1163, 

1214. 
Pierce  v.  Shipper,  429. 
Pierson,   In   re,   138,   220,  377,   465, 

950. 
Pilger,  In  re.  120,  129,  170. 
Pim  V.  St.  Louis,  592. 
Pinkel,  In  re,  994. 
Pioneer  Paper  Co.,  In  re.  55,  548. 
Pipe,  In  re,  875,  947,  953,  956. 
Pirie  v.  Chicago  Title  &  Trust  Co., 

878,  950,  963. 
Pitt,  In  re,  139,  466. 
Pittelkow.  In  re.  40,  262,  267,  580, 

581,  1009,  1195. 
Pittner,  In  re,  521,  1191. 
Pittock,  In  re,  990. 
Pitts.  In  re,  256,  261,  1123. 
Pittsburg    L.    &    C.   Wks.  v.  Bk., 

1080. 
Place,  In  re,  607. 
Plager,  In  re,  351,  365,  544. 
Piatt,  In  re,  917. 
Piatt  V.  Archer,  38,  452,  1018. 
Piatt  V.  Parker,  446. 
Piatt  V.  Preston,  82. 
Plimpton,  In  re.  376.  798. 
Plotke,  In  re.  32. 
Plummer.  In  re,  774. 
Polakoff,   In   re,   43,    348,   351,    364, 

454,  637,  677. 
Poleman.  In  re.  187.  203. 
Polidori,  In  re,  148,  165,  178. 
Pollard,  ex  p.,  1005,  1129. 
Pool  V.  McDonald,  82,  149.  289. 
Pope,  In  re.  191,  196. 
Porter.  In  re,  262. 
Porter  v.  Cummlngs.  253,  265. 
Porter  v.  Lazear,  230,  1166. 
Post,  In  re,  47,  535,  542. 
Post  V.  Corbin,  1090. 


Potter    V.    Coggeshall,    960,    1090. 

116L 
Potter  V.  Cogswell,  1148. 
Potts,  In  re,  458. 
Poud  V.  Pittard,  131. 
Powers  Dry  Goods  Co.  v.  Nelson, 

1114. 
Powell,  In  re,  541,  748.  749,  835. 
Prager,  In  re,  1190. 
Prankard,  In  re,  137. 
Pratt.  In  re,  127. 
Pratt  V.  Curtis,  1103,  1210. 
Prescott,  In  re,  852,  1173.  1188. 
Press  Post  Printing  Co.  v.  Landon 

Printing  &  Pub.  Co.,  1075,  1077, 

1157,  1161. 
Press  Pub.  Co.  v.  Monroe,  591. 
Preston,  In  re,  181,  184,  189,  193,  218, 

985,  1122,  1210,  1212. 
Price,  In  re,  41,  201,  282.  286,  519, 

526,  684,  705,  744,  900,  1207,  1212. 
Price  &  Miller,  In  re,  89. 
Princeton,  In  re.  876. 
Prinkard.  In  re,  139. 
Proby,  In  re,  306,  526,  527. 
Proctor,  In  re,  953. 
Prouty,  In  re,  598. 
Pruschen,  In  re,  53,  256. 
Pullman  v.  Upton,  1216. 
Pullman  Car  Co.  v.  Central  Trans- 
portation Co.,  591. 
Purcell,  In  re,  310. 
Pursell,  In  re,  521,  538. 
Purvine,  In  re,  53,  54,  598,  637,  716, 

1206. 
Purvis,  In  re,  835. 
Pusey,  In  re,  1157. 

Q. 

Quackenbush.  In  re.  348.  357,  358, 

392.  637,  1178. 
Quimette,  In  re.  475,  487. 

R. 

Rabenau,  In  re,  1080. 
Radcliff  V.  Woods,  201. 
Rado,  In  re,  922. 
Rafferty,  In  re,  190. 


TABLE    OF    CASES. 


xlix 


[REFERENCES    AR 

Rahrer,  In  re,  22. 

Railroad  Co.  v.  Thompson,  58. 

Rainsford,  In  re,  359.  402,  637,  639. 

Randall,  In  re,  458,  607. 

Randidge  v.  Lyman,  391. 

Randolph  v.  Canby,  1155,   1179. 

Rank,  In  re,  239. 

Rankin  v.  Fla.  R.  R.  Co.,  81,  118. 

Rantman  v.  Hopkins,  45. 

Ratcliff,  In  re,  218,  963. 

Ratcliffe,  In  re,  465. 

Rathbone,  In  re,  73,  348,  358.  359, 

435,  458,  637. 
Ratliff,  In  re,  875,  963. 
Ray,  In  re,  32,  138,  519,  995. 
Ray  V.  Brigham,  1092,  1149. 
Rayl  V.  Laphan,  398,  402,  403,  900. 
Raynor,  In  re,  458,  481. 
Ray  V.  Norseworthy.  682,  1195. 
Ray  V.  Wright,  438. 
Read.  In  re,  953. 
Read,  et  al..  In  re,  955. 
Read  v.  Knight,  955. 
Real    Est.    Tr.    Co.    v.    Thompson, 

572. 
Receivers,  etc.,  v.  Patterson  Gas  L. 

Co.,  1132. 
Redmond,  In  re,  145. 
Reed,  In  re,  367,  463.  466,  995,  1195. 
Reed  v.  Bullington,  440,  581,  1044, 

1095,  1116,  1173,  1197,  1212. 
Reed    v.    Equitable    Tr.    Co.,    262, 

1092. 
Reed  v.  Mclntyre,  1049. 
Reed  v.  Phinney,  442,  875,  953. 
Reed  v.  Union  Bk.,  189. 
Reese,  In  re,  184,  897. 
Reese  v.  Vinton,  1172,  1212. 
Refrigerating  Co.  v.  Gillett,  58. 
Reichman,  In  re,  78,  79,  949. 
Reid,  In  re,  164. 
Reid  V.  Cross,  252,  261. 
Reiman.   In  re.    180,  290,   296.   297, 

310,  312.  321,  325. 
Rein,  In  re.  806,  1024. 
Reinheimer,  In  re,  309,  310. 
Reitx  V.  People,  416,  444. 
Register  v.  State,  63. 


a    TO    SECTIONS] 

Rekersdres.  In  re.  734. 

Reliance  Storage  &  Warehouse  Co., 

In  re,  695,  696,  807,  889,  890,  976, 

989. 
Rennie,  In  re,  16,  104,  204,  377. 
Republic  Ins.  Co.,  In  re,  470,  989. 
Resler,  In  re.  219,  995,  1148. 
Revere  Copper  Co.  v.  Dimock,  273, 

383. 
Revill  V.  Claxon,  655. 
Rex  V.  Capitol  Bk.,  187. 
Reynolds.  In  re,  15,  16,  338. 
Rhoades,  In  re,  842,  895,  1005,  1087, 

1113. 
Rhoads,  In  re,  999,  1056.  1087,  1111, 

1112,  1116,  117L 
Rhoads  v.  Blatt,  510. 
Rhodes,  In  re,  184,  197. 
Rhutassel.  In  re,  360,  383,  389,  398, 

419,   432,  433. 
Rice,  In  re,  135,  159. 
Rice  v.  Grafton  Mills,  1128. 
Rice  V.  Melendy,  963. 
Rice  V.  Rudd,  195. 
Richard.    In   re,    16,    180,    184,    203, 

580,  695,  875,  876,  992.  1003.  1159, 

1228. 
Richards,   In   re,    85,   151,   523,  535, 

576,   597,    600,   604,   733,   735,    742, 

728.  835,  949,  962,  1087,  1112,  1113, 

1114,  1116,  1212. 
Richards  v.  Clark,  653. 
Richardson,  In  re,  148,  201,  270,  655. 
Richardson  v.  Coffee  Co..  1047,  1180. 
Richardson  v.  Denegre,  1047. 
Richardson  v.  Mclntyre,  415. 
Richardson  v.  New    Orleans    Coffee 

Co.,  1212,  1215. 
Richardson  v.  N.  O.  Debenture  Co., 

1047,  1212,  1215. 
Richardson  v.  Woodward,   195,   196, 

208. 
Richmond,  In  re,  295. 
Richmond  v.  Irons.  443. 
Richter's  Est.,  In  re,  876,  922. 
Rider.  In  re,  289,  293,  294.  295.  296. 

297,    298,   309,    310,   312,   862,    889, 

899. 


TABLE    OF    CASES. 


[references  are  to  sections] 


Rieser,  In  re,  1044,  1045. 
Riggin  V.  Maguire,  427,  1005. 
Riggs,  Lechtenberg   &  Co.,  In  re, 

983. 
Riker,  In  re,  578,  983,  986,  987,  1193, 

1195. 
Riorden,  In  re,  962. 
Ripon  Knitting  Wks.  v.  Schreiber, 

54,  62,  511,  637,  716,  1206. 
Rison   V.    Knapp.   67,   70,   953,   965, 

1104,  1107,  1108. 
Rix  V.  Bank.  185. 
Robert  v.  Lynch,  849. 
Robertson,  In  re,  361. 
Robertson  v.  Baldwin,  575,  583. 
Robinson,  In  re,  56,  233,  239,  426, 

435,  526,  716,  889,  1033. 
Robinson  v.  Elliott,  1091. 
Robinson  v.  Pesant,  442. 
Robinson  v.  White.    460,    576,    580, 

581,  584,  1104. 
Robinson  v.  Wilson.  193,  387. 
Roche,  In  re,  605,  607,  981. 
Rockett,  ex  p.,  1042. 
Rockwood,    In    re,    260,    577,    1141, 

1144. 
Roddin.  In  re,  138,  162. 
Rodenhagen,  In  re,  183,  203. 
Rodger,  In  re,  325. 
Rodgers  v.  Winsor,  1148. 
.Rodney,  In  re,  85. 
Roeber,  In  re,  1094. 
Rohrer,  In  re,  180. 
Rogers,  In  re,  25,  115,  249,  251.  252, 

378,  429,   510,  653,  683,   950,  1036, 

1219. 
Rogers  Milling  Co.,  In  re,  88,  875, 

922,  953. 

Rogers  v.  Palmer,  952,  964. 
Rogers  v.  U.  S.,  509. 
Rogers  v.  Winsor,  1207. 
Rolling  Mill  Co.,  In  re,  944. 
Rollins  Gold  &  Silver  Mining  Co., 

In  re,  83,  117,  919,  934. 
Rollins  V.  Twitchell.  1156. 
Romanow.    In   re.    25,    66,   82,   919, 

923.  940,  945. 


Rome  Planing  Mill,  In  re,  67,   78, 

81,  88,  949. 
Rooney,   1163. 
Roosa,  397,  402. 
Rose,  In  re.  1041. 
Rose  V.  Hart,  1132. 
Roseberry,   In  re,  1095. 
Rosenbaum,    In    re,    145,    148,    158. 

1104. 
Rosenberg,  In  re,  387,  435,  532,  890, 

1155. 
Rosenfeld,  In  re,  1031. 
Rosenfield,  In  re.  216,  348,  357,  360, 

435,  477.  528,  679,  720,  952. 
Rosenfields,  In  re,  89,  945. 
Rosenthal,  In  re,   266,  271,  415. 
Rosey,  In  re,  1013. 
Ross,  In  re,  189,  191. 
Ross  V.  Saunders,  605. 
Rosser,  In  re.  53,  54,  523.  599,  637, 

681,  716,  1206. 
Roughs  V.  Hooke,  196. 
Rouhs  V.  Hooke.  1164. 
Rouk,  In  re,  950. 
Rouse,  In  re,  1001,  1005. 
Rouse,    Hazard    &    Co.,    In    re,    16, 

598,  1042,  1124. 
Rousseau,  In  re,  1090,  1091. 
Rowans  Case,  In  re,  59. 
Rows  V.  Page,  82,  256,  278,  1149. 
Rowell  V.  Powell.  198. 
Rowland,  In  re,  57. 
Roy,  In  re,  358,  637. 
Royal,  In  re,  344,  352,  375,  637. 
Royall.   234. 

Rozinsky,  In  re,  684,  1034. 
Ruchle.  In  re,  996. 
Ruddick  v.  Billings,  599. 
Rude,  In  re,  510,  757,  848,  895.  1035, 

1078. 
Rudenick,  In  re,  148,  160,  201.  309, 

333,  334.  899,  959,  963,  1104,  1148. 
Ruffln,  In  re,  160.  170. 
Rugsdale,  In  re,  123. 
Rumsey  &  Sikemier  Co.,  In  re.  70. 
Rumsey  &  Sikemier  Co.  v.  Novelty 

Machine  Co.,  1104. 
Rundle,  In  re,  267,  426,  1003.  1005. 


TABLE    OF    CASES. 


li 


[REFERENCES    ARE    TO    SECTIONS] 


Rung.  In  re,  302. 

Runk  Bros.,  In  re,  741.  765. 

Runkle  v.  Burnham.  540. 

Rupp,  In  re,  201. 

Ruppel,  In  re,  1046,  1093. 

Rusch,  In  re,  597. 

Russell,  In  re.  36.  137,  139,  144,  161, 

148,    250,   274,   459.    510,   580,   582, 

598.  695,  889,  1212. 
Russell  V.  McCord,  145. 
Russell  V.  Owen,  581,  762. 
Russie,  In  re,  104,  204. 
Ryan,  In  re,  875,  878,  945,  953,  969, 

1126. 
Ryan  &  Griffin.  In  re,  766. 
Ryder.  In  re,  695. 


Sabin.  In  re,  30.  1078,  1092. 

Sabin  v.  Camp,  1090. 

Sabin  v.  Connor,  1094. 

Sabine,  In  re,  248.  249,  262,  683,  707, 

708,  1056. 
Sacchi.  In  re,  744,  1092. 
Safe  Deposit  &  Ins.,  In  re,  24. 
Safe  Deposit  &  Sav.  Inst..  In  re.  16, 

992,  1225. 
Safford.  ex  p..  In  re.  984. 
Sage,    Jr..    v.    Wyncoop,    952.    964, 

1081. 
St.  Albans  Foundry  Co.,  In  re.  276. 
St.  Cyr.  V.  Daignault,  1116. 
St.  Helen's  Mill  Co..  In  re,  1208. 
St.  John,  In  re,  358.  637.  1184.  1187. 
St.  John  V.  Stephenson,  391. 
Salaberry.  In  re,  945. 
Salkey,   In  re,   37,  54,  366.  521,  524, 

526,  716,  1206. 
Sallignon,  In  re,  1171. 
Salmons,  In  re,  1194.  1195. 
Salsbury,  In  re,  352,  361. 
Samson  v.  Burt,  267. 
Samson  v.  Burton,  53.  248,  276,  580. 

650. 
Sanborn,  In  re,  682.  1195. 
Sanderlin.  In  re.  160,  1090.  1176. 
Sands  Ale  Brew.  Co.,  In  re.  1149. 
Sandusky,  In  re,  163. 


Sandusky  v.  Bk..  28,  597. 

Sanford.  In  re,  75. 

Sanford  v.  Sanford,  985. 

San  Gabriel  Sanitarium  Co.,  In  re, 

116,  262,  572,  576,  580,  1007,  1195. 
Sanger  v.  Upton,  579,  1128,  1216. 
Sapiro,  In  re,  523,  546. 
Sargent,  In  re,  465,  480,  487.  945. 
Satterlee  v.  Matthewson.  180. 
Saunders,  In  re,  844.  848,  852,  871, 

876. 
Sautoff.  In  re,  1092. 
Savage,  In  re,  162. 
Sav.  Bk.  V.  Palmer,  216. 
Sav.  Fund  Doc,  In  re,  1030. 
Savory  v.  Stocking.  1171. 
Sawyer,  In  re.  312.  1010.  1042. 
Sawyer  v.  Hoag,  1128,  1216. 
Sawyer  v.  Turpin,  67,  951.  960,  1157. 
Scammon,  In  re,  458.  487.  918,  926. 
Scammon  v.  Cole.  963,  1104. 
Scammon  v.  Kimbell,  1128,  1136. 
Scanlan,  In  re.  1041. 
Schaefer.  In  re,  983. 
Schafer.  In  re.  986. 
Schauffler,  ex  rel.,  v.  Union  Surety 

&  Guaranty  Co..  766. 
Scheiffer,  In  re,  151,  733,  736,  829. 
Scheld,  1168. 

Schenberger,  In  re,   1153. 
Schenck,  In  re,  353,  358,  1210. 
Schenkein.  In  re,  88,  241.  921,  1003. 
Scheuer   v.    Smith   &   Montgomery 

Book  &  Stationery  Co.,  78. 
Scheuklin,  In  re.  139. 
Schepeler.  897. 
Schick,  In  re,  949. 
Schiermann,    In   re,    386,    427.    763, 

999,  1171,  1150,  1208. 
Schiller,  In  re,  695.  901. 
Schlesinger,  In  re,  53,  54.  62,   366, 

637.  716,  1206. 
Schloerb.    In   re,    36.    44,    250.    580, 

582. 
Schmeckel  Cloak  &  Suit  Co.,  In  re, 

846,  875,  876,  886. 
Schoenenberger,  In  re.  1003. 
Schofield,   In  re,   144. 


Hi 


TABLE    OF    CASES. 


[REFERENCES 

Scholtz,  In  re,  255,  980.  1226. 
Schreck,   In  re,  356,  359,   361,   365 

637,  639. 
Schrenkelsen  v.  Miller.  965. 
Schrom,  In  re,  45. 
Schuchart,  In  re,  162. 
Schuchardt  &  Wells.  In  re,  1005. 
Schulenberg  v.  Kabureck.  965. 
Schuller,  In  re,  1090.  1095. 
Schultz,  In  re,  365. 
Schulze   V.    Bolting,   1050,   1161. 
Schumpert,  In  re,  368,  995. 
Schwab,  In  re,  519. 
Schwartz.  198,  855. 
Schwarz.  In  re,  1003. 
Scott,  In  re,   18,    30,   140,  210,   220, 

287.   291,   294.   295.    305,   308,   310, 

312,    486,   496,    523,   540,   541,   558. 

577,    646,   654,    675,   677.   685.   806, 

807,  841,  851,  875.  876,  1038,  1044, 

1058,   1060.  1096.  1207. 
Scott  et  al..  In  re,  695. 
Scott  V.  Devlin,  1156. 
Scott  V.  Ellery,  252. 
Scott  V.  Kelly,  584. 
Scott  V.  McAleese,  234. 
ScrafEord.  In  re,  468,  475,  921.  937. 

978. 
Scull,  In  re,  458,  477. 
Scully,  In  re,  835. 
Seabolt,  In  re,  185,  201,  230. 
Sears,  In  re,  153,  465,  657. 
Sears  v.  Hanks,  187. 
Seaver  v.  Spink,  960. 
Seay,  In  re,  875. 
Sebring  v.  Wellington,  950. 
Seckendorf.  In  re.  526. 
Seckler,  In  re,  875.  878,  969. 
Sedgwick  v.  Casey,  866. 
Sedgwick  v.  Fridenberg,  609. 
Sedgwick  v.  Lynch,  77. 
Sedgwick  v.  Menck,  260. 
Sedgwick  v.  Place,  16,  45,  82,  962, 

1103,  1107. 
Sedgwick  v.  Wormser,  1106. 
Seebold,  In  re,  248. 
Seeley,  In  re,  510. 
Seidel  v.  Simeon,  263. 


ARE    TO    SECTIONS] 

Sellers  v.   Bell,   198,  206,   358,  364, 

366,  638,  .798. 
Serra  e  Hijo  v.  Hoffman,  273,  276, 

279,  384,  599. 
Sessions  v.  Romadka,  1150.  1209. 
Seventh    Nat.    Bk.    v.    Shenandoah 

Iron  Co.,  1007. 
Seydel,  In  re.  188. 
Seymour,  In  re,  234,  429. 
Shaeffer,  In  re,  230,  1166,  1195,  1196. 
Schafer.  314,  322. 

Shafer  v.  Fritchbery,  952,  990,  1179. 
Schaffer,    In   re,    50,   223,   391,    392, 

399,  410,  895,  941. 
Shapiro,  In  re,  145. 
,     Sharp  v.  Philadelphia    Warehouse 

Co.,  77. 
,     Sharpe,  ex  p.,  In  re,  1207. 
,     Sharpe  v.  Warehouse  Co.,  962. 
,     Shaw,  In  re,  325,  862,  1042,  1106. 
Shawhan  v.  Wherritt,  8,  42. 
Shearman  v.  Bingham,  28.  1182. 
Shearman  et  al.  v.  Bingham  et  al., 

658. 
Sheehan,   In   re,   94,   487,    844,   992, 

1031,  1060. 
,     Sheffer.  In  re,  945. 
Sheinbaum,  In  re,  572. 
Shelburne.  In  re,  992. 
Sheldon  v.  Wickham,  1079. 
Shelley  v.  Elliston,  1121. 
Shellington  v.  Howland,  386. 
Shenberger,  In  re.  359,  639. 
Shepard.  In  re,   134,   135,  232.  239, 

422,   979,   995. 
Shepardson,  In  re,  17. 
Shepherd,  In  re,  348.  358,  363,  389, 

951. 
Sheppard,  In  re,  347,  386,  431,  513, 

854,  860. 
Shepperd,  In  re,  429. 
Shera,  In  re,  523. 
,     Sherburne.   945. 

Sheridan,  In  re,  862,  960. 
Sherman  v.  Bingham,    575.  579,  583. 
Sherman  v.  Kortright.  639. 
Sherman  v.  Luckhardt,  950.  953. 
Sherman  v.  Straus, '435, 


TABLE    OF    CASES. 


liii 


[REFERENCES    ARE    TO    SECTIONS] 


Sherry.  In  re,  473,  502. 
Shertzer,  In  re,  363,  364. 
Sherwood,  In  re,  116,  526. 
Sherwood  v.  Mitchell,  433. 
Shields,  In  re,  184,  289,  291,  298. 
Shilladay,    In    re,    442,    999,    1046, 

1093. 
Schimer  v.  Huber,  81,  952. 
Shiner  v.  Huber,  145. 
Ship  "Edith,"  In  re,  1096. 
Shippen  v.  Robbins  Appeal,  1165. 
Shoemaker,  In  re,  261,  580,  637. 
Shorer,  In  re,  357,  364. 
Shoshone   Mining   Co.    v.    Rupper, 

573,  575. 
Shryock  v.  Bashore,  16. 
Shuey,  In  re,  256. 
Shufeldt,  In  re,  232,  239. 
Shumann  v.  Fleckenstein,  1214. 
Shutts  V.  Bk..  36,  43,  454,  576,  578, 

580,   591,   604,   953. 
Shutts  Tr.  V.  First  Nat.  Bk.,  589. 
Sicard  v.   R.  R.  Co.,  1121. 
Sidle,  In  re,  351,  365,  436,  971. 
Siegel,  Hillman  Dry  Goods  Co.,  In 

re,    875,   877,    878,    886,    953.    960. 

1014. 
Sievers,  In  re,  16,  82,  519,  573,  576, 

580,    582,    627,    1098,    1100,    1162. 

1182,  1226. 
Sigsby  V.  Willis,  136.  504. 
Silberhorn,  In  re,  572. 
Sill  V.  Worswick,  4. 
Sillitol,  In  re,  131. 
Silverman,    In     re,     21,     542,    984, 

1029,  1034,  1042. 
Silverman  Bros.,  In  re,  1005,  1041. 
Silverman  et  al..  In  re,  797. 
Sime,  In  re,  29. 
Simmons,  In  re,  477,  481. 
Simonson,  In  re,  473,  479,  480,  481, 

487,  489. 
Simonson    v.    Sinsheimer,    66,    82, 

299,   605,  923. 
Simonson,  Whiteson  &  Co.,  In  re, 

82. 
Simpson,  In  re,  232.  234. 
Simpson  v.  Bk.,  17. 


Simpson  v.  Ready.  474. 

Simpson  v.  Van  Etten,  1116. 

Sims,  In  re,  399.  971,  1014,  1090, 
1107. 

Singer  v.  Sloan,  963. 

Sink,  In  re,  842,  1022,  1092,  1175. 

Sinsheimer  v.  Simonson,  578. 

Sisler,  In  re,  189. 

Six  Fenny  Savings  Bk.  v.  Stuyve- 
sant  Bk.,  21,  646,  1044. 

Skelley,  In  re,  475. 

Skinner,  In  re,  278,  353,  358,  637, 
1103,  1104. 

Skylark,  In  re,  883. 

Slack,  In  re,  230,  1166. 

Slade,  In  re,  293. 

Slekter,  In  re,  351,  366. 

Slichter,  In  re.  128,  1133. 

Slingluff,  In  re,  351,  358,  361,  1168. 

Sloan,  875,  877.  953. 

Sloan  V.  Lewis,  495,  558,  920,  990. 

Slocum,   In  re,   158. 

Slornka,  In  re,  1042,  1044. 

Smedley,  In  re,  125. 

Smith,  In  re,  23,  82.  156,  158.  180. 
183,  184,  198,  232,  233,  239,  248, 
250,  348,  349,  358.  422,  429,  519, 
537,  544,  567,  576,  580,  635,  637, 
658,  707,  737,  749.  761,  826.  850, 
865,  889,  890,  902,  979,  983,  1029. 
1031,  1034,  1048,  1057,  1059,  1062, 
1100,  1103,  1111,  1144,  1149,  1180, 
1206,  1226. 

Smith  V.  Barnhard,  305. 

Smith  V.  Belford,  719. 

Smith  V.  Bromley,  355. 

Smith  V.  Buchanan,  582,  949,  1155, 
1188. 

Smith  V.  Engle,  273,  294,  324,  328, 
899. 

Smith  V.  Ely,  1091. 

Smith  V.  Keegan.  356. 

Smith  V.  Kehr,  186,  192,  1092,  1104. 

Smith  V.  Krauskopf,  303. 

Smith  V.  Little.  950. 

Smith  V.  Mfg.  Nat.  Bk.,  112. 

Smith  V.  Mason,  570,  579,  580,  599, 
1207. 


liv 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Smith  V.  Meisenheimer,  256,  1118. 

Smith  V.  Putnam,  1171. 

Smith  V.  Scholtz,  1191,  1192. 

Smith  V.  Schultz,  1153. 

Smith  V.  Stanchfield,  391. 

Smith  V.  Steinberg.  415. 

Smith  V.  Wheeler.  986. 

Smolie,  In  re,  99,  875,  953. 

Snedaker,  In  re,  253,  1050.  1175. 

Snelling,  In  re,  297,  300.  308. 

Snowman  v.  Harford.  63. 

Snyder  v.  Simon,  1228. 

Sohoo,  In  re,  375.  380. 

Sodosky,  In  re,  969. 

Solis,  In  re,  520,  526. 

Solomon,  In  re,  183,  189,  203,  255. 

363,  367,  368,  582,  980.  1018,  1162. 
Sonnentheil  v.  Moerlein  Brew.  Co., 

891. 
Soper,  In  re,  214,  647. 
Soudan  Mfg.  Co.,  In  re,  1091. 
Soudans  Mfg.  Co.,  Stiles  v.  Dunna- 

hoo,  1090. 
Southard    v.    Benner,    1084,    1148, 

1214. 
Souther,  In  re,  846. 
Southern  v.  Fisher,  250. 
Southern  L.  &  T.  Co.  v.  Benbow, 

42,    234,    248,   254,    390,    580,    582, 

1195. 
Southern  Minn.  Ry.  Co.,  In  re,  118. 
Southern  Overalls  Mfg.  Co.,  In  re, 

969. 
Southwestern  Car  Co.,  In  re,  1044. 
Spacht,  In  re,  949,  1116. 
Spades,  In  re,  149,  287,  289,  899. 
Spalding  v.  N.  Y.,  423. 
Sparhawk  v.  Ackley,  1182. 
Sparhawk  v.  Drexel,  169,  883,  1095, 

1185. 
Sparhawk  v.  Richards,  865. 
Sparhawk  v.  Russell,  171. 
Sparhawk    v.    Yerkes,   1150,   1182, 

1209. 
Spear,  In  re,  365. 
Specht,  In  re,  1113. 
Spencer,  In  re.  252,  256.   306,  313, 

722,  830,  897,  901. 


Spencer  v.  Lapsle,  569. 

Speyer,    In   re,    681,    714.   716,    720, 

1206. 
Spicer  v.  Ward,  82,  923. 
Spillman,  In  re,  287,  305. 
Spillman  v.  Johnson,  853. 
Spring,  In  re,  842,  987. 
Standard  Oil  Co.  v.  Hawkins,  1134. 
Stansfield,  In  re,  347.  439. 
Stansell,  In  re,  921,  922. 
Stark,  In  re.  357,  364. 
Starkweather  v.  Ins.  Co.,  1148,  1170. 
State  V.  Brice,  667. 
State  V.  Dewey,  581, 
State  V.  Doherty,  667. 
State  V.  Fagan,  666. 
State  V.  Harrison,  666. 
State  V.  Hope,  850. 
State  V.  Rollins,  237. 
State  V.  St.  Louis,  667. 
State  V.  Sanvinct,  60. 
State  V.  Wells,  666. 
State,  ex  rel.,  Stohl  v.  Superior  Ct. 

of  Kings  Co.,  19. 
State  of  Georgia  v.  Railroad,  1007. 
State  Ins.  Co.,  In  re,  995. 
State  Nat.  Bk.  v.  Dodge,  973. 
States  Sav.  Ass.  v.  Kellogg,  1216. 
Staunton,  In  re,  180,  203. 
Steadman  v.   Bk.   of  Monroe,   965, 

1090. 
Stearns  v.  Flick,  980,  1018. 
Stedman  v.  Taylor,  1192. 
Steed.  In  re,  201,  352,  358,  363,  378, 

572,  703. 
Steedman,  In  re,  1171. 
Steel  V.  Lyford,  198. 
Steele,  In  re,  198,  1049,  1167,  1168. 
Steele  &  Co.  et  al..  In  re,  207. 
Steele  v.  Buel,  182,  593. 
Steele  v.  Moody,  42,  181,  183,  286. 
Steelman  v.  Mattix,  17. 
Steffen  v.  Bower,  535. 
Stege,  In  re,  950,  1131. 
Steger,  In  re,  461. 
Stein,  In  re,  452.  489,  760,  876,  890, 

895,  901,  904,  936.  938,  940,  1060. 
Steindler,  In  re,  355. 


TABLE    OF    CASES. 


Iv 


[REFERENCES    ARE    TO    SECTIONS] 


Steininger  Mer.  Co.,  In  re,  1090. 
Stelling  &  Jones  Lumber  Co..  In  re, 

591. 
Stendts,  In  le.  995,  1090. 
Stephens.  In  re,  176,  876. 
Ltevens  v.  Meridian  Britannica  Co., 

1079. 
Stephens  v.  Perrine,  1079. 
Stephenson  v.  Jackson,  163. 
Stern,  In  re,  120,  920.  984. 
Stern  v.  Louisville  Tr.  Co.,  950.  966. 
Sternberg,  In  re.  198,  203. 
Stetson.  In  re,  403. 
Steuer,  In  re.  578.  683. 
Stevens,   In  re,   141,    158,   162,    164, 

171,    176.   183.    184,    187.   189,   374, 

412,  415,   695,   733,   818,   828,   841, 

842,  847,  849,  851,  858,  986,  1122. 
Stevens  et  al.,  In  re,  851. 
Stevens  v.  Brown,  387,  398,  581. 
Stevenson,  In  re.  85,  169,  201,  456, 

461.  653.  929,  960. 
Stevenson  et  al..  208. 
Stevenson    v,    McLaren,    70,    1104, 

1145. 
Stewart,  In  re,   201,   461,  842,   881, 

1197. 
Stewart  v.  Armstrong,  846. 
Stewart  v.  Emerson.  433,  1219. 
Stewart  v.  Isador.  842,  881. 
Stewart  v.  McClung,  198. 
Stewart  v.  Piatt,  951. 
Stickney,  In  re,  115. 
Stickney  v.  Wilt,  598,  599,  609. 
Stillwell,  In  re,  733.  743,  838. 
Stillwell  V.  Cooper,  391. 
Stillwell  V.  Walker,  869. 
Stoddard,  In  re,  359. 
Stoddard  v.  Locke,  438,  581. 
Stoddart  v.  Locke,  1095. 
Stoever,  In  re,  901,  912. 
Stokes,  In  re,  32,  172,  360,  435,  744. 
Stokes  v.  Mason,  25.  433. 
Stokes  v.  State  of  Ga.,  1002. 
Stoll  V.  Wilson,  387. 
Stone,  In  re,  190,  208 
Stone  V.  Moore,  472. 
Stoner,  In  re,  655,  1152,  1183. 


Storck   Lumber  Co.,  In  re,   16,  80, 

1228. 
Stores  V.  Engel,  579. 
Storet,  In  re,  695. 
Storm,  In  re,  78. 
Stotts,   In  re.  761,   907,   1027,   1031, 

1034. 
Stout,  In  re,  205,  987. 
Stowe,  In  re,  1091. 
Stowers,  In  re,  135. 
Stracken,  In  re,  377. 
Strain  v.  Gourin,  957. 
Strait,  In  re,  462,  690. 
Stranahan  v.  Gregory,  67,  963. 
Strang  v.  Brandon,  435. 
Strassburger,  In  re,  1013. 
Stratton  v.  Oulton,  666. 
Strause  et  al.  v.  Hooper  et  al..  161, 

356. 

Strauss,  In  re,  849. 

Strauss  v.  Hooper,  145. 

Street  Co.  v.  Lea  Bros..  91. 

Strenz,  In  re,  1106. 

Strobel  v.  Knost,  953. 

Strobel  &  Wilkins  v.  Knost,  876. 

Stroud  V.  McDaniel,  1079. 

Strouse,  In  re.  361,  366.  638. 

Stuart  V.  Hines,  452,  453,  1121, 

Stubbs,  In  re,  1018. 

Stucky  V.  Bk.,  963. 

Sturgeon,  In  re.  29,  697. 

Sturgis.  In  re,  334. 

Sturgis  V.  Colby,  983,  1179. 

Sturgis  V.  Crowinshield,  14,  15,  16, 

20.  99,  474,  1111,  1228. 
Stuyvesant,  In  re,  541. 
Stuyvesant    Bk.,    In    re,    521,    527, 

1047. 
Styer,  In  re,  682,  1194,  1195. 
Sugenheimer,   In  re,  513.  516,  835, 

849. 
Sullivan.  In  re,  261,  437,  992. 
Sullivan  v.  Davis,  198. 
Sullivan  v.  Heiskell,  18. 
Summers,  In  re,   195,  232,  257.  582. 
Sumner,   In   re,   519.   738.   834,   840, 

852,  862,  870,  871. 


Ivi 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 

Sunseri,  In  re,  198,  203,  1007,  1046,    Taylor  v.  Taylor,  1116 

1093. 
Supervisors  v.  Kennicott,  509. 
Surety  &  Guarantee  Co.,  Trust  Co 

112. 
Surety  &  Guaranty  Co.  115. 
Surety  &  Guaranty  Tr.  Co.,  116. 
Sutherland,  In  re,  949,  993. 


Sutherland  v.  Davis,  1148. 
Sutherland     v.     Lake     Sup.    Ship 

Canal,    R.    R.    &    Iron   Co.,    570, 

1092. 
Svenson,  In  re,  344. 
Swan,  In  re,  59. 
Swarts  V.  Fourth  Nat.  Bk.,  875.  886, 

947,  955,   983. 
Swarts  V.  Siegel,  415,  886,  959. 
Sweatt  V.  Boston,  etc.,  R.  R.,  112, 

118. 
Sweenie  v.  Sharp,  391. 
Sweet,  In  re,  1023. 
Swift,    In    re,    169,    695,    984,    1065, 

1152.  1173,  1182,  1215. 
Swift  et  al..  1159. 
Swope  V.  Arnold,  1049. 
Sykes,  In  re.  352,  461,  494. 
Symonds  v.  Barnes,  446. 


Tacoma  Shoe  &  Leather  Co.,  In  re, 
1132,  1137. 

Taft  V.  Bank,  963. 

Taft  V.  Marisly,  1220. 

Tait,  In  re,  262. 

Talbott,  In  re,  186,  187,  988. 

Talcott,  ex  p.,  983,  987. 

Tallman,  In  re,  349,  435,  545. 

Tampa  R.  R.,  In  re,  591. 

Tanner,  In  re,  541. 

Tatem,  In  re,  980,  1079. 

Taylor,  In  re,  54,  91,  110,  120,  121, 
123,  186,  195,  232,  234,  416,  429, 
444,  458,  472,  473,  474,  526,  719, 
914,  917,  938,  942.  950.  1099,  1104, 
1161. 

Taylor  v.  Brown,  655. 

Taylor  v.  Irwin,  1209. 


Teague,  In  re,  1090. 

Tebo,    In    re,    684,    705,    976,    1010, 

1022,  1027,  1031,  1038,  1042. 
Tecopa  Mining  &  Smelting  Co.,  In 

re,  117. 
Temple,  In  re,  133,  139,  141,  172. 
Ten  Eyck,  In  re,   1171. 
Tenny  v.  Collins,  407,  545. 
Tenthorn,  In  re,  761. 
Terrill,  In  re,  1028,  1031.  1098. 
Terry  &  Cleaver.  In  re,  952. 
Teslow,  In  re.  875,  953. 
Tesson,  In  re,  163. 
The  Griffin  Pants  Factory  v.  Nelms 

Racket  Store  Co.,  74.  81. 
The  Kimball,  In  re.  1094. 
The  Richmond,  In  re,  569. 
The  William  Branfoot,  In  re,  1024 
Thiessen,  In  re.  53,  1171,  1206. 
Thomas,  In  re,  78,  162,  193,  228.  271, 

348.  360,  419.  433,  435,  677. 
Thomas  &  Sivyer,  In  re,  837. 
Thompson,  In  re,  45,  198,  345,  675, 

692,  875,  878.  922,  969,  1126,  1198. 
Thompson    v.   Maxwell    Land   Co., 

592. 
Thompson  v.  Railroad  Co.,  58. 
Thompson's  Sons,  In  re,  969. 
Thorington  v.  Montgomery,  523. 
Thornhill  v.  Bk.,  16,  251,  582,  612, 

1100. 
Thornhill  v.  Link,  1091.  1104. 
Thornton,  In   re,  198. 
Thornton  v.  Hogan,  905. 
Thorp  V.  Thorp,  195. 
Thrall  v.  Crampton,  163. 
Thurmond    v.    Andrews,    446,    760, 

900,   1210. 
Tiffany    v.    Boatman's    Sav.    Inst., 

1090. 
Tiffany  v.  Lucas,  1006. 
Tifft,  In  re,  256,  291,  301,  519,  526, 

679,  889,  1121. 
Tilden,  In  re,  187.  202,  1014. 
Tillinghast  v.  Champlin,  171. 
Tillman,  In  re,  195. 
Tine,  In  re,  1090. 


TABLE    OP    CASES. 


Ivii 


[REFERENCES    ARE    TO    SECTIONS] 

In   re,   360,   389,   398,    437,     Tudor,  In  re. 


Tinker, 

913. 
Tirre,  In  re,  922,  953. 
Tischler,  In  re,   54,  715,   716,  1206. 
Tobias,  In  re,  183,  198. 
Todd,  In  re,  637,  684,  685. 
Todd  V.  Barton,  387. 
Toledo,  A.  A.  &  N.  M.  Ry.  Co.  v. 

Pa.  Co.,  58. 
Tollett,    In   re,   186,   192,    572,    971, 

1214. 
Tomes,  In  re,  1104. 
Tomlinson  v.  Bullock,  655. 
Tompkins  v.   Hazen,  391. 
Tonawanda    Street    Planing    Mill 

Co.,    653,    655. 
Tonkin,  In  re,  876.  962. 
Tontine  Surety  Co.,  In  re,  116. 
Toof  V.  Martin,  67,  69,  81,  950,  963. 
Tooker,  In  re,  322,  326. 
Topliff,  In  re,  877. 
Tonne,  In  re,  196,  201, 
Towle  V.  Davenport,  282. 
Town,  In  re,  984. 
Town  et  al..  In  re,  1061. 
Townsend,  In  re.  637. 
Tracy,  In  re,  360. 
Traders    Bk.    v.     Campbell,    1128, 

1131. 
Traders' 

1215. 
Traer  v. 
Trafton, 


Nat.    Bk.    V.    Campbell, 


Clews,  592. 

In  re,  222,   267,  290.  295, 

297,  317,  319. 
Travers  v.  Ross,  472. 
Treadwell    v.    Holloway,    261,   284, 

429. 
Treadwell  v.  Marden,  442,  999,  1171. 
Tremont  Nail  Co.,  ex  p.,  1095. 
Trim  v.  Wagner,  1093. 
Troth,  In  re,  703. 
Trowbridge,  In  re,  862. 
Troy  Woolen  Co.,  In  re,  607,  872. 
True.  In  re,  250. 
Trust  Co.  V.  Benbow,  576. 
Trust  Co.  V.  Marx,  576. 
Tua  V.  Carriere,  41, 


53,   54,  67,  210,    531, 
637,  681,  715.  716,  1039,  1206. 
Tufts  V.  Matthews.   1156. 
Tulley  V.  State,  666. 
Tully,  In  re,  761,  1034. 
Tune,  In  re,  577,  580,  585. 
Turnbull.  In  re,  198. 
Turner  v.  Turner,  422,  992. 
Turner  v.  Ward,  1158. 
Tuzbury  v.  Miller,  355,  402. 
Twaddell,  In  re,  1151.  1184,  1187. 
Tyler,  In  re,  363,  1015,  1162.  1212. 
Tyrrel,   In  re,  348. 
Tyrrel  v.  Hammerstein,  446. 

U. 

Ulf elder  Clothing  Co.,  In  re,  495. 
Ulrich,  In  re,  270,  454,  945. 
Ungewitter  v.  Von  Sachs,  866,  1159. 
Union  Nat.  Bk.  v.  McKey,  1134. 
Union  Planing  Mill  Co.,  In  re,  1042, 

1096. 
Union  R.  R.  Co.,  In  re,  115. 
U.  S.  V.  Baker,  1107. 
U.  S.  V.  Bank  of  N.  Carolina,  1013. 
U.  S.  V.  Barnes,     1002,     1010,     1012 

1013. 
U.  S.  V.  Bayer,  74. 
U.  S.  V.  Black,  531. 
U.  S.  V.  Block,  637. 
U.  S.  V.  Clark,  637. 
U.  S.  V.  Connor,  359. 
U.  S.  V.  Crook,  1004. 
U.  S.  V.  Freight  Assn.,  591. 
U.  S.  V.  Green,  666. 
U.  S.  V.  Griswold,  1013. 

Hammond,  605. 

Herron,    416,   421,    424,   444, 


U.  S.  V 

U.  S.  V 

1002. 

U.  S.  V 


Hoar,  416,  421. 
U.  S.  V.  Hudson,  56. 
U.  S.  V.  Jacobi,  59,  61. 
U.  S.  V.  King.  416,  421. 
U.  S.  V.  Kirkpatrick,  1012. 
U.  S.  V.  Knight,  416,  421. 
U.  S.  V.  Lewis,  158.  164,  1013. 
U.  S.  V.  Mann,  643. 
U.  S.  V.  Murphy,  1012. 


Iviii 


TABLE    OF    CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


U.  S.  V.  Norton,  655. 

U.  S.  V,  Prescott,  634. 

U.  S.  V.  Rob  Roy,  421,  424,  435. 

U.  S.  V.  Smith,  637. 

U.  S.  V.  Throckmorton,  415,  416,  424, 

444. 
U.  S.  V.  Union  Surety  &  Guarantee 

Co.,  794. 
Upshur   V.   Briscoe,   383,   390,   429, 

435. 
Upton  V.  Burnham,  1216. 
Upton  V.  Hansbrough,  1216. 
Upton  V.  Jackson,  760,  1148. 
Usher  v.  Pease,  241. 
Utt,  In  re,  601,  707. 
Utt  et  al.,  In  re,  1050. 


Vaccaro  v.  Bank,  68,  80,  144,  146. 

Vaccaro  Bank,  In  re,  141. 

Valentine,  In  re,  841. 

Valk,  In  re,  233,  239. 

Valley  Nat.   Bk.  v.  Meyers  Ass'n, 

413. 
Valliant  v.  ChDdress,  251,  1212. 
Valliquette,  In  re,  77. 
Van  Alstine,  In  re,  278. 
Van  Arden,  In  re,  232,  239,  422,  979. 
Van  Auken,  In  re.  302. 
Van  Buren,  In  re.  252,  992. 
Vanderheyden  v.  Mallory,  448. 
Vanderhoff,  In  re,  465. 
Vanderhoof  v.  Bk.,  949. 
Van  Nostrand  v.  Barr,  16. 
Van  Seyrl,  In  re,  529. 
Van  Tuyl,  In  re.  533,  535. 
Vaughan.  In  re.  1113,  1116. 
Vaughan  v.  Thompson,  187. 
Veitch,  In  re,  992,  1014,  1175. 
Vetterlein,  In  re,  312,  520. 
Vincent,  In  re,  190. 
Vogel,  In  re.  270.  526,  529,  533,  937, 

945,  1145,  1212. 
Vogel  V.  Lathrop,  81,  949,  952.  964. 
Vogler,  In  re,  180. 
Von  Boercke,  In  re,  461.  653. 
Von  Sachs  v.  Kretz.  532,  1129. 
Voorhees  v.  Frisbie,  581. 


W. 


Wager  v.  Hall,  81,  963. 

Wagner  v.  U.  S.,  232,  248,  423. 

Waite,  In  re,  69,  465,  1029. 

Wait  V.  Bank,  145. 

Wagner  v.  U.  S.,  257. 

Walbrun  v.  Babbitt,  77,  965.  1107. 

Walford  v.  Noble,  1166. 

Walker,   In  re,   228,   237,    239,    293, 

305,  519,  828,  842,  958,  1044,  1049, 

1058,  1162. 
Walker  v.  Seigel,  36,  280,  1187. 
Wall  V.  Cox,  572,  575,  580.  1214. 
Walla  Walla  v.  Walla  Walla  Wa- 
ter Co.,  590. 
Wallace,  In  re,  136,  270,  1100. 
Wallace  v.  Conrad,  1172. 
Wallace  v.  Loomis,  569. 
Wallerstein  v.  Ervin,  131. 
Walsh,  In  re,  523. 
Walsh  V.  Young,  1165. 
Walter  Scott  &  Co.  v.  Wilson,  589, 

591. 
Walther,  In  re,  358. 
Walther  v.   Walther,  553. 
Walton,  In  re.  521,  528,  876,  1020. 
Walton  V.  Walton,  63. 
Ward.  In  re,  572,  1018,  1144. 
Warden,  In  re,  1182. 
Waring  v.  Buchanan,  951,  962. 
Warner,  In  re,  953. 
Warner  v.  Cronkhite,  432. 
Warner  v.  New  Orleans,  594. 
Warre,  In  re,  637. 
Warren,  In  re,  158,  162. 
Warren    v.    Bk.,    67,    81,    914,    949, 

1085. 
Warren   v.   D.    L.    &   W.   Ry.    Co., 

949. 
Warshing,  1034. 

Warszawiak,  In  re,  679,  684,  705. 
Washburn,  In  re,  461,  1171. 
Washington  Marine  Ins.  Co..  In  re, 

1100. 
Wasson  v.  Hawkins,  1047. 
Waterbury   Furniture    Co.,    In   re, 

875. 


TABLE    OF    CASES. 


lix 


[REFERENCES    ARE    TO    SECTIONS] 


Waterlow  Organ  Co.,  In  re,  1195. 

Watertown  Bk.  v.  Simmons.  413. 

Watrons.  In  re,  848. 

Watschke  v.  Thompson.  1084,  1114. 

Watson,  In  re,  27,  31,  32.  58,  185. 

Watson  V.  Bank,  248.  582. 

Watts,  In  re,  218. 

Waugh  V.  Carver,  131. 

Waukesha   Water   Co..    In    re,    53, 

585. 
Waxelbaum,  In  re,  30,  31,  34,  186, 

461.  486,  658,  695. 
Way  V.  Howe,  399. 
Way  V.  Sperry,  391. 
Wayne  Knitting  Mills  v.   Nugent, 

640,  716. 
Wear  v.  Mayer,  610. 
Weaver,  In  re.  72,  145,  951. 
Webb,  In  re,  151.  162.  164,  357,  358, 

427.  635,  637,  643,  831.  1013,   1102. 

1171. 
Webb  &  Co.,  In  re,  1020. 
Webb  V.  Sachs.  67.  70,  81.  545,  952, 

963,  965,  1107. 
Webb  V.  Ward,  1018. 
Weber   Furniture   Co..   In  re.   289, 

297,  308,  309,  310,  312. 
Webster.  In  re,  133,  137. 
Weeks,  In  re,  983,  1058. 
Wehe,  In  re,  267. 
Weil,  In  re.  1149,  1158,  1168,  1219. 
Weinman,  In  re,  465. 
Weissner,  In  re,  875. 
Weitzel,  In  re,  127. 
Welch.  In  re,  187,  198,  358,  637. 
Welge,  In  re,  761,  774. 
Welles.  In  re.  222,  290,  308. 
Welling,  In  re,  1168. 
Wellman.  In  re.  655. 
Wells,  In  re.  67,  81,  185,  188,  189, 

297,  949,  1149. 
Wells  V.  Lamprey,  314. 
Welsh,  In  re,  1103. 
Wente  v.  Young.  580. 
Weslund.  In  re.  1043. 
Wesson,  In  re,  273,  279,  383. 
West,  In  re,  88,  186,  695. 


West  Co.  V.  Lea,  19,  647,  1162. 
West  Norfolk  Lumber  Co.,  In  re, 

1044,  1096. 
West  Phil.  Bank  v.  Gerry,  414. 
Westbrook  Mfg.  Co.  v.  Grant,  655. 
Western   Sav.   &  Trust  Co.,   In  re, 

918,  945. 
Western   Union   Cold    Storage  Co. 

V.  Hurd,  429. 
Western    Union    Telegraph    Co.    v. 

Mass.,   1014. 
Westfall   Bros.   &  Co.,   In  re,   520, 

526. 
Weston,  In  re,  138. 
Wetmore,  In  re,  351,  358,  365,  637, 

734,     749,    763.    1151,    1153,    1183, 

1184,  1187. 
Weyhausen.  In  re,  454. 
Whalen,  In  re,  78,  949,  1116. 
Wheeler,  ex  parte,  170. 
Wheelock  v.  Lee,  1217. 
Whipple,  In  re,  248.  250,  297.  309, 

310. 
White,  In  re,  52,  184.  186.  344,  348, 

368.  389.  398,  528.  638. 
White  V.  Bradley  Timber  Co.,  465, 

466. 
White  V.  Crawford,  842. 
White  V.  Griffin,  1171. 
White  V.  Hill,  1018. 
White  V.  Jones,  473,  1148,  1187. 
White  V.  Parish,  170. 
White   V.    Schloerb.    582,    675,    685, 

1212. 
White  V.  Timber  Co..  487. 
Whitehead,  In  re,  192,  193,  1022. 
Whitehead   v.    Pillsbury,   886,   962, 

1091. 
Whitehouse.  In  re,  239. 
Whitener.  In  re,  606. 
White  Star  Laundry  Co..  In  re,  116. 
Whiting,  In  re,  162. 
Whiting,  ex  p.,  In  re,  865. 
Whitley  Grocery  Co.  v.  Roach,  653, 

960. 
Whitmer  v.  Field.  195. 
Whitney,  In  re,  312.  432. 


Ix 


TABLE  OF  CASES. 


[REFERENCES    ARE    TO    SECTIONS] 


Whitney  v.  Crafts.  426. 

Whitten  v.  State,  58. 

Whitten  v.  Tomlinson,    234. 

Whyte,  In  re,  848. 

Wickham  v.  Valle's  Ex'rs,  1156. 

Wicks  V.  Perkins,  1092,  1196. 

Wlelarski,  In  re,  461.  736. 

Wiggers,  In  re,  232,  234. 

Wight  V.  Muxlow,  964. 

Wilbur  V.  Stockholders,  1216,  1218. 

Wilbur  V.  Watson,  980. 

Wilcox,    In    re,    158,    159,    178.    351, 

353,  354,  361. 
Wilcox  et  al..  In  re,  1058. 
Wilcox  V.  Hawley,  186. 
Wilcox  &  Howe  Co.,  In  re,  1080. 
Wilcox  V.  Kell,  170. 
Wilcox  &  Wright,  In  re.  1005. 
Wilder,  In  re,  218,  843,  851. 
Wildman  v.  Taylor,  1171. 
Wiley,  In  re,  160. 
Wilkes,  In  re,  683,  1095. 
Wilkins,  In  re,  374. 
Wilkins  v.  Davis,  134,  151,  172,  374, 

414,  831,  1148. 
Wilkinson,  In  re,  375. 
Wilkinson  v.  Babbitt,  1013. 
Williams.  In  re,  31,  32.  66,  133,  158, 

170,   183,    198.   233.   234,    257,   312, 

361,    377,   468.    475,   487,   600,   638, 

798,  925,  937,  952.  985,  992,  1044. 
Williams  v.  Butcher,  900. 
Williams  v.  Crow,  1044. 
Williams  v.  Harkins.  427,  1005. 
Williams  v.  Heard,  1168,  1220. 
Williamson,  In  re,  59,  186. 
Willis  V.  Carpenter.  504,  612,  842. 
Wilmot  V.   Mudge,  435. 
Wilson.  In  re,  54,  137.  169,  183,  184, 

201,   203,   296,   300,   308,    310,   311, 

637,  720,  1116. 
Wilson  V.  Bank,  78,  81,  598,  949. 
Wilson  V.  Brinkman,  949. 
Wilson  V.  Nelson,  78,  81,  950. 
Wilson    V.    Parr.    41,    42,    495,    980. 

1022,  1162.  1212. 
Wilson  V.  Penn.  Trust  Co.,  1046. 


Wilson  &  Shafer  v.  Bk.,  990. 
Wilson  V.  Stoddart,  966. 
Wilt  V.  Stickney,  286. 
Wimm,  In  re,  1116. 
Winchester  v.  Heiskell,  584. 
Winkens,  In  re,  133,  178,  414. 
Winn,  In  re,  40,  250.  252,  267,  842, 

853.  1096.  1149. 
Winship  v.  Phillips,  1116. 
Winsor,  In  re,  367,  637. 
Winter  v.  Claiter,  472. 
Winter  v.  I.   M.  &  N.  P.  Ry.  Co., 

In  re,  71,  118. 
Winterintz,  In  re,  17. 
Winters  v.  Clayton,  1121. 
Wise,  In  re,  840,  853,  862,  875,  877, 

889,  922,  966. 
Wiswael  v.  Campbell.  602,  840,  852. 
Witkowski,  In  re,  11,  398,  399,  526, 

541. 
Wittenberg  Veneer  &  Panel  Co.,  In 

re,  950. 
Wolf,  In  re,  344,  988,  1091. 
Wolf  V.  Stix,  415. 
Wolfstein,  In  re,  348,  480,  678. 
Wolpert,  In  re,  352. 
Wood,  In  re,  351,  358,  463,  637.  763, 

889,    890,    895,    1049,    1090,    1153, 

1184. 
Wood  V.  BaUey.  609. 
Wood  V.  Hazen.  272,  387. 
Wood  V.  Owings,  960. 
Woodard,  In  re,  185,  203,  695,  806, 

995,  1028,  1029,  1030. 
Woodbury,  In  re,  575,  576,  580,  581, 

583,  747. 
Woodbury  v.  Warren.  195. 
Woodford.  In  re,  535,  918,  920. 
Wood  M.  &  R.  Mach.  Co.  v.  Brooke, 

1186,  1188. 
Woodruff  V.  Cheeves,  189,  572. 
Woods.  In  re.   10,  67,  81,  115,  358, 

595. 
Woods  V.  Buckewell,  599. 
Woodside  Coal  Co.,  In  re,  117. 
Woodward,  In  re,  85,  547,  717,  950, 

960,  1081,  1099,  1102. 


TABLE    OF    CASES. 


Ixi 


[REFERENCES    ARE    TO    SECTIONS] 

Woolsey  v.  Cade,  429. 

Wooten,    In   re,   734.   840.   869,   871, 

995,    1032. 
Worcester  Co.,  In  re.  16.  598.  599, 

600.  604,   605,   609.  611,  983,   1044. 
Worden  v.  Searles,  59. 
Work,  In  re,  133. 

Worland,  In  re,  40.  682,  1007,  1195. 
World  Co.  V.  Brooker.  262. 
Wronkow.  In  re,  210.  294,  310. 
W.  S.  Tr.  Co.,  In  re,  465. 
Wright,  In  re,  16,  49.  58,  190,  360, 

429.    434,   435,   609.    697,   740,    963, 

984.  995,  1044,  1079,  1161. 
Wright  V.  Bk.,  1156. 
Wright  V.  Filley,  81. 
Wright  V.  Rogers,   1128. 
W'right  Lumber  Co.,  875. 
Wyatt,  In  re.  639,  1164. 
Wyley,  et  al..  In  re,  886. 
Wynne,  In  re,  262,  760,  960,  999. 


Yates,  In  re,  61,  97.  913,  1005. 
Yates  V.  Hollingsworth,  391. 
Yeatman  v.  Sav.  Inst.,  1102. 
York,  In  re,  609,  653. 
Yost,  In  re,  186. 

Young,  In  re,  201,  983,  985,  1122. 
Young  V.  Ridenbaugh,  403,  227,  854. 
Young  V.  Upson,  71,  950. 
Young  V.  Young,  422. 
Yukon    Woolen    Co.,    In    re,    1148, 
1214. 

Z. 

Zahm  V.  Fry,  270,  952. 
Zarega's  Case,  In  re,  431. 
Zauga's  Case,  In  re,  421. 
Zieber  v.  Hill,  1017. 
Zeperink  v.  Card.  429. 
Zinn,  In  re.  748. 
Zugg,  In  re,  168,  219. 


LAW    OF    BANKRUPTCY 


TITLE  I. 
IN  GENERAL. 

§  1.  With  hardly  an  exception,  bankruptcy  laws  form  a 
part  of  the  administrative  systems  of  all  civilized  nations. 
Great  Britain,  Germany,  Russia,  France,  Italy,  Norway, 
Sweden,  Spain,  Mexico  and  many  other  nations  have  responded 
to  the  needs  of  their  people  and  wisely  provided  laws  gov- 
erning bankruptcy.  One  of  the  earliest  systems  is  found  in  the 
statutes  of  England  of  1542,  which  has  from  time  to  time  been 
revised  and  perfected,  the  most  comprehensive  statute  on  the 
subject  being  that  of  August  1,  1849. 

§  2.  The  systems  in  vogue  in  the  several  nations  show 
much  diversity,  varying  from  that  which  is  found  in  Russia— 
where  the  right  of  the  debtor  to  resume  business  is  dependent 
upon  the  good  will  of  his  creditors,  and  where  a  single  dis- 
satisfied creditor  can,  upon  making  a  paltry  monthly  payment, 
keep  the  bankrupt  a  prisoner  until  the  debt  is  paid— to  the 
highly  advanced  system  which  prevails  in  England  and  the 
United  States. 

§  3.  As  the  idea  of  a  National  bankruptcy  system  may  be 
said  to  have  become  a  part  of  the  Federal  constitution  by 
a  process  of  evolution  from  the  English  statutory  law,  it  is 
interesting  to  note  as  a  matter  of  history  that  the  earliest 
statute  on  the  subject  of  bankruptcy  is  found  in  34  and  35 
Henry  VIII  (chapter  4),  which  was  primarily  provided  as  a 
protection  against  the  Lombards  and  fraudulent  traders,  who, 
like  the  dishonest  debtors  of  to-day,  incurred  obligations  and 
liabilities  and  then  surreptitiously  removed  themselves  beyond 
the  jurisdiction,  without  having  been  first  discharged  there- 
from.    It  was  without  limit  as  to  the  persons  who  could  be- 

1 


2  LAW    OF    BANKRUPTCY. 

come  recipients  of  its  provisions,  the  restriction  as  to  traders 
first  appearing  in  the  statute  of  Elizabeth,  while  the  right  of  a 
trader  to  become  a  voluntary  bankrupt  first  appears  in  the 
statute  of  6  George  IV  (chapter  16).^ 

§  4.  Among  the  earliest  laws  affecting  insolvents,  we  find 
applicants  for  relief  referred  to  as  "persons  craftily  obtaining 
into  their  hands  great  substance  of  other  men's  goods,  who 
suddenly  flee  to  parts  unknown  or  keep  their  houses,  not  mind- 
ing to  pay  or  restore  to  their  creditors  their  debts  and  duties, 
but  at  their  own  will  and  pleasure  consume  the  substance  ob- 
tained by  credit  of  other  men,  for  their  owti  pleasure  and  deli- 
cate living  against  all  reason,  equity  and  good  conscience.  "^ 

While  these  early  bankruptcy  laws  went  upon  the  hypoth- 
esis that  one  guilty  of  bankruptcy  was  a  criminal,^  this  view 
certainly  does  not  now  prevail,  and  in  fact  did  not  at  the  time 
of  Lord  Loughborough,  who  remarked,  with  reference  to  bank- 
rupts, "the  law,  upon  the  act  of  bankruptcy  being  committed, 
vests  his  property  upon  a  just  consideration;  not  as  a  forfeit- 
ure; not  on  a  supposition  of  a  crime  committed;  not  as  a 
penalty."^ 

§  5.  Chief  Justice  Shaw,  in  describing  the  English  system, 
says  it  is  "an  adversary  proceeding  against  a  defaulting 
trader,  upon  doing  certain  acts  indicative  of  present  or  im- 
pending insolvency.  These  (bankrupt)  laws  provide,  gen- 
erally, that  upon  a  trader's  doing  certain  acts  considered  acts 
of  bankruptcy,  a  creditor  may  apply  for  and  obtain  a  commis- 
sion (out  of  chancery),  under  which  the  whole  of  the  trader's 
property  is  sequestered  and  taken  into  the  custody  of  the  law, 
to  be  administered  by  officers  appointed  for  that  purpose,  the 
proceeds  of  which,  with  some  slight  exceptions,  are  appro- 
priated to  the  pajrment  of  all  the  bankrupt's  debts,  if  suffi- 
cient therefor;  otherwise  to  pay  them  in  equal  proportions,  as 
far  ^as  is  sufficient  for  that  purpose.  The  same  law  further 
provides  that,  if  the  bankrupt  will  honestly  and  faithfully  co- 
operate in  the  proceeding,  if  he  will  disclose  all  his  property 
and  effects,  and  aid  the  officers  appointed  for  that  purpose  by 
information  and  by  all  means  in  his  power,  and  do  all  the 
duties  required  of  him  in  the  premises,  he  shall  be  absolved  and 

iKunzler  v.  Kohaus,  5  Hill,  322.        4  sill  v.  Worswick,  1  H.  Bl.  665; 

2  34  and  35  Henry  VIH,  ch.  4.         In  re  De  Forrest,  9  N.  B.  R.  278. 

3  3  Pars,  on  Contracts,  425.  F.  C.  3745. 


IN    GENERAL.  3 

discharged  of  all  his  debts,  and  receive  a  certificate  as  the 
authoritative  evidence  of  his  right  to  such  discharge.  "^ 

§6.  The  oppressor's  hand  resting  heavily  upon  our  fore- 
fathers in  the  old  world,  and  causing  them  to  migrate  to  new 
and  untried  fields,  naturally  inclined  them  to  incorporate  lib- 
eral and  wise  provisions  for  the  protection  of  all  classes  in  the 
Federal  constitution.  Among  them  is  one  evidently  suggested 
by  the  English  bankruptcy  statutes,  and  it  is  found  in  section 
S  of  article  1  of  that  instrument,  which  authorizes  Congress 
"to  establish  .  .  .  uniform  laws  on  the  subject  of  bank- 
ruptcy throughout  the  United  States."  This  section,  together 
with  section  10  of  the  same  article,  providing  that  "no  state 
shall  .  .  .  pass  any  laws  impairing  the  obligation  of  con- 
tracts," are  most  important  factors  in  the  legal  and  commer- 
cial world.  Pursuant  to  the  authority  contained  in  section  8, 
Congress  has  on  three  different  occasions  previous  to  the 
l>resent  one,  enacted  laws  providing  a  uniform  system  of  bank- 
ruptcy, which  for  evident  reasons  failed  of  their  purpose  and 
early  expired. 

§  7.  The  first  was  the  act  of  April  4,  1800,^  and  was  limited 
to  five  years;  but  it  was  repealed  by  the  act  of  December  19, 
1803.'^  The  fact  that  it  was  intended  chiefly  for  the  protection 
of  creditors,  the  sparseness  of  the  settlements,  the  scarcity  of 
Federal  courts,  and  the  difficulty  and  slowness  of  travel,  con- 
tributed mainly  to  its  failure.  The  distance  between  places 
where  courts  were  held,  by  reason  of  the  method  of  locomotion, 
made  ready  relief  almost  impossible  and  soon  brought  about 
a  demand  for  the  repeal  of  the  law. 

The  second  act  was  approved  August  19,  1841,^  but  like  its 
predecessor  was  short  lived,  being  repealed  March  3,  1843.^ 
In  addition  to  some  of  the  causes  that  contributed  to  the  fail- 
ure of  the  prior  law,  this  one  was  framed  so  as  to  greatly  favor 
the  debtor;  it  also  became  the  subject  of  political  contention; 
and,  under  the  combined  influence,  naturally  failed. 

The  next  bankruptcy  law  was  approved  March  2,  1867,^*^ 
and  after  an  existence  of  eleven  years  was  repealed  by  the 
act  of  June  7,  1878,^1  to  take  effect  September  1,  1878.    Th^ 

5  May  V.  Breed,  7  Cush.  28.       9  5  Stat.  L.  614. 

6  2  Stat.  L.  19.  10  14  Stat.  L.  517. 
T  2  Stat.  L.  248.  n  20  Stat.  L.  99. 
8  5  Stat.  L.  440. 


4  LAW    OF    BANKRUPTCY. 

law  was  several  times  amended,  the  most  important  modifi- 
cation being  that  made  by  the  act  of  June  22,  1874.^2  "vVhile 
this  law  of  1867  had  many  imperfections,  its  provisions  were 
more  equitable  as  between  creditor  and  debtor;  but  the  ex- 
penses attending  litigation  and  its  administration,  together 
with  the  lack  of  uniform  rules  and  regulations  governing 
assignees  and  registers,  more  than  all  else,  contributed  to  its 
failure  and  induced  its  repeal. 

The  law  now  in  force  in  the  United  States  was  enacted  on 
July  1,  1898,  and  amended  in  various  respects  on  February  5, 
1903. 

§  8.  Every  business  transaction  involving  the  giving  of 
credit  necessarily  implies  two  classes— a  debtor  and  a  creditor. 
Bankruptcy  laws  are  not  designed  for  one  but  for  both  classes, 
and  are  beneficial  to  all  but  the  dishonest  debtor.  The  policy 
and  aim  of  bankrupt  laws  are  to  compel  an  equal  distribu- 
tion of  the  assets  of  the  bankrupt  among  all  his  creditors. 
Hence,  when  a  merchant  or  trader,  by  any  of  the  tests  of  in- 
solvency, has  shown  his  inability  to  meet  his  engagements,  one 
creditor  cannot,  by  collusion  with  him,  or  by  a  race  of  dili- 
gence, obtain  a  preference  to  the  injury  of  others.^ ^ 

§  9.  In  the  absence  of  a  bankruptcy  law,  the  least  suspicion 
of  the  insolvency  of  a  debtor,  his  inability  to  meet  financial 
obligations  or  the  like,  naturally  cause  the  zealous  creditor  to 
institute  attachment  proceedings  and  perhaps  cause  liquida- 
tion of  his  debtor,  who,  left  to  his  own  resources  and  given 
reasonable  time,  would  be  able  to  avoid  a  suspension  and  per- 
haps ruin.  The  sole  gainer  through  the  absence  of  such  a  law, 
outside  of  the  dishonest  debtor,  is  he  who  is  first  on  the  ground 
Avith  his  attachment  process  and  whose  lien  operates  to  defeat 
other  creditors  with  equally  just  claims,  but  who  are  perhaps 
more  merciful  and  less  anxious  to  cause  the  creditor's  liquida- 
tion. 

§  10.  In  addition  to  the  value  of  a  bankruptcy  law  in  con- 
ducing to  a  better  business  understanding  between  the  debtor 
and  creditor,  it  acts  as  a  preventive  and  check  to  overtrading, 
by  largely  preventing  the  giving  of  preferences  by  the  in- 
solvent.    In  this  connection  Cadwalader,  J.,  said:     ''In  this 

12  18  Stat.  L.  178.  "  Shawhan  v,  Wherritt,  7  How. 

627. 


IN    GENERAL.  5 

respect  its  operation  will  be  gradual,  but  must  be  highly  bene- 
ficial. When  relations  and  friends  of  a  debtor,  and  when  capi- 
talists, who  without  affection  or  friendship  would  make  profit 
from  his  embarrassments,  learn  that  they  cannot  be  secured  by 
a  preference  out  of  the  wreck  of  his  affairs,  they  will  not  fur- 
nish him  the  means  of  overtrading.  So  long  as  he  could,  by 
securing  advances  and  accommodations,  obtain  them,  the 
temptation  to  attempt  to  retrieve  his  losses,  by  doubling  his 
investments,  was  before  the  enactment  of  the  bankrupt  law, 
irresistible ;  and  the  system  of  business  was  that  of  mere  gam- 
bling adventure.  But  when  a  debtor  who  suffers  losses  knows 
that  he  cannot  prefer  his  relations  and  friends,  and  when  capi- 
talists know  that  they  cannot,  without  risk,  assist  him  to  the 
injury  of  other  creditors,  he  will  stop  his  business  in  season, 
to  give  a  fair  dividend  to  all  his  creditors,  and  thus  make 
a  fair  settlement  with  them  in  the  court  of  bankruptcy,  or, 
much  oftener,  out  of  it.  Then,  in  the  course  of  time,  few  judi- 
cial bankruptcies  will  occur.  "^^ 

§  11.  The  purpose  of  a  bankrupt  law  is  to  place  within  the 
possession  of  the  creditor  that  to  which  he  may  be  entitled, 
within  the  shortest  reasonable  time,  and  at  the  same  time,  if 
the  bankrupt  has  made  a  fair  and  honest  surrender,  and  com- 
plied with  the  requisites  made  of  him,  to  give  him  a  speedy 
release,  and  let  him  begin  anew  to  provide  an  honest  living  for 
himself  and  those  dependent  upon  him  and  again  become  a 
useful  and  active  member  of  society.^^ 

§  12.  A  bankrupt  or  insolvent  law,  viewed  as  operating  on 
the  rights  of  creditors,  is  a  system  of  remedy.  It  takes  out  of 
the  hands  of  the  creditors  the  ordinary  remedial  processes, 
and  suspends  the  ordinary  rights  which  by  law  belong  to  cred- 
itors, and  substitutes  in  their  place  a  new  and  comprehensive 
remedy  designed  for  the  common  benefit  of  all.  The  rights 
with  which  the  trustee  is  clothed  as  the  representative  of 
creditors  are  to  render  this  great  and  common  remedy 
effectual.!  6 

§  13.  Bankruptcy  is  an  ancient  English  word  which  has 
come  down  to  us  at  least  from  the  time  of  Elizabeth,  bearing 
all  the  way  a  meaning  co-extensive  with  insolvency,  and  it 

14  In  re  Woods,  7  N.  B.  R.  126.  le  Curtis,  J.,  in  Betton  v.  Valen- 

15  In  re  Witkowski,  10  N.  B.  R.     tine,  1  Curt.  176. 
209,  F.  C.  17920. 


6  LAW    OF    BANKRUPTCY, 

was  especially  equivalent  to  that  word  when  the  constitution 
was  adopted.'" 

§  14.  There  is  no  substantial  difference  between  a  strictly 
bankrupt  law  and  an  insolvent  law  except  possibly  theoretic- 
ally, and  that  is  in  the  circumstances  that  the  former  affords 
relief  upon  the  application  of  the  creditor,  and  the  latter  upon 
the  application  of  the  debtor.  In  the  general  character  of  the 
remedy  there  is  no  difference,  however  much  the  modes  by 
which  the  remedy  may  be  administered  may  vary.  But,  even 
in  the  respect  named,  there  is  no  difference  in  this  instance. 
The  present  law  is  both  a  bankrupt  law  and  an  insolvent  law 
by  definition,  for  it  affords  relief  upon  the  application  of  either 
the  debtor  or  creditor  under  the  heads  of  voluntary  and  in- 
voluntary bankruptcy.'^  Hence  a  bankrupt  law  may  contain 
those  regulations  which  are  generally  found  in  insolvent  laws, 
and  an  insolvent  law  may  contain  those  which  are  common 
to  a  bankrupt  law.^^ 

§  15.  In  the  absence  of  a  Federal  bankruptcy  law,  each 
state  has  full  authority  to  enact  insolvent  laws  binding  per- 
sons and  property  within  its  jurisdiction,  provided  it  does  not 
impair  the  obligation  of  existing  contracts;-^  but  a  state  can- 
not by  such  a  law  discharge  one  of  its  own  citizens  from  his 
contracts  with  citizens  of  other  states  though  made  after  the 
passage  of  such  a  law,  unless  they  voluntarily  become  parties 
to  the  proceedmgs  in  insolvency.  While  this  is  true,  each  state 
has  the  power  by  general  law,  so  long  as  it  does  not  impair 
the  obligation  of  any  contract,  to  regulate  the  conveyance 
and  disposition  of  all  property,  real  or  personal,  within  its 
limits  and  jurisdiction.  Accordingly  a  discharge  under  a  state 
insolvency  law  has  no  extra-territorial  force  or  effect.-^ 

§  16.  When  Congress  exercises  its  constitutional  power  to 
establish  uniform  laws  on  the  subject  of  bankruptcy,  the  law 
passed  under  such  power  is  paramount  and  exclusive  of  all 
state   insolvent   laws  inconsistent  therewith,^^   and  the  state 

17  Kunzler  V.  Kohaus,  5  Hill,  320.     supra;    Baldwin   v.    Hale,    1   Wall. 

18  Martin  V.  Berry,  37  Cal.  222.         223;    Sturges   v.    Crowninshield,   4 

19  Sturges  V.  Crowinshield,  4  Wheat.  122;  Denny  v.  Bennett,  128 
Wheat.  196;  Hanover  Nat.  Bank  U.  S.  489.  497;  In  re  Reynolds,  9 
V.   Moyses,  186  U.  S.  181,  8  A.  B.     N.  B.  R.  52;   P.  C.  11723. 

R.  1.  -1  Denny  v.  Bennett,  supra. 

20  Brown  v.  Smart,  145  U.  S.  454;  22  Parmenter  Mfg.  Co.  v.  Hamil- 
Hanover    Nat.    Bank    v.    Moyses,    ton,  1  N.  B.  N.  8,  1  A.  B.  R.  39;  In 


IN    GENERAL. 


laws  relating-  to  the  subject  matter  are  suspended  or  super- 
seded during  the  existence  of  the  Federal  law,23  even  as  be- 
tween citizens  of  the  same  state,^*  but  can  in  no  sense  be  said 
to  be  repealed  by  it,-^  the  same  being  true  of  territorial  laws 
of  like  nature.-®  Hence  an  insolvent  law  may  be  amended, 
repealed  or  enacted  by  a  state  during  the  existence  of  the 
bankrupt  law,  and  such  amendment,  repeal  and  enactment 
will  be  valid  legislative  acts,  though  the  operation  of  these 
acts  in  so  far  as  they  conflict  with  the  Federal  law  are  sus- 
pended while  it  continues  in  force.  When  the  bankrupt  law 
is  repealed,  the  insolvent  laws  of  the  states  again  become  oper- 
ative without  re-enactment;  and  if  amended  during  the  exist- 
re  Bruss-Ritter  Co.  1  N.  B.  N.  39,     dler  v.  Siddle,  10  N.  B.  R.  236,  F. 


1  A.  B.  R.  58,  90  F.  R.  651;  In  re 
Rouse,  Hazard  &  Co.,  1  N.  B.  N.  75, 
91  F.  R.  96,  1  A.  B.  R.  234,  1  N.  B. 
N.  231,  91  F.  R.  514;  Blake  v.  Fran- 
cis-Valentine Co.,  1  N.  B.  N.  47,  1 

A.  B.  R.  372,  89  F.  R.  691;  In  re 
Curtis,  1  N.  B.  N.  163,  1  A.  B.  R. 
440,  91  F.  R.  737;  In  re  Sievers, 
1  N.  B.  N.  68,  1  A.  B.  R.  117,  91  F. 
R.  366;  s.  c.  as  Davis  v.  Bohle,  1  N. 

B.  N.  216,  1  A.  B.  R.  412,  92  F.  R. 
325;  In  re  Etheridge  Furn.  Co.,  1 
N.  B.  N.  139,  1  A.  B.  R.  112,  92  F. 
R.  329;  In  re  McKee,  1  N.  B.  N. 
139,  1  A.  B.  R.  311;  In  re  Rennie, 
1  N.  B.  N.  335,  2  A.  B.  R.  182;  In 
re  Dept.  Store,  1  N.  B.  N.  300;  In 
re  Fellerath,  1  N.  B.  N.  292,  2  A. 
E.  R.  40,  95  F.  R.  121;  In  re  Lang- 
ley,  1  N.  B.  R.  155;  VanNostrand  v. 
Barr,  2  N.  B.  R.  154;  Thornhill  v. 
Bk.,  5  N.  B.  R.  367,  1  Woods  1,  F.- 

C.  13992 ;  In  re  Merchants'  Ins.  Co., 
6  N.  B.  R.  43,  3  Biss.  162,  F.  C. 
9441;  In  re  Ind.  Ins.  Co.,  6  N.  B. 
R.  260,  Holmes  103,  F.  C.  1017;  In 
re  Safe  Dep.  &  Sav.  Inst,  7  N.  B. 
R.  392,  F.  C.  12211;  In  re  Citizens' 
Sav.  Bk.,  9  N.  B.  R.  152,  F.  C. 
2735;  Schryock  v.  Bashore,  13  N. 
B.  R.  481,  F.  C.  12820;  contra, 
Sedgwick  v.  Place,  1  N.  B.  R.  204, 
34  Conn.  552,  F.  C.  12622;  Maltbie 
V  Hotchkiss.  5  N.  B.  R,  485;  Chan- 


C.  2594. 

23  Parmenter  Mfg.  Co.  v.  Hamil- 
ton, 172  Mass.  178;  1  A.  B.  R.  39; 
In  re  Bruss-Ritter  Co.,  90  F.  R. 
651,  1  A.  B.  R.  58;  In  re  Anderson, 
110  F.  R.  141,  6  A.  B.  R.  555;  In 
re  Mason  Sash,  Door  &  Lumber 
Co.,  112  F.  R.  323,  7  A.  B.  R.  66; 
In  re  Storck  Lumber  Co.,  114  F. 
R.  360,  8  A.  B.  R.  86;  Carling  v. 
Seymour  Lumber  Co.,  8  A.  B.  R. 
29;  Littlefield  v.  Gray,  8  A.  B.  R. 
409;  In  re  Richard,  2  A.  B.  R.  506; 
see  Hanover  Nat.  Bank  v.  Moyses, 
186  U.  S.  181,  8  A.  B.  R.  1;  Herron 
Co.  V.  Superior  Court,  8  A.  B.  R. 
492;  Sturgis  v.  Crowninshield,  4 
Wheat.  122;  Ogden  v.  Saunders,  12 
Wheat.  213,  6  L.  Ed.  606 ;  Perry  v. 
Langley,  1  N.  B.  R.  559;  Griswold 
v.  Pratt,  9  Mete.  16;  In  re  Reyn- 
olds, 9  N.  B.  R.  50,  F.  C.  11723; 
Thornhill  et  al.  v.  Bank,  5  N.  B. 
R.  367,  1  Woods  1,  F.  C.  13992; 
Shryrock  et  al.  v.  Bashore,  13  N. 
B.  R.  481. 

2i  Kassard  v.  Kroner,  4  N.  B.  R. 
569. 

25  Lavender  v.  Gosnell,  12  N.  B. 
R.  282;  In  re  Everitt,  9  N.  B.  R.  90. 
F.  C.  4579;  In  re  McKee.  1  N.  B.  N. 
139,  1  A.  B.  R.  311. 

26  In  re  Renic,  1  N.  B.  N.  335,  2 
A.  B.  R.  182. 


8  LAW    OF    BANKRUPTCY. 

ence  of  the  bankrupt  law,  they  will  become  operative  in  their 
amended  form.^''^ 

§  17.  It  is  only,  however,  to  the  extent  that  Congress  has 
legislated  upon  the  subject  that  the  statutes  of  the  several 
states  are  suspended  by  its  legislation.  As  stated  by  Chief 
Justice  Marshall  in  Sturgis  v.  Crowninshield,2s  with  reference 
to  the  power  given  Congress :  * '  This  establishment  of  uniform- 
ity is  perhaps  incompatible  with  state  legislation  on  that  part 
of  the  subject  to  which  the  act  of  Congress  may  extend.  .  . 
It  does  not  appear  to  be  a  violent  construction  of  the  Consti- 
tution, and  is  certainly  a  convenient  one,  to  consider  the  power 
of  the  states  as  existing  over  such  cases  as  the  laws  of  the 
Union  may  not  reach ;  but,  be  this  as  it  may,  the  power  granted 
to  Congress  may  be  exercised  or  declined,  as  the  wisdom  of 
that  body  shall  decide.  If,  in  the  opinion  of  Congress  uniform 
laws  concerning  bankruptcies  ought  not  to  be  established,  it 
does  not  follow  that  partial  laws  may  not  exist,  or  that  state 
legislation  on  the  subject  must  cease.  It  is  not  the  mere  ex- 
istence of  the  power,  but  its  exercise,  which  is  incompatible 
with  the  exercise  of  the  same  power  by  the  states."  If,  there- 
fore, the  bankruptcy  law  excepts  from  its  operation  either  in 
express  terms  or  by  necessary  implication  a  class  of  cases, 
it  must  be  considered  that  it  was  the  intention  of  Congress  not 
to  interfere  in  that  class  of  cases  with  the  laws  of  the  several 
states  in  reference  thereto.  The  state  laws  will  remain  oper- 
ative in  all  cases  which  are  not  within  the  provisions  of  the 
bankruptcy  law.  Therefore,  any  class  of  persons  or  corpora- 
tions not  covered  by  the  bankruptcy  law  are  subject  to  the 
laws  of  the  several  states  governing  insolvency  and  the  states 
are  authorized  to  legislate  with  reference  thereto.  In  such 
cases  there  is  no  conflict  of  jurisdiction  between  the  state  and 
Federal  law  but  each  statute  is  operative  >within  its  own  juris- 
diction and  may  be  enforced  without  in  any  respect  infringing 
upon  the  jurisdiction  of  the  other.^^ 

27  In  re  Wright,  1  N.  B.  N.  428,  Pac.  Rep.  (Calif.)  814,  8  A.  B.  R. 
95  F.  R.  807,  2  A.  B.  R.  592;  In  re  492;  In  re  Winternitz,  4  B.  R.  127, 
Worcester  Co.,  102  F.  R.  808,  4  A.  Clarke  v.  Ray,  1  Har.  J.  318 ;  In  re 
B.  R.  496;  Ex  p.  Eames,  2  Story,  Shepardson,  36  Conn.  23;  In  re 
322,  F.  C.  4237;  see  Butler  v.  Geery,  43  Conn.  289;  see  Simpson 
Coreley,  146  U.  S.  303,  314.  v.  Bank,  56  N.  H.  466;  Steelman  v. 

28  4  Wheat.  122.  Mattix,  36  N.  J.  L.  344;   Martin  v. 

29  Herron  v.  Superior  Court,  68  Berry,  37  Calif.  208. 


IN    GENERAL.  9 

§  18.  To  whatever  extent  Congress  has  undertaken  to  pro- 
vide remedies  and  prescribe  procedure,  its  authority  being  un- 
questionably paramount,  state  statutes  designed  for  the  same 
or  similar  purposes  must  give  way.^o  The  bankrupt  law  does 
not  suspend  an  ordinary  law  for  the  collection  of  debts.^^  or 
for  the  arrest  of  fraudulent  or  absconding  debtors^-  or 
to  prevent  fraudulent  assignments  in  trust  for  creditors  and 
other  fraudulent  conveyances^^  qj.  laws  relating  to  the  insolv- 
ent estates  of  persons  under  legal  disability,  as  lunatics  or 
spendthrifts,^^  or  a  law  merely  protecting  the  debtor  from 
imprisonment.^^ 

§  19.  Since  the  time  of  George  II  and  even  prior,  the  cur- 
rent of  English  adjudications,  followed  by  our  own,  has  been 
that  a  voluntary  assignment  of  a  debtor  to  an  assignee  of  his 
own  choosing,  though  without  preference,  is  itself  an  act  of 
bankruptcy,  a  fraud  upon  the  act  and  hence  a  fraud  upon 
creditors  as  respects  their  rights  in  bankruptcy  and  voidable 
at  the  trustee's  option,  even  without  any  express  provision  to 
that  effect  in  the  statute,  on  the  principle  that  it  defeats  the 
rights  of  creditors  secured  by  the  bankrupt  laAV  to  the  choice 
of  a  trustee,  to  the  summary  jurisdiction  of  the  bankruptcy 
court,  and  to  the  ample  control  which  the  law  intended  to  give 
them  over  the  estate  of  their  insolvent  debtors.^^  While  the 
assignment  is  void  there  would  seem  to  be  no  reason  why  it 
would  not  be  of  full  force  and  effect  between  the  parties 
thereto  where  it  is  not  followed  by  the  bankruptcy  of  the 
assignor.^''' 

§  20.  So  far  as  state  laws  attempt  to  discharge  the  con- 
tract as  against  citizens  of  other  states,  they  are  unconstitu- 
tional,^^ and  so  a  discharge  under  a  foreign  bankrupt  law 

30  In  re  McKee,  1  N.  B.  N.  139,  35  Sullivan  v.  Heiskell,  Crabbe, 
1  A.  B.  R.  311.  U.  S.  Dlst.  Ct.  525. 

31  Chandler  v.  Siddle,  10  N.  B.  R.  36  in  re  Gutwillig,  90  F.  R.  475, 
236,  3  Dill.  477,  F.  C.  2594.  affirmed  92  F.  R.  337 ;  West  v.  Lea, 

32  In  re  Scott,  1  N.  B.  N.  265,  1  174  U.  S.  590,  2  A.  B.  R.  463. 

A.  B.  R.  650;  McCollough  v.  Good-        37  See  State  ex  rel.  Strohl  v.  Su- 
hart,  1  N.  B.  N.  512,  3  A.  B.  R.  85.     perior  Court  of  King's  Co.,  1  N.  B. 

33  Ebersole  v.  Adams,  13  N.  B.  R.     N.  309,  1  A.  B.  R.  92. 

141.  38  Sturges    v.    Crowninshield,    4 

34  Mayer  v.    Hellman,   91   U.    S.     Wheat.  122. 
496 ;    Hawkins  v.    Learned,   54  N. 

H.  333. 


10  LAW    OF    BANKRUPTCY. 

cannot  be  pleaded  in  a  bar  to  an  action  on  a  contract  made  in 
this  coimtry,39  A  state  law  discharging  the  person  or  the 
property  of  the  debtor,  and  thereby  terminating  the  legal 
obligation  of  the  debt,  cannot  constitutionally  be  made  to 
apply  to  debts  contracted  prigr  to  the  passage  of  the  law; 
but  the  law  may  be  made  to  apply  to  such  future  contracts  as 
can  be  considered  as  having  been  made  in  reference  to  the 
law.^*^  Statutes  of  this  class  must  be  construed  to  be  parts 
of  all  contracts  made  when  they  are  in  existence,  and  there- 
fore cannot  be  held  to  impair  their  obligation.^i  In  fact,  the 
inhibition  of  the  constitution  is  wholly  prospective.  The  states 
may  legislate  as  to  contracts  thereafter  made  as  they  may  see 
fit.  It  is  only  those  in  existence  when  the  hostile  law  is  passed 
that  are  protected  from  its  effects.^ - 

In  fine,  insolvent  laws  of  one  state  cannot  discharge  the 
contracts  of  citizens  of  other  states,  because  they  have  no 
extra-territorial  operation,^'^  and  consequently  the  tribunal 
sitting  under  them,  unless  in  cases  where  the  citizen  of  such 
other  state  voluntarily  becomes  a  party  to  the  proceeding,  has 
no  jurisdiction  in  the  case.^^  Legal  notice  cannot  be  given, 
and  as  a  result  there  can  be  no  obligation  to  appear,  and.  of 
course,  there  can  be  no  legal  default.^^ 

§  21.  Congress  is  given  plenary  power  over  the  subject  of 
bankruptcy,  under  one  limitation  only,  that  the  law  passed 
upon  that  subject  shall  be  uniform  throughout  the  United 
States,"^*'  and  this  power  carries  with  it  a  right  to  establish 
the  details  of  the  system  if  it  shall  think  proper.^^  Congress 
cannot,  however,  impose  upon  state  courts  any  duties  in  con- 
nection with  the  enforcement  of  a  bankrupt  law,^^  though  by 

■•?9  McMillan  V.  McNeill,  4  "^Tieat.  -t^  Clay  v.  Smith,  3  Pet.  411; 
209.  Denny  v.  Bennett,  128  U.  S.  489. 

40  Ogden  V.  Saunders,  12  Wheat.  ^-^  Baldwin  v.  Hale,  1  Wall.  223; 
213;  Baldwin  v.  Hale,  1  Wall.  223.     Ogden  v.  Saunders,  12  Wheat.  213. 

46  In   re   Silverman,   4   N.   B.   R. 

173,  F.  C.  12855;  In  re  Duerson,  13 

N.  B.  R.  183,  F.  C.  4117. 

42  Edwards  v.  Kearzey.  96  U.  S.        ,,  gj^    p^^^^    Savings    Bank    v. 

395.  603;   Denny  v.  Bennett,  128  U.     gtuyvesant  Bank,  10  N.  B.  R.  399, 

S.  489,  495.  p    Q    12919;    In  re  Deckert,  10  N. 

«  Baldwin  v.  Hale,  1  Wall.  223;     B.  R.  1,  F.'C.  3728. 
Oilman    v.    Lockwood,    4    id.    409;         4s  Qoodall  v.   Tuttle,  7   N.  B.  R. 
Boyle  V.  Zacharie,  6  Pet.  635.  193,  3  Biss.  219,  F.  C.  5533. 


41  Denny   v.   Bennett,   128   U.   S 
489. 


IN   GENERAL.  11 

comity  the  state  courts  recognize  and  enforce  the  provisions 
of  such  a  law  so  far  as  is  within  their  power. 

§  22.  The  constitutionality  of  the  bankruptcy  law  has  been 
frequently  attacked  on  the  ground  that  by  adopting  the 
various  state  exemption  laws,^''  or  making  a  distinction  be- 
tween natural  and  artificial  persons,  and  between  classes  of 
artificial  persons,^"  it  lacked  uniformity.  But  the  courts  have 
almost  invariably  held  that  the  uniformity  required  is 
geographical  and  not  personal  in  the  sense  of  being  alike  ap- 
plicable to  all  members  of  the  community,  no  limitation  being 
placed  upon  Congress,  as  to  the  classification  of  persons,  who 
are  to  be  affected  by  such  laws,  and  that  the  constitution  con- 
templated uniformity  of  administration  only,^i  and  since  so 
far  as  the  distribution  of  the  assets  are  concerned,  the  law 
is  uniform.^-  The  recognition  of  the  local  law  in  the  matter 
of  exemptions,  dower,  priority  of  payments  and  the  like,  is  not 
an  attempt  by  Congress  to  unlawfully  delegate  its  legislative 
power,  and  would  not  be  for  that  reason  void.^^  It  has  been 
attacked  on  the  ground  that  in  voluntary  proceedings  it 
violated  the  Fifth  Amendment  because  it  deprives  creditors  of 
their  property  without  due  process  of  law  in  failing  to  provide 
for  notice,  but  the  Supreme  Court  held  the  contention  as  un- 
tenable.^^ 

§  23.  The  retrospective  effect  of  the  bankrupt  law,  by  im- 
pairing the  obligation  of  contracts,  does  not  render  it  uncon- 
stitutional as  the  inhibition  to  the  impairment  of  contracts 
does  not  apply  to  the  Federal  government.^^ 

§  24.  Proceedings  instituted  under  state  insolvency  laws 
prior  to  the  passage  of  the  national  bankruptcy  law,  are  not 
affected  by  it,^^  though  the  mere  fact  that  a  state  court  has 

49  In  re  Beckerford,  4  N.  B.  R.  ss  Hanover  Nat.  Bank  v.  Moyses, 

203,  1  Dill.   45,  F.  C.  1209;    In  re  supra;  In  re  Rahrer,  140  U.  S.  54.5, 

Deckert,    2    Hughes    183;    Hanover  560. 

Nat.  Bank  v.  M©yses,  186  U.  S.  181,  r.4  Hanover  Nat.  Bank  v.  Moyseo, 

8  A.  B.  R.  1.  supra. 

"•0  Leidigh  Carriage  Co.  v.  Sten-  55  in  re  Jordan,  8  N.  B.  R.  180, 

gel.  1  N.  B.  N.  387,  95  F.  R.  637,  2  F.  C.  7514;    In  re  Smith,  14  N.  B. 

A.  B.  R.  383.  R.  295,  2  Woods  458,  F.  C.  12996; 

•"'1  Hanover  Nat.  Bank  v.  Moyses,  In  re  Everett,  9  N.  B.  R.  90,  F.  C. 

supra;    In  re   Jordan,   8   N.   B.   R.  4579. 

180,  F.  C.  7514.  56  See  last  paragraph  of  act,  also 

52  In  re  Beckerford,  supra.  Longis   v.    Creditors,    20   La.   Ann. 


12  LAW    OF    BANKRUPTCY. 

taken  possession  of  the  property  of  an  insolvent,  thereby  first 
gaining  jurisdiction,  cannot  be  allowed  to  defeat  the  proper 
execution  of  the  latter  law.^''' 

15 ;    Martin  v.  Berry,  37  Cal.   208,  ^^  Geo.  M.  West  Co.  v.  Lea  Bros., 

where  the  same  is  held  to  be  the  174  N.  S.  590,  1  N.  B.  N.  409,  2  A. 

effect  of  the  act  of  1867;  Muslin  v.  B.  R.  483;  In  re  Safe  Dep.  &  Ins., 

Creditors,  3  N.  B.  R.  126.  7  N.  B.  R.  392.  F.  C.  12211. 


TITLE  II. 
THE   NATIONAL   BANKRUPTCY   LAW. 


CHAPTER  I. 

DEFINITIONS. 

§25.  '(Sec.  la)  Meaning  of  words  and  phrases.— The 
'words  and  phrases  used  in  this  Act  and  in  proceedings  pur- 
'suant  hereto  shall,  unless  the  same  be  inconsistent  with  the 
'context,  be  construed  as  follows: 

'(1)  "A  person  against  whom  a  petition  has  been  filed "i 
'shall  include  a  person  who  has  filed  a  voluntary  petition; 

'(2)  "Adjudication"  shall  mean  the  date  of  the  entry  of  a 
'decree  that  the  defendant,  in  a  bankruptcy  proceeding,  is  a 
'bankrupt,  or  if  such  decree  is  appealed  from,  then  the  date 
'  when  such  decree  is  finally  confirmed  -^ 

'(3)  "Appellate  courts"  shall  include  the  circuit  courts  of 
'appeals  of  the  United  States,  the  supreme  courts  of  the  Ter- 
'ritories,  and  the  Supreme  Court  of  the  United  States; 

'(4)  "Bankrupt"  shall  include  a  person  against  whom  an 
'involuntary  petition  or  an  application  to  set  a  composition 
'aside  or  to  revoke  a  discharge  has  been  filed,  or  who  has  filed 
'a  voluntary  petition,  or  who  has  been  adjudged  a  bankrupt ;3 

1  "A  person  against  whom  a  pe-  mark,  as  we  say  a  cart-rout,  which 
tition  is  filed."  See  cases  cited  un-  is  the  sign  or  mark  where  the  cart 
der  §  1113,  post.  has  gone;  so,  metaphorically,  it  is 

2  Adjudication. — An  adjudication  taken  for  him  that  hath  wasted  his 
on  a  petition  in  bankruptcy  is  a  estate  and  removed  his  banque,  so 
final  judgment  which  it  is  beyond  that  there  is  left  but  a  mention 
the  power  of  Congress  to  annul  or  thereof"  (4  Inst.  277).  Blackstone 
set  aside  (In  re  Comstock  &  Co.,  defines  a  "bankrupt"  as  "a  trader 
10  N.  B.  R.  451,  F.  C.  3077),  the  who  secretes  himself  or  does  cer- 
rights  of  the  parties  being  fixed  tain  other  acts,  tending  to  defraud 
at  such  date  (In  re  Kerr  &  Roach,  his  creditors"  (2  Bl.  Com.  471). 
9  N.   B.  R.  566,  F.  C.  7729).  The  word  "bankruptcy"  under  the 

3  Bankrupt. — This  term  is  de-  act  of  1841  meant  a  particular 
fined  by  Lord  Coke  as  "a  sign  or  status,   to   be   ascertained   and   de- 

13 


14  THE    iMATIONAL    BANKRUPTCY    LAW.  Ch.  1 

'(5)  "Clerk"  shall  mean  the  clerk  of  a  court  of  bankruptcy; 

'(6)  "Corporations"  shall  mean  all  bodies  having  any  of  the 
'powers  and  privileges  of  private  corporations  not  possessed 
'by  individuals  or  partnerships,  and  shall  include  limited  or 
'other  partnership  associations  organized  under  laws  making 
'the  capital  subscribed  alone  responsible  for  the  debts  of  the 
'association;^ 

'(7)  "Court"  shall  mean  the  court  of  bankruptcy  in  which 
'the  proceedings  are  pending,  and  may  include  the  referee; 

'(8)  "Courts  of  bankruptcy"  shall  include  the  district 
'courts  of  the  United  States  and  of  the  Territories,  the  Supreme 
'Court  of  the  District  of  Columbia,  and  the  United  States 
'court  of  the  Indian  Territory,  and  of  Alaska; 

'(9)  "Creditor"  shall  include  anyone  who  owns  a  demand 
'or  claim  provable  in  bankruptcy,  and  may  include  his  duly 
'authorized  agent,  attorney,  or  proxy ;^ 

'(10)  "Date  of  bankruptcy,"  or  "time  of  bankruptcy,"  or 
'  "commencement  of  proceedings,"  or  "bankruptcy,"  with 
'reference  to  time,  shall  mean  the  date  when  the  petition  was 
'  filed  ;6 

'(11)  "Debt"  shall  include  any  debt,  demand,  or  claim 
'provable  in  bankruptcy;'^ 

Glared   by   judicial    decree    (In   re  315,  2  A.  B.  R.  170;   In  re  Appel,  2 

Black  et  al.,  1  N.  B.  R.  81,  2  Ben.  N.  B.  N.  R.  907,  4  A.  B.  R.  722;  In 

196,  F.  C.  1457).  re  Lewis,  1  N.  B.  N.  556,  91  F.  R. 

i  Corporations. — See       "Corpora-  C32,  1  A.  B.  R.  458);  but  it  is  not 

tions,"  post,  §§  102,  113.  the  filing  of  every  petition  in  bank- 

5  Creditor. — This  term  includes  ruptcy,  but  only  such  as  may  be 
any  one  having  a  provable  claim  filed  by  a  debtor  in  his  own  behalf, 
(In  re  Leigh  Bros.,  1  N.  B.  N.  425.  or  by  a  creditor  against  a  debtor 
2  A.  B.  R.  606);  and  may  include  (In  re  Litchfield,  9  N.  B.  R.  506,  7 
his  "duly  authorized  agent,  attor-  Ben.  259,  F.  C.  8385)  upon  which 
ney,  or  proxy."  an  adjudication  can  be  made  that 

6  "Date  of  bankruptcy,"'  ''Time  is  meant.  In  re  Rogers,  10  N.  B. 
of    bankruptcy."    ''Commencement     R.  444,  F.  C.  12003.) 

of    proceedings,"  or  '"bankruptcy."  '  Debts. — The     word     "debt"     is 

— Either  of  the  foregoing  expres-  used  in  its  legal  or  limited  sense, 

sions  in  reference  to  time  means  and    not    in    its    popular    and    en- 

the    date    when    the    petition    was  larged   signification,  and   does  not 

filed   (In  re  Romanow,  1  N.  B.  N.  include  all  of  the  bankrupt's  debts, 

213,  1  A.  B.  R.  461,  92  F.  R.  510;  such    as,     for    instance,    a    claim 

In  re  Harris,  1  N.  B.  N.  384,  2  A.  against   him    for   alimony,    or   for 

B.  R.  359;  In  re  Gerson,  1  N.  B.  N.  the  support  of  a  bastard  child,  or 


CH.  1  DEFINITIOMS.  15 

'(12)  "Discharge"  shall  mean  the  release  of  a  bankrupt 
'from  all  of  his  debts  which  are  provable  in  bankruptcy,  ex- 
'eept  such  as  are  excepted  by  this  Act; 

'(13)  "Docnment"  shall  include  any  book,  deed,  or  instru- 
*ment  in  writing-; 

'(14)  "Holiday"  shall  include  Christmas,  the  Fourth  of 
'July,  the  Twenty-second  of  February,  and  any  day  appointed 
'by  the  President  of  the  United  States  or  the  Congress  of  the 
'United  States  as  a  holiday  or  as  a  day  of  public  fasting  or 
'thanksgiving; 

'  (15)  A  person  shall  be  deemed  insolvent  within  the  provis- 
'ions  of  this  Act  whenever  the  aggregate  of  his  property, 
'exclusive  of  any  property  which  he  may  have  conveyed,  trans- 
'f erred,  concealed,  or  removed,  or  permitted  to  be  concealed 
'or  removed,  with  intent  to  defraud,  hinder  or  delay  his  credit- 
'ors,  shall  not,  at  a  fair  valuation,  be  sufficient  in  amount  to 
'pay  his  debts ;^ 

'  (16)  "Judge"  shall  mean  a  judge  of  a  court  of  bankruptcy, 
'not  including  the  referee;^ 

'(17)   "Oath"  shall  include  affirmation; 

'(18)  "Officer"  shall  include  clerk,  marshal,  receiver, 
'referee,  and  trustee,  and  the  imposing  of  a  duty  upon  or  the 
'forbidding  of  an  act  by  any  officer  shall  include  his  successor 
'and  any  person  authorized  by  law  to  perform  the  duties  of 
'such  officer; 

'(19)  "Persons"  shall  include  corporations,  except  where 
'otherwise  specified,  and  officers,  partnerships,  and  women, 
'and  when  used  with  reference  to  the  commission  of  acts  which 
'are  herein  forbielden  shall  include  persons  who  are  partici- 
'  pants   in   the   forbidden   acts,   and  the   agents,   officers,    and 

a    speculative     option,     commonly  ^  Judge. — The    word    "judge"  in 

called  a  "put,"  where  the  object  of  the  present  act  expressly  excludes 

the  parties  is  not   a  sale  and  de-  the  referee  and  is  confined  to  the 

livery  of  the  goods,   but  a   settle-  judge    of    a    court   of    bankruptcy 

ment  in  money  on  differences   (In  (In  re  Hare,  119  F.  R.  246)  ;  hence 

re  Baker,  1  N.  B.  N.  547;  3  A.  B.  R.  the  decisions  construing  the  word 

101,  96  F.  R.  954;  Stokes  V.  Mason,  "judge"     as    used     in    section     23 

12  N.  B.  R.  498;  In  re  Chandler,  9  of  the  act  of  1867  to  mean  or  in- 

N.  B.  R.  514,  F.  C.  2590).  dude  the  register  would  not  be  ap- 

^  Insolvency.  —  See      Determina-  plicable    now    (In  re    Bininger  et 

tion  of  Insolvency,  post,  §  67.  al.,  9  N.  B.  R.  568,  F.  C.  1421). 


16  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  1 

'members  of  the  board  of  directors  or  trustees,  or  other  simi- 
'lar  controlling  bodies  of  corporations  ;^° 

'  (20)  "Petition"  shall  mean  a  paper  filed  in  a  court  of  bank- 
'ruptcy  or  with  a  clerk  or  deputy  clerk  by  a  debtor  praying 
'for  the  benefits  of  this  Act,  or  by  creditors  alleging  the  com- 
'  mission  of  an  act  of  bankruptcy  by  a  debtor  therein  named  ;^i 

*(21)  "Referee"  shall  mean  the  referee  who  has  jurisdiction 
*of  the  case  or  to  whom  the  case  has  been  referred,  or  anyone 
'acting  in  his  stead; 

'(22)  "Conceal"  shall  include  secrete,  falsify,  and  mutilate; 

*(23)  "Secured  creditor"  shall  include  a  creditor  who  has 
'security  for  his  debt  upon  the  property  of  the  bankrupt  of  a 
'nature  to  be  assignable  under  this  Act,  or  who  owns  such  a 
'debt  for  which  some  indorser,  surety,  or  other  persons  second- 
'arily  liable  for  the  bankrupt  has  such  security  upon  the  bank- 
'rupt's  assets; 

'(24)  "States"  shall  include  the  Territories,  the  Indian  Ter- 
'ritory,  Alaska,  and  the  District  of  Columbia; 

'(25)  "Transfer"  shall  include  the  sale  and  every  other  and 
'different  mode  of  disposing  of  or  parting  with  property,  or 
'the  possession  of  property,  absolutely  or  conditionally,  as  a 
'payment,  pledge,  mortgage,  gift,  or  security; 

'(26)  "Trustee"  shall  include  all  of  the  trustees  of  an 
' estate ; 

'(27)  "Wage-earner"  shall  mean  an  individual  who  works 
'for  wages,  salar}^  or  hire,  at  a  rate  of  compensation  not  ex- 
'ceeding  one  thousand  five  hundred  dollars  per  year; 

'(28)  Words  importing  the  masculine  gender  may  be  ap- 
*  plied  to  and  include  corporations,  partnerships,  and  women; 

'  (29)  Words  importing  the  plural  number  may  be  applied  to 
'and  mean  only  a  single  person  or  thing; 

10  Person. — The  word  "person"  less  used  in  a  more  limited  sense 
includes  a  minor  (In  re  Brice,  1  (In  re  Ore.  Pub.  &  Pr.  Co.,  13  N. 
N.  B.  N.  310,  2  A.  B.  R.  197,  93  B.  R.  199,  F.  C.  10588;  In  re  Cal. 
F.  R.  942),  also  corporations,  ex-  Pac.  R.  R.  Co.,  11  N.  B.  R.  193.  3 
cept  where  otherwise  specified,  Sawy.  240,  F.  C.  2315). 
and  hence  renders  unnecessary  the  n  Petition. — A  petition  in  bank- 
decision  under  the  act  of  1867  that,  ruptcy  is  an  action  or  suit  (In  re 
in  absence  of  statute  definition  to  Comstock,  etc.,  Co.,  10  N.  B.  R.  451, 
that  effect,  the  word  "person"  F.  C.  3077). 
would    include   a   corporation,   un- 


Ch.  1 


DEFINITIONS. 


17 


'  (30)  Words  importing  the  singular  number  may  be  applied 
'to  and  mean  several  persons  or  things. '^~ 


12  Act  of  1867.  Sec.  38.  And  he 
it  further  enacted.  That  the  filing 
of  a  petition  for  adjudication  in 
banltruptcy,  either  by  a  debtor  in 
his  own  behalf,  or  by  any  creditor 
against  a  debtor;  upon  which  an 
order  may  be  issued  by  the  court, 
or  by  a  register  in  the  manner  pro- 
vided in  section  four,  shall  be 
deemed  and  taken  to  be  the  com- 
mencement of  proceedings  in  bank- 
ruptcy under  this  act;     .     .     . 

Sec.  48.     And  be  it  further  en- 


acted. That  the  word  "assignee" 
and  the  word  "creditor"  shall  in- 
clude the  plural  also;  and  the 
word  "messenger"  shall  include 
his  assistant  or  assistants,  except 
in  the  provision  for  the  fees  of 
that  officer.  The  word  "marshal" 
shall  include  the  marshal's  depu- 
ties ;  the  word  "person"  shall  also 
include  "corporation" ;  and  the 
word  "oath"  shall  include  "affirm- 
ation."    .     .     . 


CHAPTER  II. 

CREATION  OF  COURTS  OF  BANKRUPTCY   AND   THEIR 
JURISDICTION. 


§26. 

(2a)   Courts       created — juris- 

46. 

Business  continued    tem- 

diction in  general. 

porarily. 

Unspecified  powers. 

47. 

Bringing     in     additional 

27. 

Courts  Federal — Revenue  law. 

parties. 

28. 

Courts  always  open — Terms. 

48. 

Administration     of      es- 

29. 

Judge,       qualifications. 

tates.        Suits  —  Controver- 

duty, etc. 

sies. 

30. 

Place    of    business,    residence 

49. 

Suits      against      adverse 

or  domicile. 

claimants. 

31. 

Distinction  between  "res- 

50. 

Closing  and  reopening  es- 

idence" and  "domicile." 

tates. 

32. 

Length  of  required. 

51. 

Certification    of    findings 

33. 

Must  be  alleged. 

by  referees. 

34. 

Burden  of  proof. 

52. 

Exemptions. 

35. 

Alien  or  non-resident. 

53. 

Issuance  of  orders. 

36. 

Jurisdiction  of  courts  of  bank- 

54. 

Punishment    for    failure 

ruptcy. 

to  obey  orders. 

37. 

In  law  and  equity. 

55. 

Contempt  of  witness,  etc. 

38. 

Over  corporations. 

56. 

Power    to    punish. 

39. 

Judgment  of  State  courts. 

57. 

Review  of  order  of  com- 

40. 

Liens. 

mitment. 

41. 

Receivers  in  State  courts. 

58. 

Classes  of  contempts. 

42. 

Collateral    attack   of    de- 

59. 

Nature  of  offence. 

cisions. 

60. 

Pardon  of. 

43. 

Want  of  suflScient,  when 

61. 

Nature  of  punishment. 

raised. 

62. 

Punishment    not    impris- 

44. 

Commencement    of     pro- 

ment for  debt. 

ceedings. 

63. 

Defence  to  order  commit- 

45. 

Receiver    for    preserving 

estate. 

ting  for  contempt. 

^  26.  '  (Sec.  2a)  District  Courts,  Supreme  Court,  D.  C,  Ter- 
'ritorial  Courts— jurisdiction.— That  the  courts  of  bankruptcy 
'as  hereinbefore  defined,  viz.,  the  district  courts  of  the  United 
'States  in  the  several  States,  the  Supreme  Court  of  the  Dis- 
'trict  of  Columbia,  the  district  courts  of  the  several  Terri- 
'tories,  and  the  United  States  courts  in  the  Indian  Territory 
'and  the  District  of  Alaska,  are  hereby  made  courts  of  bank- 

18 


Ch.  2  CREATION  OF  COURTS  OF  BANKRUPTCY.        19 

riiptcy,  and  are  hereby  invested,  within  their  respective  ter- 
ritorial limits  as  now  established,  or  as  they  may  be  hereafter 
changed,  with  such  jurisdiction  at  law  and  in  equity  as  will 
enable  them  to  exercise  original  jurisdiction  in  bankruptcy 
proceedings,  in  vacation  in  chambers  and  during  their  re- 
spective terms,  as  they  are  now  or  may  be  hereafter  held,  to 

'(1)  To  adjudicate  bankrupt.— Adjudge  persons  bankrupt 
who  have  had  their  principal  place  of  business,  resided  or 
had  their  domicile  within  their  respective  territorial  jurisdic- 
tions for  the  preceding  six  months,  or  the  greater  portion 
thereof,  or  who  do  not  have  their  principal  place  of  business, 
reside,  or  have  their  domicile  within  the  United  States,  but 
have  property  within  their  jurisdictions,  or  who  have  been 
adjudged  bankrupts  by  courts  of  competent  jurisdiction  with- 
out the  United  States  and  have  property  within  their  juris- 
dictions ; 

'(2)  Allowance  of  claims.— Allow  claims,  disallow  claims, 
reconsider  allowed  or  disallowed  claims,  and  allow  or  disal- 
low them  against  bankrupt  estates; 

*(3)  Appoint  receivers  or  marshal.— Appoint  receivers  or  the 
marshals,  upon  application  of  parties  in  interest,  in  case  the 
courts  shall  find  it  absolutely  necessary,  for  the  preservation 
of  estates,  to  take  charge  of  the  property  of  bankrupts  after 
the  filing  of  the  petition  and  imtil  it  is  dismissed  or  the 
trustee  is  qualified ;  ' 

'(4)  Trial  of  offenses.— Arraign,  try,  and  punish  bankrupts, 
officers,  and  other  persons,  and  the  agents,  officers,  members 
of  the  board  of  directors  or  trustees,  or  other  similar  controll- 
ing bodies,  of  corporations  for  violations  of  this  Act,  in  ac- 
cordance with  the  laws  of  procedure  of  the  United  States  now 
in  force,  or  such  as  may  be  hereafter  enacted,  regulating  trials 
for  the  alleged  violation  of  laws  of  the  United  States; 

'(5)  Temporary  transaction  of  business.— Authorize  the 
business  of  bankrupts  to  be  conducted  for  limited  periods  by 
receivers,  the  marshals,  or  trustees,  if  necessary  in  the  best 
interests  of  the  estates ;  and  allow  such  officers  additional 
compensation  for  such  services,^  but  not  at  a  greater  rate  than 
in  this  Act  allowed  trustees  for  similar  services. 

1  Subdivision  5  of  section  2  was  thereof  of  the  words  "and  allow 
amended  by  the  Act  of  February  such  officers  additional  compensa- 
5,  1903,  by  the  addition  at  the  end     tion  for  such  services,  but  not  at 


20  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

*  (6)  Substitution  of  parties.— Bring  in  and  substitute  addi- 
tional persons  or  parties  in  proceedings  in  bankruptcy  when 
necessary  for  the  complete  determination  of  a  matter  in  con- 
troversy ; 

'(7)  To  collect  and  distribute  assets.— Cause  the  estates  of 
bankrupts  to  be  collected,  reduced  to  money  and  distributed, 
and  determine  controversies  in  relation  thereto,  except  as 
herein  otherwise  provided; 

'(8)  To  close  estates.— Close  estates,  whenever  it  appears 
that  they  have  been  fullj^  administered,  by  approving  the  final 
accounts  and  discharging  the  trustees,  and  reopen  them  when- 
ever it  appears  they  were  closed  before  being  fully  adminis- 
tered ; 

'(9)  To  confirm  or  reject  compositions.— Confirm  or  reject 
compositions  between  debtors  and  their  creditors,  and  set 
aside  compositions  and  reinstate  the  cases; 

'(10)  To  consider  referee's  findings.— Consider  and  confirm, 
modify  or  overrule,  or  return,  with  instructions  for  further 
proceedings,  records  and  findings  certified  to  them  by 
referees ; 

'(11)  To  determine  exemptions.— Determine  all  claims  of 
bankrupts  to  their  exemptions ; 

'(12)  To  grant  discharges,  etc.— Discharge  or  refuse  to  dis- 
charge bankrupts  and  set  aside  discharges  and  reinstate  the 
cases ; 

'(13)  To  enforce  orders.— Enforce  obedience  by  bankrupts, 
officers,  and  other  persons  to  all  lawful  orders,  by  fine  or  im- 
prisonment or  fine  and  imprisonment. 

'(14)  To  extradite  bankrupts.— Extradite  bankrupts  from 
their  respective  districts  to  other  districts; 

*(15)  To  make  orders.— Make  such  orders,  issue  such  proc- 
ess, and  enter  such  Judgments  in  addition  to  those  specifically 
provided  for  as  may  be  necessary  for  the  enforcement  of  the 
provisions  of  this  Act; 

'  (16)  To  punish  contempts.— Punish  persons  for  contempts 
'committed  before  referees; 

'(17)  To  appoint  or  remove  trustees.— Pursuant  to  the  rec- 

a  greater  rate  than  in  the  Act  al-     ices,"  as  found  in  the  text, 
lowed    trustees    for    similar    serv- 


C'H.  2 


CREATION  OF  COURTS  OF  BANKRUPTCY. 


21 


'ommendation  of  creditors,  or  when  they  neglect  to  recommend 
'the  appointment  of  trustees,  appoint  trustees,  and  upon  com- 
'  plaints  of  creditors,  remove  trustees  for  cause  upon  hearings 
'  and  after  notices  to  them ; 

*  (18)  To  tax  costs.— Tax  costs,  whenever  they  are  allowed  by 
'law,  and  render  judgments  therefor  against  the  unsuccessful 
'party,,  or  the  successful  party  for  cause,  or  in  part  against 
'each  of  the  parties,  and  against  estates,  in  proceedings  in 
'bankruptcy;  and 

'(19)  To  transfer  cases.— Transfer  cases  to  other  courts  of 
'bankruptcy. 

'Unspecified  powers.— Nothing  in  this  section  contained  shall 
'  be  construed  to  deprive  a  court  of  bankruptcy  of  any  power  it 
'would  possess  were  certain  specific  powers  not  herein  enu- 
'  merated.  '^ 


2  Act  of  1867.  Sec.  1.  Be  it  en- 
acted .  .  .  That  the  several 
District  Courts  of  the  United 
States  be,  and  they  hereby  are, 
constituted  courts  of  bankruptcy, 
and  they  shall  have  original  juris- 
diction in  their  respective  districts 
in  all  matters  and  proceedings  in 
bankruptcy,  and  they  are  hereby 
authorized  to  hear  and  adjudicate 
upon  the  same  according  to  the 
provisions  of  this  act.  The  said 
courts  shall  be  always  open  for  the 
transaction  of  business  under  this 
act,  and  the  powers  and  jurisdic- 
tion hereby  granted  and  conferred 
shall  be  exercised  as  well  in  vaca- 
tion as  in  term  time,  and  a  judge 
fitting  at  chambers  shall  have  the 
same  powers  and  jurisdiction,  in- 
cluding the  power  of  keeping  or- 
der and  of  punishing  any  contempt 
of  his  authority,  as  when  sitting 
in  Court.  And  the  jurisdiction 
hereby  conferred  shall  extend  to 
all  cases  and  controversies  arising 
between  the  bankrupt  and  any 
creditor  or  creditors  who  shall 
claim  any  debt  or  demand  under 
the  bankruptcy;    to   the  collection 


of  all  the  assets  of  the  bankrupt; 
to  the  ascertainment  and  liquida- 
tion of  the  liens  and  other  specific 
claims  thereon;  to  the  adjustment 
of  the  various  priorities  and  con- 
flicting interests  of  all  parties  and 
to  the  marshalling  and  disposition 
of  the  different  funds  and  assets, 
so  as  to  secure  the  rights  of  all 
parties  and  due  distribution  of  the 
assets  among  all  the  creditors; 
and  to  all  acts,  matters,  and  things 
to  be  done  under  and  in  virtue  of, 
the  bankruptcy,  until  the  final  dis- 
tribution and  settlement  of  the 
estate  of  the  bankrupt,  and  the 
close  of  the  proceedings  in  bank- 
ruptcy. The  said  courts  shall  have 
full  authority  to  compel  obedience 
to  all  orders  and  decrees  passed  by 
them  in  bankruptcy,  by  process  of 
contempt  and  other  remedial 
process,  to  the  same  extent  that 
the  circuit  courts  now  have  in  any 
suit  pending  therein  in  equity. 
Said  courts  may  sit,  for  the  trans- 
action of  business  in  bankruptcy, 
at  any  place  in  the  district,  of 
which  place  and  the  time  of  hold- 
ing court,   they   shall  have   given 


22  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

§27.  Court  federal— revenue  law.— The  court  of  bank- 
ruptcy is  essentially  a  federal  institution ;  and  the  war  revenue 
law  of  1898,  itself  essentially  federal,  declaring  what  may  or 
may  not  be  competent  evidence  "in  any  court"  must,  in  the 
nature  of  things,  be  peculiarly  applicable  to  the  court  of 
bankruptcy.  The  decision  of  a  state  court,  therefore,  under 
the  former  revenue  laws  that  they  could  have  no  force  or  effect 
in  declaring  a  rule  of  evidence  in  that  state,  would  not  be 
authority  in  bankruptcy  proceedings,  but  a  paper  declared 
incompetent  for  want  of  conformance  to  the  revenue  law, 
should  be  so  held  in  such  proceedings  in  a  Federal  Court.^ 

§  28.  Court  always  open— term.— The  court  of  bankruptcy 
having  no  regular  terms,  is  always  open,  and  its  adjudications, 
orders  and  decrees  remain,  at  all  times,  subject  to  re-examina- 
tion and  correction  upon  application  made  in  an  appropriate 
form  when  discovered  to  be  erroneous,  provided  rights  have 
not  become  vested  under  them  which  such  correction  will 
disturb  ;^  and,  in  the  exercise  of  its  exclusive  original  juris- 
diction it  may  act  in  administrative  matters  or  matters  of 
mere  discretion  as  well  in  vacation  as  in  term  time,  and  a 
judge  sitting  in  chambers  in  such  matters  has  the  same  power 
and  jurisdiction  as  when  sitting  in  court.^  The  proceedings 
in  a  pending  suit  are  therefore  continuous  from  the  filing  of 
the  petition  to  the  closing  of  the  estate.^ 

§  29.  Judge,  qualification,  duty  and  conduct.— The  same  re- 
quirements as  to  qualification,  duty  and  conduct  of  Federal 

notice,  as  well  as  at  the  places  And  in  those  judicial  districts 
designated  by  law  for  holding  which  are  not  within  any  organ- 
such  courts.  ized  circuit  of  the  United  States, 
Sec.  49.  And  be  it  further  en-  the  power  and  jurisdiction  of  a 
acted.  That  all  the  jurisdiction,  circuit  court  in  bankruptcy  may 
power,  and  authority  conferred  be  exercised  by  the  district  judge, 
upon  and  vested  in  the  District  3  in  re  Dobson,  2  N.  B.  N.  R. 
Court  of  the  United  States  by  this  514;  In  re  Watson,  2  N.  B.  N.  R. 
act    in    cases  of   bankruptcy    are  308. 

hereby  conferred  upon  and  vested  *  Mahoney   v.    Ward,    100   F.    R. 

in  the  Supreme  Court  of  the  Dis-  278,  2  N.  B.  N.  R.  558,  3  A.  B.  R. 

trict    of    Columbia,    and  ^  in     and  770;   Sandusky  v.  Bk.,  12  N.  B.  R. 

upon  the    supreme    courts    of  the  176,  23  Wall.  289;  23  L.  Ed.  155. 

several   Territories   of  the   United  s  Shearman  v.  Bingham,  7  N.  B. 

States,  when  the  bankrupt  resides  R.  490. 

in  the  said  District  of  Columbia  or  6  in   re   Ives,    113   F.   R.    911,   7 

in   either  of  the  said   Territories.  A.  B.  R.  692;    reversing  111  F.  R. 


Ch.  2      PLACE    OF    BUSINESS— RESIDENCE— DOMICILE.  23 

judges  in  the  courts,  apply  with  equal  force  to  courts  of  bank- 
ruptcy. Thus  a  judge,  who  has  been  a  depositor  in  an  insolv- 
ent banking  institution  but  who  has  sold  his  claim,  is  not 
thereby  disqualified  from  sitting  in  the  matter,  although  the 
motive  on  the  part  of  the  purchaser  of  his  claim  may  have  been 
to  remove  the  disqualification,'^  though  he  would  be  disquali- 
fied from  acting  as  the  general  adviser  of  trustees  as  to  their 
acts.^  In  the  discharge  of  his  functions,  as  a  Federal  judge, 
his  conduct  and  administration  need  not  conform  to  the  prac- 
tice in  the  state  courts.^ 

§30.  Place  of  business,  residence  or  domicile.— Place  of 
business,  residence  and  domicile  are  three  distinct  alternative 
jurisdictional  requisites  under  the  present  law,^*'  so  that  if 
the  alleged  bankrupt  does  not  have  either  his  principal  place 
of  business,  his  residence  or  domicile  within  the  district,  a  court 
of  bankruptcy  has  no  power  to  obtain  jurisdiction  over  him  by 
any  service  of  process  otherwise  than  in  accordance  with  the 
rule,ii  and,  though  the  alleged  bankrupt  appear  on  the  return 
day  and  consent  to  the  adjudication,  the  court  will  neverthe- 
less dismiss  the  proceedings  on  objections  from  other  creditors 
that  he  never  resided  or  carried  on  business  in  the  state.^^  In 
the  case  of  voluntary  proceedings,  it  has  been  held  that  if 
objection  be  made  to  the  adjudication  because  of  lack  of  these 
jurisdictional  requisites,  the  burden  of  showing  their  exist- 
ence rests  on  the  bankrupt.^  ^  If,  however,  the  respondent  in 
bankruptcy  proceedings  consents  to  a  reference  to  take  proof, 
he  thereby  gives  the  court  jurisdiction  over  his  person,  and 
can  not  impeach  its  decrees  in  a  collateral  action  ;i^  but,  in  a 
dispute  over  the  ownership  of  a  fund  controlled  by  a  trustee 
in  bankruptcy,  the  court  has  jurisdiction  without  reference 
to  the  residence  of  the  parties.^ ^ 

495,  6  A.  B.  R.  653 ;   In  re  Jemison  12  in  re  Fogerty,  4  N.  B.  R.  143, 

Mercantile   Co.,    112    F.    R.    966,    7  1  Sawy.  233,  F.  C.  4895. 

A.  B.  R.  588.  13  In  re  Scott,  111   F.  R.   144,  7 

7  In  re  Sime,  7  N.  B.  R.  407,  2  A.  B.  R.  39.  See  In  re  Waxel- 
Sawy.  320.  F.  C.  12860.  baum,  97  F.  R.  562,  3  A.  B.  R.  392. 

8  In  re  Sturgeon,  1  N.  B.  R.  131,  i*  People  ex  rel.  Jennys  v.  Bren- 
F.  C.  1356.  nan,  12  N.  B.  R.  567. 

9  Nudd  V.  Burrows,  13  N.  B.  R.  is  In  re  Sabin,  18  N.  B.  R.  157, 
289,  91  U.   S.  426.  F.    C.    12195;    Markson    &    Spauld- 

10  In  re  Clisdell,  2  A.  B.  R.  424.     ing  v.  Meany.  4  N.  B.  R.  165,  F.  C. 

11  Hyslop  V.  Hoppock,  6  N.  B.  R.  9098;  Payson  v.  Dietz,  8  N.  B.  R. 
557,  5  Ben.  533,  F.  C.  6989.  193,  F.  C.  10861. 


24  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

In  the  case  of  a  corporation,  its  principal  place  of  abode 
should  be  construed  to  mean  its  principal  office.^^  A  court 
would  have  jurisdiction  of  a  petition  in  case  of  a  foreign  cor- 
poration, if  it  has  its  principal  place  of  business  as  distinct 
from  its  residence  or  domicile  within  the  district  where  filed,i' 
and  this  has  been  held  to  be  true  although  its  articles  of  asso- 
ciation provide  that  its  principal  office  shall  be  at  a  place  in 
the  state  of  incorporation.^^ 

§31. Distinction  between  "residence"  and  "domi- 
cile."— There  is  a  clear  difference  intended  to  be  made  by  the 
law  between  "residence"  and  "domicile;"  the  essential  dis- 
tinction being  that  the  first  involves  the  intent  to  leave  when 
the  purpose  for  which  one  has  taken  up  his  abode  is  accom- 
plished; the  other  has  no  such  intent,  the  abiding  is  animo^ 
manendi.  Thus  one  may  seek  a  place  for  the  purpose  of  health, 
business  or  pleasure :  and  if  his  intent  be  to  remain,  it  becomes 
his  domicile ;  if  it  be  to  leave  as  soon  as  his  purpose  is  accom- 
plished, it  is  his  residence.  Perhaps  the  most  satisfactory 
definition  is  that  one  is  a  resident  of  a  place  from  which  his 
departure  is  indefinite  as  to  time,  but  definite  as  to  purpose, 
and  for  this  purpose  he  has  made  the  place  his  temporary 
home ;  so  one  can  have  but  one  domicile  but  many  residences, 
and  cannot  be  without  a  legal  domicile  somewhere  ;^^  a  tempo- 
rary absence  will  not  destroy  either  residence  or  domicile, 
though  an  absence  that  would  suffice  to  destroy  a  residence 
might  not  affect  a  domicile.  Bodily  presence  is  necessary  to 
residence  while  it  is  not  to  domicile :  for  instance,  a  New 
Yorker  may  spend  years  in  Europe  retaining  his  domicile  in 
New  York  while  his  residence  might  be,  in  the  spring,  in  Lon- 
don ;  in  the  summer,  in  Paris ;  in  the  winter,  on  the  Riviera.-^ 
A  domicile  once  acquired  is  presumed  to  continue  until  it  is 

16  In  re  Cal.  Pac.  R.  R.  Co.,  11  3  A.  B.  R.  677;   In  re  Grimes,  94 

N.   B.    R.   193,    3    Sawy.    24,   F.    C.  F.  R.  300,  2  A.  B.  R.  160. 

2315;   see  In  re  Elmira  Steel  Co.,  ao  in  re   Berner,   2  N.   B.   N.   R. 

109  F.  R.  456,  5  A.  B.  R.  484.  330,  3  A.  B.  R.  325;  In  re  Clisdell, 

IT  In  re  Magid  v.  Hope  Silk  Mfg.  2  N.  B.  N.  638,  2  A.  B.  R.  424,  101 

Co.,  110  F.  R.  352,  6  A.  B.  R.  61Q;  F.  R.  246;   In  re  Grimes,  1  N.  B. 

In  re  Marine  Machine  &  Conveyor  N.  339,  2  A.  B.  R.  160,  95  F.  R.  800 ; 

Co.,  91  F.  R.  630,  1  A.  B.  R.  421.  Brisenden    v.    Chamberlain,    53    F. 

"Dressel  v.  Lumber  Co.,  107  F.  R.  311;  In  re  Watson,  4  N.  B.  R. 

R.  255,  5  A.  B.  R.  744.  197,  F.  C.  12272. 

18  In  re  Williams,  99  F.  R.  544. 


Ch.  2     PLACE    OF    BUSINESS— RESIDENCE— DOMICILE.  25 

shown  to  have  changed,  and  where  a  change  of  domicile  is 
alleged,  the  burden  of  proving  it  rests  upon  the  person  making 
the  allegation.21  Thus  where  a  bankrupt,  before  the  filing  of 
the  petition,  absconds  for  the  purpose  of  avoiding  arrest,  his 
domicile  is  not  thereby  changed  unless  an  intent  to  change 
is  shown  by  the  party  making  such  allegation.22 

§32. Length  of,  required.— The  act  provides  that  "the 

courts  of  bankruptcy  *  *  are  hereby  invested  *  * 
with  such  jurisdiction  *  *  as  will  enable  them  to  ex- 
ercise original  jurisdiction  *  *  to  (1)  adjudge  persons 
bankrupt  who  have  *  *  resided,  or  had  their  domicile 
within  their  respective  territorial  jurisdictions  for  the  pre- 
ceding six  months,  or  the  greater  portion  thereof."  The  cor- 
responding provision  in  the  act  of  1867  was  "resided  or  car- 
ried on  business  for  the  six  months  next  immediately  preced- 
ing the  time  of  filing  the  petition,  or  for  the  longest  period 
during  such  six  months."  The  phraseology  of  the  two  pro- 
visions is  plainly  different.  Under  the  act  of  1867,  it  was 
properly  held  that  a  debtor  might  file  his  petition  in  the  dis- 
trict in  which  he  had  resided  or  carried  on  business  for  the 
six  months  next  immediately  preceding  the  filing  of  the  peti- 
tion, or  for  the  longest  period  during  or  within  such  six  months 
that  he  had  resided  or  carried  on  business  in  any  district.^^ 

An  interpretation  of  the  expression  "the  preceding  six 
months  or  the  greater  portion  thereof"  is  not  altogether  free 
from  doubt.  A  construction  that  the  word  "greater"  is 
sjTionymous  with  the  word  '  *  longest ' '  used  in  the  Act  of  1867-^ 
is  contrary  to  the  express  language  of  the  statute;  w^hile  the 
contention  that  bankrupt  must  have  established  his  residence 
or  domicile  within  the  territorial  jurisdiction  at  least  six 
months  preceding  the  filing  of  his  petition,  and  not  absented 
himself  during  said  period  for  one-half  of  the  time,  and  that 
although  he  may  have  resided  in  the  district  for  the  three  and 
a  half  months  immediately  preceding  the  filing  of  the  petition, 
but  for  a  number  of  months  or  years  previously  in  another 

21  Mitchell  V.  U.  S.,  21  Wall.  350,  Ben.  386,  F.  C.  4962;  In  re  Leigh- 
353;  In  re  Waxelbaum,  97  F.  R.  ton,  5  N.  B.  R.  95,  4  Ben.  457,  F.  C. 
562,  3  A.  B.  R.  267.  8221;  In  re  Goodfellow,  1  Saw.  510, 

22  In  re  Filer,   108  F.  R.   209,   5  F.  C.  5536. 

A.  B.  R.  332,  3  N.  B.  N.  R.  366.  24  in  re  Ray,  1  N.  B.  R.  336,  2 

23  In  re  Foster,  3  N.  B.  R.  57,  3     A.  B.  R.  158. 


26  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

stat(!,  the  court  would  not  have  jurisdiction,  is  not  tenable.^-'' 
Such  a  construction  fails  to  sufficiently  consider  the  language. 
The  use  of  the  disjunctive  "or"  shows  that  the  two  portions 
of  the  provision  are  alternative.  To  give  jurisdiction  the 
prospective  bankrupt  must  have  his  principal  place  of  business, 
resided  or  be  domiciled  in  the  district  for  more  than  three 
months  of  the  preceding  six  months,  the  residence  of  the 
creditors  being  immaterial.  So  that  in  order  for  jurisdiction 
to  exist  in  bankruptcy,  there  must  have  been  a  residence  or 
domicile  for  at  least  three  months,  and  this  three  months  need 
not  be  the  three  months  immediately  preceding  the  filing  of 
the  petition,  but  may  be  any  three  months  of  actual  legal  resi- 
dence or  domicile  within  the  six  months  preceding  the  institu- 
tion of  bankruptcy  proceedings.^^ 

There  is  no  provision  in  the  statute  for  the  case  of  an  astute 
debtor,  who,  in  his  effort  to  defeat  jurisdiction,  changes  his 
residence  or  domicile  from  one  district  to  another  before  the 
three  months'  jurisdictional  period  is  established,  though  the 
domicile  will  be  presumed  to  continue  at  one  place  until  it  is 
shown  to  have  changed.-^  If  the  residence,  domicile  or  place 
of  business  is  less  than  three  months,  it  is  not  sufficient  to 
make  the  jurisdictional  period,  to  allege  that  the  business  was 
being  conducted  during  the  additional  period  by  an  assignee 
under  a  general  assignment,  where  there  is  no  evidence  that  he 
actually  conducted  business,  or  did  anything  more  than  close 
it  out.-^  A  bankrupt  may  reside  and  have  his  domicile  in  one 
state  and  have  his  principal  place  of  business  in  another,  and 
the  court  in  either  would  have  jurisdiction  if  the  time  be  of 
sufficient  length.^^^  And  it  has  been  held  that  although  out  of 
the  country  for  six  years  his  domicile  might  be  in  the  United 
States  and  he  could  institute  proceedings  without  an  actual 
residence  of  three  months  or  more  before  filing  the  petition.^*^ 

§  33. must  be  alleged.— Having  a  principal  place  of 

25  In  re  Stokes,  1  N.  B.  N.  106,  1         2s  in  re  Plotke,  supra. 

A.  B.  R.  35.  29  See   in  re   Mackey,   110   F.   R. 

26  In  re  Berner,  2  N.  B.  N.  R.  330,  355,  6  A.  B.  R.  577;  In  re  Brice 
3  A.  B.  R.  325;   In  re  Plotke,  3  N.     93  F.  R.  942,   2  A.   B.  R.  197;    In 

B.  N.  R.  122,  104  F.  R.  964;  5  A.  re  Watson,  4  N.  B.  R.  197,  F.  C. 
B.  R.  171;  In  re  Appel.  2  N.  B.  N.     12,  272.     • 

R.  907,  103  F.  R.  931.  so  in  re  Williams,  99  F.  R.  544, 

27  Mitchell  V.  U.  S.,  21  Wall.  350.     3  A.  B.  R.  677. 


Ch.  2  DOMICILE— JURISDICTION    OF    COURTS.  27 

business,  residence  or  doniicile^i  within  the  territorial  jurisdic- 
tion of  the  particular  court  of  bankruptcy  in  which  the  peti- 
tion is  filed  is  jurisdictional  and  must  be  alleged  in  the 
petition  and  proved.  It  is  not  sufficient  to  allege  these  facts 
disjunctively  in  a  petition  because  in  such  case  it  states 
neither  one  fact  nor  the  other,  but  a  positive  statement  of  any 
one  of  these  facts,  or  a  conjunctive  statement  of  any  two  or 
all  three  would  be  sufficient;  and,  it  has  been  held  that  if  upon 
examination  of  the  petition  and  schedules,^^  the  referee  finds 
them  insufficient,  he  should  return  them  to  the  clerk  with  a 
statement  of  the  defects  noted  thereon.^^ 

§34. burden  of  proof  as  to.— The  burden  of  proof  is 

upon  the  person  making  the  allegation,^^  and  change  of  domi- 
cile can  only  be  proved  by  showing  the  acquisition  of  a  new 
one  and  it  is  not  sufficient  to  show  residence  in  another  place, 
which  is  not  inconsistent  with  an  intention  to  return  to  the 
place  of  domicile. 3^ 

§  35. alien  or  non-resident.— A  person  without  a  prin- 
cipal place  of  business,  residence  or  domicile  within  the 
United  States,  or  who  has  been  adjudged  bankrupt  by  a  for- 
eign court  of  competent  jurisdiction  is  within  the  jurisdiction 

31  Under  the  act  of  1867.    A  peti-  where  a  person  acted  as  agent  and 

tioner  in  bankruptcy     carried  on  attorney    in    buying     and     selling 

business    for    many    years    in    one  merchandise,    at   an   office    with   a 

city   and  then   retired   and   moved  sign  having  his  brother's  name  on 

to  another,   but  was  employed   in  it,  and  was  well  known  by  those 

the  former  place,  his  petition  was  dealing  with  him  to  be  doing  such 

properly  filed  in  the  district  where  business  at  that  office,  he  carried 

his  business  was  conducted   (In  re  on  business  within  the  meaning  of 

Belcher,    1    N.    B.    R.    202,    2    Ben.  the  term  used   (In  re  Bailey,  1  N. 

463,    F.    C.    1237).        A    clerk    em-  B.  R.  177,  2  Ben.  437,  F.  C.  753). 

ployed   in   one   state  and   residing  As  to  office  of  a  corporation,  see  In 

in  another  was  held  not  to   have  re  Cal.  Pac.  R.  R.  Co.,  11  N.  B.  R. 

carried  on  business  in  the  former  193,  3  Sawy.  240,  F.  C,  2315. 
(In  re  Magie,     1  N.  B.  R.     153).        32  Sec.   39a    (2),  act    of   July  1, 

The  fact  that  a      person   has  an  1898. 

office   at   which   he   receives   mail         33  in    re    Laskaris,    1    N.    B.    N. 

and  settles  up  the  old  business  of  209,  1  A.  B.  R.  480;  In  re  Clisdell, 

an  insolvent  firm  of  which  he  was  2  A.  B.  R.  24 ;  In  re  Reals.  17  N. 

a    member,    and    which    had    gone  B.  R.  108,  9  Ben.  223,  F.  C.  1165. 
out  of  business,  was  not  sufficient         34  Mitchell     v.     U.    S.,    21    Wall, 

to  sustain  an  allegation  of  carry-  350,  353 ;  In  re  Waxelbaum,  97  F. 

ing  on  business  within  the  juris-  R.  562,  3  A.  B.  R.  267. 
diction    (In   re  Little,   2  N.  B.   R.         35  in  re  Clisdell,  2  A.  B.  R.  424. 
97,   3    Ben.    25,   F.    C.   8391);    and, 


28  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  3 

of  the  Federal  court  of  bankruptcy  if  he  has  property  within 
the  district  of  such  court. 

§36.  Courts  of  bankruptcy,  jurisdiction  in  general.— A  dis- 
trict court  of  the  United  States,  as  a  court*  of  bankruptcy,  is  a 
court  of  record,  and,  although  its  jurisdiction  is  limited,  it  is 
not  an  inferior  court  in  such  a  sense  that  all  facts  essential 
to  its  jurisdiction  must  affirmatively  appear  on  the  face  of  its 
record  in  order  to  sustain  its  judgments.^^  Its  jurisdiction  is 
absolute,  paramount  and  exclusive  to  adjudicate  the  question 
of  bankruptcy,  to  settle  and  liquidate  the  estate  of  the  bank- 
rupt and  as  to  all  matters  and  questions  arising  in  bank- 
ruptcy proceedings  touching  the  persons  and  property  of  the 
bankrupts,  their  relations  to  their  creditors,  and  the  rights 
of  creditors  in  and  to  the  bankrupt's  estate,^'  from  the  com- 
mencement of  the  proceedings^^  to  their  close.^^ 

Its  jurisdiction  operates  as  a  supersedeas  of  the  process  in 
the  hands  of  a  sheriff,  and  an  injunction  against  all  other 
proceedings  than  such  as  might  thereupon  be  had  under  the 
authority  of  the  court  until  the  bankruptcy  shall  have  been 
closed.'*^  After  jurisdiction  has  been  acquired  of  the  prop- 
erty, the  court  of  bankruptcy  will  by  summary  proceedings 
stop  any  interference  with  it,  and  if  it  has  been  seized,  will 
cause  its  return.^^ 

Whenever  such  jurisdiction  is  properly  and  in  good  faith 

36  In   re   Columbia   Real   Estate  &   Bott,   12   N.   B.  R.   394,   F.   C. 

Co.,  101  F.  R.  965,  4  A.  B.  R.  411.  17085. 

3T  Hall  V.  Kinsell,  2  N.  B.  N.  R.  38  in  re  Carow,  4  N.  B.  R.  178, 

745,  102  F.  R.  301;  In  re  Gutwillig,  F.  C.  2426. 

1  N.  B.  N.  40,  1  A.  B.  R.  78,  90  F.  ao  Bucknam  v.  Dunn,  16  N.  B.  R. 

R.  47-5;  s.  c.  1  N.  B.  N.  554,  92  F.  470,  2  Hask.  215,  F.  C.  2096;  Penny 

R.  337,  1  A.  B.  R.  388;  In  re  Bruss  v.  Taylor,  10  N.  B.  R.  200,  F.  C. 

Ritter  Co.,  1  N.  B.  N.  39,  1  A.  B.  10957. 

R.  58,  90  F.  R.  651;   In  re  Ethe-  4o  Jones   v.   Leach,   1   N.   B.   R. 

ridge   Furn.   Co.,   1   N.   B.   N.   139,  165,  F.  C.  7475, 

1  A.  B.  R.  112,  92  F.  R.  329;  In  re  4i  In  re  Schloerb,  2  N.  B.  N.  R. 

Huddleston,  1   N.  B.  N.  214,  1  A.  721,  178  U.  S.  542;    In  re  Russell, 

B.    R.    572;     Carpenter    Bros.    v.  101  F.  R.  248,  3  A.  B.  R.  658;   In 

O'Connor,  1  N.  B.  N.  132,  1  A.  B.  re  Murphy,   2  N.  B.  N.  R.  393,  3 

R.   381;    Keegan   v.  King,   3  A.  B.  A.  B.  R.  499;   Byrd  v.  Harrold,  18 

R.  79,  96  F.  R.  758;  Allen  v.  Mont-  N.  B.  R.  433,  F.  C.  229;   Carter  v. 

gomery,   10   N.   B.   R.   503;    In    re  Hobbs,  1  N.  B.  N.  191,  1  A.  B.  R. 

Archenbrown,  11  N.  B.  R,  149,  F.  215,  92  F.  R.  594;  In  re  Huddles- 

C    504;  In  re  Barrow,  1  N.  B.  R.  ton,   1   A.   B.   R.   572,   1   N.  B.  N. 

125,  F.  C.  1057;   Walker  v.  Seigel  214. 


Ch.  2       JURISDICTION    OF    COURTS    OF    BANKRUPTCY.  29 

invoked  the  courts  are  bound  to  assume  and  exercise  it,  there 
being  no  discretion  in  the  niatter,*^  ^j^ig  jurisdiction  vesting 
from  the  filing  of  the  petition.  The  fact  that  the  bankrupt's 
attorneys  had  not  been  admitted  to  practice  in  the  Federal 
courts  would  not  invalidate  proceedings  already  had,  for  the 
provision-*^  that  the  bankrupt  may  conduct  his  case  by  an 
attorney  authorized  to  practice  in  the  Federal  courts,  is  not 
the  source  of  jurisdiction.^^  There  seems  to  be  nothing  to  pre- 
vent a  creditor  from  attacking  the  jurisdiction  without  first 
filing  formal  proof  of  his  claim,  which  would  import  a  recog- 
nition of  the  jurisdiction,  but  he  must  show  he  is  a  creditor 
and  has  an  interest  to  protect.'*^ 

If  the  court  has  no  jurisdiction  of  the  subject  matter,  it 
cannot  be  conferred  by  the  voluntary  act  of  the  defendant 
and  the  point  can  be  raised  at  any  time.'*'^  If  want  of  juris- 
diction appears  upon  the  face  of  the  petition  and  respondent 
consents  to  it,  the  court  may  take  notice  of  the  point  on  its  own 
motion  •*'^  but,  if  it  is  merely  want  of  jurisdiction  over  the  per- 
son, the  objection  may  be  waived  expressly  or  by  implica- 
tion."*^ 

§37.  In  law  and  equity.— Under  the  bankrupt  law  the  dis- 
trict courts  have  jurisdiction  both  at  law  and  in  equity,*^-'  and 
will  protect  infants,  lunatics  and  other  incompetents  and  ap- 
point a  guardian  ad  litem  for  them.^^  It  will  deal  with  the 
rights  of  the  parties  upon  their  merits,  rather  than  be  con- 
trolled by  strict  legal  forms,^^  and  will  restrain  the  enforce- 
ment of  a  legal  right  so  that  it  shall  not  cause  unnecessary 

42  In  re  Keiler,  18  N.  B.  R.  10,  48  Shutts  v.  Bk.,  2  N.  B.  N.  R. 
F.  C.  7647;  Cook  v.  Waters,  9  N.  320,  98  F.  R.  705,  3  A.  B.  R.  492; 
B.  R.  155,  but  see  Avery  v.  John-  Hall  v.  Kincell,  2  N.  B.  N.  R.  745, 
son,  3  N.  B.  R.  36;  4  Id.,  143,  F.  C.  102  F.  R.  301;  People  v.  Brennan, 
675.  12  N.  B.  R.  567. 

43  G.  0.  IV.  49  In    re   Fendley,    10    N.   B.   R. 

44  In  re  Kindt,  2  N.  B.  N.  R.  250,  F.  C.  4728;  In  re  Salkey,  11  N. 
373,  98  F.  R.  867,  3  A.  B.  R.  546.  B.  R.  423,  6  Biss.  269,  F.  C.  12253; 

45  In  re  Boston  H.  &  E.  R.  R.  In  re  Bowie,  1  N.  B.  R.  185,  F.  C. 
Co.,  6  N.  B.  R.  209,  9  Blatch.  101,  1725;  In  re  Ind.  Cin.  &  Laf.  R.  R. 
F.  C.  1678.  Co.,  8  N.  B.  R.  302,  F.  C.  7023. 

4«  Jobbins  v.  Montague,  6  N.  B.  so  in  re  O'Brian,  2  N.  B.  N.  R. 

R.  509.  F.  C.  7330.  312. 

47  In   re   Hopkins,    18    N.    B.   R.  si  in   re   Byrne,    2   N.   B.   N.    R. 

339,  F.  C.  6686.  246.  3  A.  B.  R.  268,  97  F.  R,  762. 


30  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

loss  or  embarrassment  to  the  estate.*^-  As  between  contend- 
ing creditors,  in  the  interest  of  fair  dealing  and  good  con- 
science, it  will  postpone  the  claim  of  one  where  there  is  evi- 
dence of  a  fraudulent  combination  and  scheme  in  favor  of 
others,^^  and  the  mere  fact  that  there  is  a  remedy  at  law 
will  not  oust  the  jurisdiction  of  equity  if  the  remedy  at  law 
is  not  as  prompt,  practical  and  efficient  to  the  ends  of  justice 
and  its  prompt  administration  as  the  equitable  remedy.^^ 

§  38.  Over  corporations.— A  decree  adjudging  a  corporation 
bankrupt  is  in  the  nature  of  a  decree  in  rem,  and  if  the  court 
rendering  it  had  jurisdiction  it  can  only  be  assailed  by  a  direct 
proceeding  in  a  competent  court,  unless  due  notice  of  the 
I)etition  was  never  given  or  the  decree  is  void  in  form.^^  The 
"dissolution"  of  a  corporation  by  a  state  court  does  not  end 
its  existence  so  as  to  prevent  the  jurisdiction  of  the  bank- 
ruptcy courts  from  attaching,^^  nor  will  it  deprive  the  bank- 
ruptcy court  of  jurisdiction,  or  abate  the  proceedings.^^  Ser- 
vice of  the  rule  to  show  cause  on  the  cashier  of  a  corporation 
which  has  passed  into  the  hands  of  a  receiver  is  sufficient  to 
enable  the  court  to  proceed  to  adjudication.^^ 

§39.  Judgment  of  state  court.— The  court  of  bankruptcy 
has  no  jurisdiction  to  annul  or  correct,  upon  appeal  or  petition, 
a  judgment  rendered  in  a  state  court ;  nor  can  it  question  alle- 
gations made  in  pleadings  in  a  state  court  prior  to  the  filing  of 
the  judgment  in  the  court  of  bankruptcy  with  a  petition  for 
injunction.^^ 

§  40.  Liens. — Whatever  priorities,  liens  or  rights  a  creditor 
has  he  must  submit  to  the  bankruptcy  court,  as  after  adjudi- 
cation it  takes  jurisdiction  of  the  estate  and  will  administer 
the  same  to  a  final  settlement,*^^  since  it  has  jurisdiction  to 
hear  and  determine  all  questions  of  liens  invoking  rights  of 

52  In  re  Chambers,  Calder  &  Co.,  N.  B.  R.  260,  F.  C.  7017;  Id.,  6  N. 
2  N.  B.  N.  R.  388,  98  F.  R.  865,  3  B.  R.  169,  2  Lowell  97,  F.  C.  7018. 
A.  B.  R.  537.  5-  Piatt    v.    Archer,    6    N.    B.    R. 

53  In  re  Headley,  2  N.  B.  N.  R.  465,  9  Blatch.  559,  F.  C.  11213. 
250,  3  A.  B.  R.  272,  97  F.  R.  765.  r.s  piatt  v.  Archer,  ante. 

5*  Cox  V.  Wall,  2  N.  B.  N.  R.  572,  so  in  re  Dunn,  11  N.  B.  R.   270. 

99  F.  R.  546,  3  A.  B.  R.  664.  2  Hughes  169,  F.  C.  4172;   McKin- 

55  New    Lamp    Chimney    Co.    v.  sey  v.  Harding,  4  N.  B.  R.  10,  F. 

Ansonia  Brass  and  Copper  Co.,  13  C.  8866. 

N.  B.  R.  385,  91  U.  S.  656.  6o  in  re  Cobb.  3  A.  B.  R.  129,  1 

50  In  re  Independent  Ins.  Co.,  6  N.  B.  N.  557,  96  F.  R.  821. 


Ch.  2        JURISDICTION    OF    COURTS    OF    BANKRUPTCY,  31 

property  claimed  by  the  estate,*'!  ^j^^  parties  who  claim  such 
liens  may  appear  and  be  heard  without  first  resorting  to  the 
state  court,  for  their  establishment.^^^  The  court  may  order 
the  property  to  be  sold  free  of  liens  and  marshal  and  dis- 
tribute the  proceeds  so  as  to  protect  the  rights  and  interests 
of  all;^^  or  it  may  enforce  a  lien  against  the  purchaser  of 
property  sold  by  an  assignee  subject  to  such  lien;^^  but  a  judg- 
ment creditor  cannot  claim  the  jurisdiction  of  the  court  for 
the  collection  of  a  debt  which  is  fully  secured  by  the  only  lien 
on  real  estate.®^  A  prior  lien  gives  a  prior  claim,  and  the 
district  court  may  ascertain  and  liquidate  it.®^ 

§  41.  Receivers  in  state  courts.— Proceedings  under  the  state 
insolvency  laws  being  void,  a  receiver  appointed  pursuant 
thereto  for  the  purpose  of  taking  charge  of  the  insolvent's 
property  will  be  required  to  tarn  the  custody  of  the  same  over 
to  the  receiver  or  trustee  in  the  bankruptcy  proceedings  subse- 
quently instituted  against  the  same  insolvent,  whose  power  and 
authority  become  paramount  by  virtue  of  the  latter  proceed- 
ings. In  this  connection  the  word  "judgment"  as  used  in  sec- 
tion 67  of  the  law  has  been  held  to  be  sufficiently  broad  to 
apply  to  a  judgment  of  a  state  court  appointing  a  receiver 
which  is  avoided  by  the  adjudication.^''^  In  view  of  the  comity 
existing  between  the  Federal  and  state  courts,  application 
should  first  be  made  to  the  state  court  of  which  the  receiver  is 
an  officer.^8  The  fact  that  such  property  is  in  the  hands  of  a 
receiver  is  no  ground  for  dismissing  the  petition.^^ 

As  to  expenses  and  allowances  of  receivers,  see  post  §  —807. 

§  42.  Collateral  attack  of  decisions.— A  bankruptcy  pro- 
ceeding is  a  proceeding  in  rem  and  all  persons  interested  in 
the  res  are  regarded  as  parties  to  such  proceedings,  including 

61  In  re  High  et  al.,  3  N.  B.  R.         ee  in  re  Winn,  1  N.  B.  R.  131. 
46,  F.  C.  6473.  «"  Mauran  v.  Carpet  Lining  Co., 

62  In  re  Byrne,  2  N.  B.  N.  R.  246,     6  A.  B.  R.  734. 

3  A   B.  R.  268,  97  F.  R.  762.  ss  in  re  Lengert  Wagon  Co.,  110 

63  In  re  Worland,  1  A.  B.  R.  450,  F.  R.  927,  6  A.  B.  R.  535 ;  Wilson 
1  N.  B.  N.  316,  92  F.  R.  893;  In  re  v.  Parr,  8  A.  B.  R.  230;  In  re  Les- 
Pittelkow,  1  A.  B.  R.  472,  see  post,  ser,  110  F.  R.  433,  3  A.  B.  R  815; 
§1195.                      .  In  re  Price,  92  F.  R.  987,  1  A.  B. 

64Bucknam  v.  Dunn  et  al.,  16  N.  K.  606;  see  Tua  v.  Carriere,  117  U. 

B.  R.  470,  2  Hask.  215,  F.  C.  2096.  S.  201. 

65  In  re  Johann,  4  N.  B.  R.  143,         69  in  re  Green  Pond  R.  R.  Co.,  13 

F.  C.  7331.  N.  B.  R.  118,  F.  C.  5786. 


32  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

not  only  the  bankrupt  and  trustee  but  all  the  creditors  of  the 
bankrupt  ;'^^  and  a  decree  therein  is  notice  to  all  the  world  and 
cannot  be  attacked  collaterally,  but  is  conclusive  as  to  the  ju- 
risdiction of  the  court  and  the  regularity  of  the  proceedings^* 
Hence  in  a  collateral  proceeding  objection  cannot  be  raised  to 
the  court's  jurisdiction/^  the  adjudication/^  the  discharge/'* 
the  acts  of  the  trustee^^  or  his  title  for  purposes  of  sale/^  or 
the  like, 

§  43.  Want  of  sufficient  jurisdiction,  when  raised.*— Objec- 
tions to  the  jurisdiction  must  be  made  as  speedily  as  possible ; 
and  where  a  creditor  was  notified  of  the  first  meeting  of  cred- 
itors, appeared  thereat,  nominated  the  trustee,  and  exhaustive- 
ly examined  the  bankrupt,  it  is  too  late  for  him  to  raise  an 
objection  as  to  the  jurisdiction  of  the  person  or  thing  for  the 
first  time  on  the  application  for  discharge,'^'^  or  on  appeal/^ 
but  as  jurisdiction  over  the  subject  matter  must  be  given  by 
law,  and  cannot  be  given  by  consent,  or  be  waived,  the  ques- 
tion may  be  raised  at  any  time,  or  made  by  the  court  on  its 
own  motionJ^  Where  a  petition  is  filed  to  set  aside  an  adju- 
dication on  the  ground  of  want  of  jurisdiction  in  the  court  to 
make  it,  although  the  petitioner  may  be  a  stranger  to  the  pro- 
ceedings and  therefore  not  entitled  to  make  it,  it  is  in  the 
discretion  of  the  court  to  hear  him  as  amicus  curiae.^^ 

§  44.  Commencement  of  proceedings. — For  jurisdictional 
purposes,  so  far  as  applying  to  periods  of  limitation,  bank- 

70  Carter  v.  Hobbs,  92  F.  R.  594,  195;  Alston  v.  Robinett,  9  N.  B.  R. 
1  A.  B.  R.  215;  Southern  L.  &  T.  74;  Corey  v.  Ripley,  4  N.  B.  R.  163. 
Co.  V.  Benbow,  96  F.  R.  514,  3  A.  "  Morris  v.  Swartz,  10  N.  B.  R. 
B.  R.  9.  305. 

71  Shawhan  v.  Wherritt.  7  How.  76  Steele  v.  Moody,  16  N.  B.  R. 
627;  Michaels  v.  Post,  21  Wall.  398;  558. 

Morse  v.  Godfrey,  3  Story,  364;  In  7?  Hall  v.  Kinsell,  2  N.  B.  N.  R. 

re  Columbia  Real  Estate  Co.,  101  745;  In  re  Polakoff,  1  N.  B.  N.  232, 

F.  R.  965,  4  A.  B.  R.  411.  1  A.  B.  R.  358. 

72  In  re  Clisdell,  101  F.  R.  246,  4  7.s  in  re  Bmrich,  2  N.  B.  N.  R. 
A.  B.  R.  95;  In  re  Mason,  99  F.  R.  656,  101  F.  R.  231,  4  A.  B.  R.  89. 
256,  3  A.  B.  R.  599;  In  re  Columbia  79  in  re  Mason,  2  N.  B.  N.  R.  425. 
Real  Estate  Co.,  supra;  New  Lamp  99  F.  R.  256,  3  A.  B.  R.  599;  Hall. 
Chimney  Co.  v.  Brass  &  Copper  2  N.  B.  N.  R.  785.  102  F.  R.  201; 
Co.,  13  N.  B.  R.  385,  91  U.  S.  656.  Phutts  v.  Bank,  2  N.  B.  N.  R.  320. 

73  Wilson  V.  Parr,  8  A.  B.  R.  230;  98  F.  R.  705.  3  A.  B.  R.  492. 

see  Chapman  v.  Brewer,  114  U.  S.         s"  In    re   Columbia    Real    Estate 
158,  29  L.  Ed.  83.  Co.,  101  F.  R.  965,  4  A.  B.  R.  411. 

74  Black  V.  Blayo,   13   N.   B.   R. 


Ch.  2       JURISDICTION    OF    COURTS    OF    BANKRUPTCY.  33 

ruptcy  proceedings  are  coninienced  by  the  filing  of  the  original 
petition,  and  the  fact  that  the  service  of  the  subpoena,  or  other 
further  proceedings,  were  delayed,  is  immaterial.  If  counting 
from  the  day  the  petition  is  filed  the  act  of  bankruptcy  was 
within  the  four  months  and  the  bankrupt  has  resided,  had  his 
domicile  or  principal  place  of  business  the  requisite  time  in  the 
district*^^   the  bankruptcy  court  has  full  jurisdiction.^^ 

§45- receiver  for  preserving    estate.— Upon    proper 

application  showing  the  liability  of  the  estate  to  deterioration 
or  waste  pending  action  upon  the  petition  and  appointment 
of  a  trustee,  this  provision  authorizes  the  court  of  bankruptcy 
to  appoint  a  receiver  or  the  marshal  to  take  immediate  pos- 
session of  bankrupt's  property.^^  Upon  the  filing  of  a  petition, 
the  bankrupt's  estate  is  in  custodia  Icgis  and  the  court  of 
bankruptcy  has  the  power,  and  it  is  its  duty,  upon  its  own 
motion,  in  a  proper  case,  to  take  actual  possession  of  his  estate 
through  a  receiver,  or  by  a  direction  to  the  marshal  ;S^  as  where 
the  bankrupt  confesses  judgment  upon  an  agreement  and 
makes  a  general  assignment  for  the  benefit  of  creditors  ;^''^  or 
where  he  makes  a  general  assignment  within  four  months  prior 
to  the  filing  of  the  petition  f*^^  or  is  secretly  disposing  or  re- 
moving his  property,  and  the  like.  Since  the  estate  is  in 
custodia  Icgis,  the  officer  appointed  to  manage  it  is  accountable 
to  the  court  appointing  him  and  to  that  court  alone.^^  The 
court  will  not  appoint  a  provisional  receiver  to  receive  the  sur- 
render of  a  preference,^^  qj.  upon  the  ground  that  the  debtor 
removed  goods  in  fulfilment  of  an  existing  contract  made  long 
before  the  commencement  of  the  bankruptcy  proceedings,  as 
such  act  is  not  frandulent.'^^ 

51  In  re  Appel,  2  N.  B.  N.  R.  907,  ^^e  In  re  Gutwillig,  1  N.  B.  N.  18; 
103  F.  R.  931 ;  In  re  Lewis,  1  N.  B.  In  re  Etheridge  Fur.  Co.,  1  N.  B. 
N.  556,  91  F.  R.  532,  1  A.  B.  R.  458;  N.  139,  92  F.  R.  329,  1  A.  B.  R.  112: 
In  re  Kinott,  2  N.  B.  N.  R.  373,  98  Sedgwick  v.  Place,  3  N.  B.  R.  35. 
F.  R.  867,  3  A.  B.  R.  546.  ?  Ben.  360,  F.  C.  12619. 

52  In  re  Schloerb,  2  N.  B.  N.  R.  nt  in  re  Carow,  4  N.  B.  R.  178, 
234,  97  F.  R.  326.  F.  C.   2426. 

83  See  Lansing  v.  Manton,  14  N.  -<«  In  re  Thompson,  2  N.  B.  N.  R. 

B.  R.  127,  F.  C.  8077.  1016. 

s+  In  re  Abrahamson  &  Bretsteiu,  "o  Bk.  v.  Brady's  Bend  Iron  Co., 

1  N.  B.  N.  23,  1  A.  B.  R.  44.  5  N.  B.  R.  491,  F.  C.  9018. 

''"'  Rautman  v.  Hopkins,  1  N.  B. 
N.  41. 


34  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  'i 

In  case  of  an  examination  of  bankrupt  at  the  application  of 
creditors  before  a  trustee  is  elected,  the  provisionally  appoint- 
ed receiver  should  intervene,  as  if  any  property  is  discovered 
and  recovered  he  would  be  entitled  to  its  possession  f^  and  he 
is  not  limited  merely  to  the  care  and  preservation  of  the  prop- 
erty, but  where  it  is  necessary  to  protect  the  interests  of  the 
estate  he  may  sell  the  same  under  order  of  the  court,  or 
subject  to  its  confirmation.'*^  Prior  to  adjudication,  the  court 
Avill  not  authorize  or  direct  such  a  receiver  to  bring  suit  in 
another  state  to  obtain  property  of  the  bankrupt  there  situ- 
ated, but  the  petitioning-  creditors  should  apply  to  the  proper 
court  in  such  state,  setting  up  the  pending  bankruptcy  pro- 
ceedings as  the  basis  of  the  action  and  ask  jorotection  for  their 
rights,  by  injunction,  receiver,  or  other  appropriate  remedy,  in 
which  proceeding  the  trustee,  when  appointed,  can  appear.^^ 
A  marshal  has  no  authority  under  a  warrant  issued  under  a 
petition  asking  that  the  debtor's  property  be  seized  provision- 
ally to  seize  property  outside  of  his  district,""  and,  if  in 
executing  a  warrant  for  the  seizure  of  property,  he  seize  that 
of  a  stranger,  he  becomes  liable  to  an  action  for  trespass  in  a 
state  court.^'* 

^j  46. business  continued  temporarily.— I'pon  a  proper 

showing  the  court  is  eiidowed  by  this  provision  with  authority 
to  prevent  the  loss  of  good  will,  trade  and  depreciation,  which 
follows  the  closing  of  a  business,  as  well  as  to  prevent  a  sacri- 
fice of  the  estate  at  times  of  money  depression,  absence  of 
a  market,  and  the  like,  by  permitting  its  continuance  for  a 
limited  period. 

^  47.  Bringing  in  additional  parties.— The  court  has  power 
to  bring  in  and  substitute  additional  persons  or  parties  when 
necessary  for  the  complete  determination  of  a  matter  in  con- 
troversy. Thus  it  may  issue  an  order  to  a  non-joining  partner 
requiring  him  to  shoAv  cause  why  the  petitioning  partner 
should   not   be   discharged   from   the   liability   incurred   as  a 

00  In    re    Franklin    Syndicate.  2         "2  in   re   Schrom,   97   F.   R.   760, 
N.  B.  N.   R.   522,  101  F.  R.  402,   4     3  A.  B.  R.  352. 
A.  B.  R.  511.  f>--  Carr   v.   Phillips.   18   N.  B.  R. 

f"  In  re  Becker.  2  N.  B.  N.  R.  245.     527. 
98  F.  R.  407,  3  A.  B.  R.  412.  '+  Marsh  v.  Armstrong,  11  N.  B. 

R.  125. 


Ch.  2        JURISDICTION    OF    COURT— ADMINISTRATION.  35 

member  of  the  tirm,**^  even  though  such  non-joining  partner 
be  lion  compos f^  but  it  is  questionable  whether  a  corporation 
in  which  the  bankrupt  was  for  years  a  stockholder,  can  be 
brought  in  so  as  to  enable  its  books  to  be  examined.^^  This 
power  to  bring  in  parties  would  not  authorize  the  court  to 
direct  a  creditor  to  join  in  a  petition  for  the  purpose  of  mak- 
ing the  requisite  number  or  amount  of  claims  to  give  the  court 
jurisdiction.  Under  the  act  of  1867,  it  was  held  where  there 
appeared  to  be  an  adverse  interest  in  any  one  not  before  the 
court,  that  it  could  not  adjudicate  on  the  same  without  that 
person  being  properly  before  it,  and  without  setting  in  motion 
its  machinery  for  the  purpose  of  litigating  any  supposed 
rights  ;^^  and  strangers  to  the  bankruptcy  proceedings,  not 
served  with  process,  and  who  had  not  voluntarily  appeared 
and  become  parties  to  such  litigation,  could  not  be  compelled 
to  come  into  court  under  a  petition  for  a  rule  to  show  cause. ^ 

§  48.  Administration  of  estates.— Suits.— Controversies.— iV 
trustee  may  be  ordered  by  the  court  to  enter  his  appearance 
and  defend  any  pending  suit  against  a  bankrupt,-  and  with 
the  approval  of  the  court  be  permitted  to  prosecute  as  trustee 
any  suit  commenced  by  the  bankrupt  prior  to  the  adjudication, 
with  like  force  and  effect  as  though  it  had  been  commenced  by 
him. 3 

The  jurisdiction  to  collect  and  distribute  estates  and  deter- 
mine controversies  in  relation  thereto,  depends,  first,  on  whether 
the  controversy  has  reference  to  property  actually  in  the  pos- 
session of  the  bankruptcy  court  or  belonging  to  the  bankrupt 
estate ;  second,  whether  it  arises  in  the  bankruptcy  proceed- 
ings and  the  property  becomes  therefore  subject  to  distribu- 
tion ;  or  third,  whether  by  the  nature  of  the  controversy  power 
is  conferred  on  the  court  to  determine  conflicting  liens  and 
apportion  assets.^  Thus  a  claim  to  priority  of  payment  or 
superior  right  to  a  fund  in  the  trustee's  hands  to  be  distrib- 
uted, should  be  asserted  in  the  bankruptcy  court.^ 

9-'  In  re  Elliot,  2  N.  B.  N.  R.  350.  2  See.  11  (b)  of  act  of  1898. 

96  In  re  O'Brien,  2  N.  B.  N.  R.  •'Sec.  11  (c)  of  act  of  1898. 
312.  4  In  re  Kellogg,  113  F.  R.  120,  7 

97  See  In  re  Post,  1  N.  B.  N.  294.  A.  B.  R.   623. 

98  In  re  Pierce,  15  N.  B.  R.  449,  5  In  re  McCallum,  113  F.  R.  393, 
7  Biss.  426,  F.  C.  11139.  7  A.  B.  R.  596. 

1  Smith  V.  Mason,  6  N.  B.  R.  ], 
14  Wall.  419.      . 


36  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

§  49.  Suits  against  adverse  claimants/^— The  bankruptcy 
court  controls  the  trustee,  supervises  the  administration  of  his 
trust,  settles  his  accounts  and  orders  the  distribution  of  the 
moneys  in  his  hands,  but  is  not  required  to  assume  the  burden 
of  the  litigation  necessary  for  the  collection  of  the  assets.  If 
there  are  no  assets  to  pay  the  cost  of  litigation,  or  the  outcome 
is  speculative  or  doubtful,  or  only  one  creditor  is  interested,  it 
has  been  held  that  on  notice  to  creditors  that  a  single  creditor, 
or  class  of  creditors,  desire  to  conduct  such  litigation  through 
the  trustee  and  that  only  such  creditors  as  share  in  the  ex- 
pense will  share  in  the  recovery,  to  order  a  suit  to  be  brought 
for  the  benefit  of  subscribing  creditors.'^  When  the  bankruptcy 
court  in  a  controversy  between  the  trustee  and  a  creditor  has 
rendered  a  decision  adverse  to  the  trustee  and  he  has  lost  his 
right  of  appeal  without  culpable  neglect,  the  court  may  grant 
a  rehearing  for  the  purpose  of  reviving  such  right.^  Creditors 
desiring  to  recover  property  and  include  the  same  in  the  assets 
of  the  bankrupt  must  institute  their  action  through  the 
trustee;  and  suits  by  or  against  the  bankrupt  must  proceed 
through  the  same  channel;^  and,  when  a  trustee  applies  for 
instructions  relative  to  a  suit  the  creditors  wish  him  to  bring, 
it  is  sufficient  to  show  that  he  will  probably  succeed;  as  cer- 
tainty of  success  need  not  be  demonstrated.  If  a  proposition 
of  settlement  has  been  offered,  the  moving  creditors  should 
show  that  they  are  likely  to  secure  a  better  result  by  suit  than 
by  accepting  the  proposed  settlement.^ ^ 

§  50.  Closing  and  reopening  estates.— A  trustee  is  required 
to  close  the  estate  as  expeditiously  as  is  compatible  with  the 
best  interests  of  the  parties  in  interest,^  ^  and  will  prepare  for 
the  final  meeting  of  the  creditors  a  detailed  statement  of  the 
administration  of  the  estate,!^  ^nd  make  final  reports  and  file 
final  accounts  with  the  court  fifteen  days  before  the  day  fixed 
for  the  final  meeting  of  the  creditors.^" 

The  court  has  the  power  to  reopen  an  estate  whenever  it 

6  See  for  discussion  of  this  mat-  A.  B.  R.  160;   In  re  Pearson,  1  N. 

ter  Chap.  XXIII,  post.  B.  N.  474. 

T  In   re   McNamara,    2   N.   B.    N.  lo  in   re   Phelps,    2    N.   B.    N.   R. 

R.  341.  484,  3  A.  B.  R.  396. 

«In    re    Wright,    96    F.    R.    820,  n  Sec.  47   (2)   of  act  of  1898. 

3  A.  B.  R.  184.  12  Sec.  47  (7)  of  act  of  1898. 

0  In  re  Carter,  1  N.  B.  N.  162,  1  ta  Sec.  47   (8)  of  act  of  1898. 


Ch.  2  JURISDICTION    OF    COURT— FINDINGS.  37 

appears  that  it  was  closed  before  being-  fully  administered,  and 
while  in  such  case  it  is  unnecessary  that  the  petition  therefor 
be  of  any  technical  or  formal  character,  it  should  be  either  in 
itself  or  in  connection  with  supporting  affidavits  of  such  per- 
suasive character  as  to  satisfy  the  court  of  the  existence  of 
assets  unadministered.'^  While  the  law  is  silent  as  to  the  time 
within  which  an  estate  may  be  reopened,  this  right  would 
doubtless  exist  at  any  time  when  unadministered  assets  are 
discovered.  Under  subdivision  8,  a  court  of  bankruptcy  has 
jurisdiction  to  entertain  a  supplemental  petition  filed  by  a 
voluntary  bankrupt  after  the  estate  has  been  closed  and  the 
bankrupt  discharged,  setting  out  additional  schedules  of  prop- 
erty, with  the  reasons  for  their  former  omission,  and  the  court 
may  reopen  the  proceedings  for  the  purpose  of  administering 
the  new  assets  for  the  benefit  of  creditors  who  proved  their 
claims  in  accordance  with  the  statute  in  the  original  proceed- 
ings. But  such  supplementary  proceedings  cannot  affect  the 
discharge  of  the  bankrupt,  where  more  than  a  year  has  elapsed 
since  it  was  granted,  nor  has  a  creditor  who  failed  to  prove  his 
claim  in  the  original  proceedings  any  standing  in  such  supple- 
mentary proceedings,  or  the  right  to  examine  the  bankrupt 
therein.^  ^ 

§  51.  Certification  of  findings  by  referees.— Referees  are 
required  to  make  up  records  embodying  the  evidence,  or  the 
substance  thereof,  as  agreed  upon  by  the  parties  in  all  eon- 
tested  matters  arising  before  them,  whenever  requested  to  do 
so  by  either  of  the  parties  thereto,  together  with  their  findings 
therein,  and  transmit  the  same  to  the  judges.^ ^ 

§  52.  Exemptions.— The  court  of  bankruptcy  has  exclusive 
jurisdiction  to  determine  the  claims  of  a  bankrupt  to  his  ex- 
emptions.^"^ While  it  is  the  dutj^  of  the  trustee  to  set  apart 
the  bankrupt's  exemption,  his  action  is  not  final,  but  the  court 
of  bankruptcy  is  expressly  empowered  to  determine  all  claims 
to  exemptions;  nor  does  the  limitation  of  twenty  days  for 
filing  exceptions  to  such  setting  apart^'*  apply  to  the  bankrupt, 
who  may  petition  the  court  in  relation  to  his  claim  to  exemp- 

14  In  re  Newton,  107  F.  R.  429,  it  McGahan  v.  Anderson,  113  F. 
6  A.  B.  R.  52.  R.  115.  7  A.  B.  R.  641;  In  re  Mayer, 

15  In  re  Shaffer,  104  F.  R.  982,  3  108  F.  R.  602,  6  A.  B.  R.  117.  See 
N.  B.  N.   R.   54.  also  Chap.  VI.  post. 

leSec.  39a  (5)   act  of  1898.  is  G.    O..   XVII. 


38  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

tion  at  any  time  while  the  property  is  still  iinadministered.^" 

§  53.  Issuance  of  orders.— The  court  has  power  to  issue  an 
injunction  to  restrain  any  one  from  removing,  disposing  of  or 
otherwise  interfering  Avith  bankrupt's  property ;2''  to  appoint 
receivers  whose  duty  it  is  to  care  for  and  protect  the  assets  ;-^ 
to  issue  orders  requiring  persons  to  surrender  for  can- 
cellation instruments  purporting  to  convey  property  of  the 
bankrupt,  which  it  is  alleged  never  became  effective,--  or 
property  of  the  bankrupt,^^  or  property  in  the  hands  of  an 
assignee  under  a  general  assignment;-^  and  to  issue  a  writ  in 
the  nature  of  a  ne  exeat  and  arrest  the  bankrupt  whenever 
the  facts  warrant  the  belief  that  he  is  about  to  abscond,  either 
with  or  without  his  property',  to  the  embarrassment  of  the 
bankruptcy  proceedings.-^  It  has  no  power  to  summon  before 
it  by  a  rule  to  show  cause  third  persons  who  are  not  parties  to 
the  record  and  who  reside  without  the  district  and  state ;-'' 
nor  to  issue  a  warrant  for  the  arrest  of  the  bankrupt  under 
subdivision  9b  of  the  law  where  the  purpose  is  that  the  war- 
rant shall  serve  as  a  basis  of  extradition,  when  he  resides  in 
another  state.^'^  While  the  courts  have  no  power  to  make  gen- 
eral rules  in  bankruptcy,-*  they  are  not  hampered  by  such 
technicalities  as  to  prevent  doing  what  is  just  and  for  the 
protection  of  the  estate,  even  if  it  requires  the  revocation  of  an 
order  already  made.-^  They  also  have  power  and  authority 
to  order  a  bankrupt  to  deliver  to  the  trustee  any  money  or 
other  propert}'  in  his  possession  or  under  his  control,  but  as  the 
enforcing  of  such  order  may  lead  to  the  bankrupt's  imprison- 
ment for  contempt,  it  should  not  issue  if  there  be  any  doubt  of 
his  ability  to  comply  therewith,>'^o  and  persons  holding  bank- 

19  In  re  White,  3  N.  B.  N.  R.  27,  2s  in  re  Lipke,  2  N.  B.  N.  R.  347, 
103  F.  R.  774,  4  A.  B.  R.  613.  98  F.  R.  970,  3  A.  B.  R.  569. 

20  In   re   Pruschen,    1    N.    B.   N.  -'6  in    re    Waukesha    Water    Co. 
526.     See  also  cases  under  Sec.  11.  116  F.  R.  1009,  8  A.  B.  R.  715. 
post,  p.   175.  27  In  re  Ketchum,  108  F.  R.  35, 

21  In  re  Fixen  &  Co.,  1  N.  B.  N.  5  A.  B.  R.  532. 

568,  2  A.  B.  R.  822,  96  F.  R.  748.  28  in  re  Kennedy.  7  N.  B.  R.  337, 

22  In    re    Waukesha    Water    Co.,     F.  C.  7699. 

116  F.  R.  1009,  8  A.  B.  R.  715.  29  Samson  v.  Burton,  6  N.  B.  R. 

23  Mueller  v.  Nugent,   184   U.  S.     403. 

1.  7  A.  B.  R.  224.  3"  In  re  Purvine,  1  N.  B.  N.  326, 

24  Bryan  v.  Bernheimer,  181  U.  96  F.  R.  192,  2  A.  B.  R.  787;  In  re 
S.  188,  5  A.  B.  R.  623.  Rosser.  Id.  469,  96  F.  R.  305.  2  A. 


UH. 


JURISDICTION    OF    COURT— CONTEMPTS. 


39 


rupt's  property  without  claim  of  title  will  be  guilty  of  con- 
tempt on  withholding-  it  from  the  trustee  and  may  be  sum- 
marily proceeded  against  for  its  recovery.^i 

§  54.  Punishment  for  failure  to  obey  order.— A  court  of 
bankruptcy  has  ])ower  to  order  the  bankrupt  to  pay  over  to 
his  trustee  money  or  other  property  belonging  to  his  estate 
and  found  in  his  possession  or  control,^-  or  in  the  possession 
of  a  third  person  holding  as  a  mere  bailee,  or  agent,  of  bank- 
fupt,23  while  the  amendment  to  the  law  extends  this  power 
even  to  the  case  of  a  third  party  holding  property  under 
an  adverse  claim.  If  he  fails  to  obey  such  order,  the  court 
will  punish  him  as  for  a  contempt,  but  since  the  failure  to 
obey  may  be  followed  by  imprisonment,  the  power  should 
be  exercised  with  great  caution,  and  before  an  order  is  made 
evidence  should  be  required  such  as  would  convince  an  un- 
prejudiced mind  beyond  a  reasonable  doubt  that  the  bank- 
rupt is  able  to  comply  therewith  if  made.^-^  It  has  also  been 
held  that  where  it  is  doubtful  whether  the  bankrupt  actually 
has  property  under  his  control  which  he  has   been  ordered 


B.  R.  755;  In  re  Tudor,  Id.  476,  96 
F.  R.  943,  2  A.  B.  R.  808;  In  re  Mc- 
Cormick,  2  Id.  104.  97  F.  R.  566,  3 
A.  B.  R.'340;  In  re  Schlesinger,  Id. 
169,  97  F.  R.  930,  3  A.  B.  R.  342; 
In  re  Mayer,  Id.  257,  98  F.  R.  839, 
3  A.  B.  R.  533;  In  re  Deuell,  Id. 
597,  100  F.  R.  633,  4  A.  B.  R.  60; 
In  re  Thiessen,  Id.  625. 

31  In  re  Moore,  104  F.  R.  869. 

32  In  re  Schlesinger,  102  F.  R. 
117,  4  A.  B.  R.  361;  Ripon  Knitting 
Wks.  V.  Schreiber,  2  N.  B.  N.  R. 
899,  101  F.  R.  810,  4  A.  B.  R.  299; 
In  re  Deuell,  100  F.  R.  633,  2  N.  B. 
N.  597,  4  A.  B.  R.  60;  In  re  Rosser. 
101  F.  R.  562,  4  A.  B.  R.  153 ;  In  re 
McCormick,  2  N.  B.  N.  R.  104,  3 
A.  B.  R.  340,  97  F.  R.  566;  In  re 
Tischler,  2  N.  B.  N.  R.  549;  In  re 
Anderson,  103  F.  R.  354;  In  re 
Wilson.  116  F.  R.  419,  8  A.  B.  R. 
612:  In  re  Levin,  113  F.  R.  498.  6 
A.  B.  R.  743;  In  re  Greenberg, 
106  F.  R.  496.  5  A.  B.  R.  840;    In 


re  Hempner,  6  N.  B.  R.  521,  F.  C. 
7689;  In  re  Salkey,  11  N.  B.  R. 
423,  6  Biss.  269,  F.  C.  12253;  In  re 
Dresser,  3  N.  B.  R.  138,  F.  C.  4077. 

33  Mueller  v.  Nugent,  184  U.  S.  1, 
7  A.  B.  R.  224;  reversing  5  A.  B.  R. 
176,  which  reversed  3  N.  B.  N.  R. 
32,  104  F.  R.  530,  4  A.  B.  R.  747; 
In  re  Macon  Sash,  Door  &  Lum- 
ber Co.,  112  F.  R.  323,  7  A.  B.  R.  66. 

34  In  re  Anderson,  103  F.  R.  854; 
In  re  Tischler,  2  N.  B.  N.  R.  549; 
In  re  Mayer,  2  N.  B.  N.  R.  257,  98 
F.  R.  839,  3  A.  B.  R.  533;  In  re 
Friedman,  1  N.  B.  N.  332;  2  A.  B. 
R.  301;  In  re  DeGottardl,  114  F. 
R.  328,  7  A.  B.  R.  723.  See  also 
In  re  Purvine,  1  N.  B.  N.  326,  96 
F.  R.  192,  2  A.  B.  R.  787;  In  re 
Kuntz,  Id.  256;  In  re  Tudor,  Id. 
476,  96  F.  R.  942,  2  N.  B.  R.  808. 
96  F.  R.  85 ;  In  re  Oliver,  Id.  329,  9G 
F.  R.  85;  2  A.  B.  R.  783;  In  re 
Ogles,  Id.  400 ;  In  re  Pearson,  Id. 
474;  In  re  Mooney.  15  N.  B.  R.  456 


40  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

to  surrender,  he  should  not  be  imprisoned  indetinitely.^"'  This 
power  will  not  be  used  to  punish  for  frauds  committed  by 
bankrupt  against  the  law  nor  to  coerce  him  or  transferees  to 
make  restitution  of  money  or  property  previously  transferred 
in  fraud  of  the  law,^^  nor  without  notice  of  the  charge,  claim 
or  proposed  judgment  or  order,  and  an  opportunity  to  be 
heard  thereon,  and  the  want  of  these  essentials  cannot  be 
supplied  by  merely  giving  the  bankrupt  an  opportunity  of  being 
cross-examined  as  to  his  examination  before  the  referee,  or  any 
matter  tending  to  show  what  had  become  of  the  property.^" 
The  court  also  has  power  to  compel  the  production  of  the 
bankrupt's  books,^^  or  those  of  third  parties  where  there  is 
reason  to  believe  that  they  will  show  the  disposition  of  the 
bankrupt's  property  and  affect  the  right  of  the  bankrupt  to  a 
discharge  which  involves  the  exercise  of  a  wide  discretion  and 
should  not  be  interfered  with  by  the  appellate  court  unless 
manifesth^  abused,  and  to  punish  failure  to  obey  as  a  con- 
tempt.^^ 

§  55.  Contempt  of  witness,  etc.— The  refusal  of  a  witness 
ordered  to  appear  and  be  examined  concerning  the  acts,  con- 
duct and  property  of  the  bankrupt  is  a  contempt  and  may  be 
punished  ;^^  so  where  bankrupt  was  summoned  to  appear  in 
supplementary  proceedings  and  filed  his  petition  and  was  ad- 
judged a  bankrupt  between  the  service  of  the  summons  and 
the  day  fixed  for  his  examination,  he  was  held  in  contempt 
and  fined,  the  bankruptcy  proceedings  not  ousting  the  state 
court.^^  Where  there  was  simply  a  threat  but  no  levy  under 
a  judgment  of  a  state  court  nor  other  interference  with  the 
property,  the  sheriff  would  not  be  guilty  of  contempt.-*^ 

For  Contempts  before  referee,  see  chap.  XLI.  post. 

35  In  re  Taylor,  114  F.  R.  607,  7  R.  233,  3  A.  B.  R.  253,  98  F.  R.  414. 
A.  B.  R.  410.  ^"  In  re  Howard,  1  N.  B.  N.  488, 

36  In  re  Mayer,  supra.  2  A.  B.  R.  582,  95  F.  R.  415,  citing 

37  In  re  Rosser,  101  F.  R.  562,  4  In  re  Feinberg,  2  B.  R.  425;  In  re 

A.  B.  R.  153;  Boyd  v.  Glucklich,  Fay,  3  B.  R.  860;  In  re  Pioneer 
116  F.  R.  131,  8  A.  B.  R.  393.  See  Paper  Co.,  7  N.  B.  R.  250;  Garri- 
In  re  Pearson,  1  N.  B.  N.  474,  2  A.  son  v.  Markley,  7  N.  B.  R.  246;  In 

B.  R.  819.  re  Comstock,  13  N.  B.  R.  193;  In  re 

38  In  re  Wilson,   116   F.  R.   419,  Fredenberg,  1  B.  R.  268. 

%  A.  B.  R.  612.  ^1  Bk.  v.  Graham,  1  N.  B.  N.  59. 

30  In  re  Morgan  et  al.^  2  N.  B.  N.        42  in  re  McBride,  2  N.  B.  R.  345. 


Ch.  2  JURISDICTION    OF    COURT— CONTEMPTS.  41 

§  56.  Contempts,  power  to  punish.— The  power  to  punish 
for  contempt  is  inherent  in  all  courts ;  its  existence  is  essential 
to  the  preservation  of  order  in  judicial  proceedings,  and  to 
the  enforcement  of  the  judgments,  orders  and  writs  of  the 
courts,  and  consequently  to  the  due  administration  of  justice. 
The  moment  the  courts  of  the  United  States  were  called  into 
existence  and  invested  with  jurisdiction  over  any  subject,  they 
became  possessed  of  this  power.'*^  The  authority,  however,  to 
inflict  summar}^  punishment  for  contempts  was  subsequently 
limited^ ^  to  the  cases  of  misbehavior  in  the  presence  of  the 
courts,  or  so  near  thereto  as  to  obstruct  the  administration  of 
justice,  the  misbehavior  of  any  of  the  officers  of  the  court  in 
their  official  transactions  and  the  disobedience  or  resistance  by 
any  such  officer  or  by  any  party,  juror,  witness  or  other 
person  to  any  lawful  writ,  process,  order,  rule,  decree  or  com- 
mand of  the  courts.^'^ 

The  provision  in  the  present  law  specifically  empowering 
courts  of  bankruptcy  to  ' '  enforce  obedience  by  the  bankrupts, 
officers  and  other  persons  to  all  lawful  orders,  by  a  fine  or 
imprisonment,  or  fine  and  imprisonment,"^*'  may  be  regarded 
as  merely  declaratory  of  the  necessarily  inherent  powers 
alreadj^  possessed  by  them.^'^  This  power  to  punish  has  been 
extended  to  "contempts  committed  before   referees. "^^ 

§  57.  Review  of  order  of  commitment.— While  the  exercise 
of  the  power  of  punishment  for  contempt  of  their  orders,  by 
courts  of  general  jurisdiction,  was  formerly  not  subject  to 
review,^^  in  some  jurisdictions  the  power  to  punish  has  been 
much  restricted  and  the  right  of  review  and  appeal  from  such 
proceedings  is  allowed.  Nor  was  there,  in  the  system  of  fed- 
eral jurisprudence,  any  relief  against  such  orders,  when  the 
court  had  authority  to  make  them,  except  through  the  court 
making  the  order,  or  by  the  exercise  of  the  pardoning  power. 
When,  howe^ver,  a  court  undertakes  by  its  process  of  contempt, 
to  impose  punishment  for  refusal  to  comply  with  an  order 
which  it  had  no  authority  to  make,  the    order    itself,  being 

43  Judiciary  Act  of  1789,  1  Stat.         46  Sec.  2   (13)   of  act  of  1898. 

L.  83.  47  u.  S.  V.  Hudson,  7  Cranch.  32. 

44  Act  March  2,  1831,  4  Stat.  L.  4s  Sec.  2  (16)  of  act  of  1898; 
487.  Mueller  v.  Nugent,  post, 

45  R.  S.  Sec.  725;  Ex  parte  Rob-  4n  Hays  v.  Fischer.  102  U.  S.  121; 
inson,  19  Wall.  505.  Ex  parte  Kearney,  7  Wheat.  38. 


42  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

without  jurisdiction,  is  void,  and  the  order  of  punishment  is 
equally  void.  When  the  proceeding  for  contempt  in  such  a 
case  results  in  imprisonment,  the  proper  course  is  to  sue  out 
a  writ  of  habeas  corpus  for  the  discharge  of  the  prisoner.^^ 
A  party  failing  to  obey  an  order  of  the  court  to  disclose  the 
whereabouts  of  assets  or  to  turn  over  to  a  trustee  money  or 
property  of  the  estate,  is  guilty  of  contempt,  and  may  be  im- 
prisoned, in  which  event  such  order  is  reviewable  as  to  matters 
of  law  by  the  Court  of  Appeal s.^^ 

§  58.  Classes  of  contempts.— Contempt  may  be  said  to  be 
of  two  classes — civil  and  criminal.  Civil  contempts  are  those 
quasi  contempts  which  consist  in  failing  to  do  that  which  the 
contemnor  is  ordered  by  the  court  to  do  for  the  advantage  or 
benefit  of  another  party  to  the  proceeding  before  the  court; 
while  criminal  contempts  are  all  those  acts  in  disrespect  of 
the  court,  or  of  its  process,  or  which  disturb  the  administra- 
tion of  justice,  or  tend  to  bring  the  court  in  disrepute,  such 
as  disorderly  conduct,  insulting  behavior  in  the  presence,  or 
immediate  vicinity,  of  the  court,  or  acts  of  violence  which 
interrupt  its  proceedings,  also  disobedience  or  resistance  of 
the  process  of  the  court,  the  interference  with  property  in  the 
custody  of  the  law,  misconduct  of  officers  of  the  court,  and 
the  like.^2 

As  was  said  in  the  case  of  Indianapolis  AYater  Company  v. 
American  Strawboard  Company ,^3  broadly  considered,  con- 
tempts may  be  classified  as  "direct"  and  "constructive." 
Those  which  are  committed  within  the  presence  of  the  court, 
while  sitting  judicially,  or  so  near  as  to  interfere  with  or 
interrupt  its  orderly  course  of  procedure,  are  direct  contempts, 
which  are  usually  punished  in  a  summary  manner,  without 
evidence,  upon  vicAV  and  personal  knowledge  of  the  deciding 
judge. ^^  Contempts  are  constructive  when  they  are  commit- 
ted not  in  the  presence  of  the  court,  but  tend  by  their  operation 
to   interrupt,   obstruct,   embarrass,   or    prevent  the    due  and 

•'■'OEx  parte  Fisk,  113  U.  S.  713,  Ex    parte    Edwards.    11    Fla.    184; 

718;   Ex  parte  Rowland,  104  U.  S.  In  re  Watson,  3  Lans.,  N.  Y..  408; 

604.  Phillips  V.  Welch,  11  Nev.  187,  190. 

ni  Mueller  v.  Nugent,  184  U.  S.  1,  -•■•.  75  F.  R.  972,  975. 

7  A.  B.  R.  224;  Boyd  v.  Glucklich,  ■•^  Whitten  v.  State.  36  Ind.  196; 

116  F.  R.  131,  8  A.  B.  R.   393.  Ex  parte  Wright,  65  Ind.  504;  Peo- 

•''•2  Rapalje  on  Contempt,  Sec.  21 ;  pie  v.  Wilson,  64  111.  195. 


Ch.  2  CONTEMPTS— POWER    TO    PUNISH.  43 

orderly  administration  of  justice.  Constructive  contempts 
may  be  distributed  into  two  j^^eneral  classes,  namely:  First, 
those  wherein  the  contemptuous  acts  primarily  affect  public 
rights  or  the  due  administration  of  public  justice;  and,  sec- 
ond, those  which  primarily  affect  private  rights,  and  only 
remotely  and  incidentally  affect  public  rights  or  public  justice. 
When  the  contempt  consists  in  the  failure  or  refusal  of  the 
party  to  do  or  refrain  from  doing  something  which  he  is 
ordered  to  do,  or  refrain  from  doing  for  the  benefit  or  advan- 
tage of  the  opposite  party,  the  proceeding  is  not  criminal,  but 
is  civil  and  remedial  in  its  nature.  And  in  this  sort  of  con- 
tempt the  intention  with  which  the  act  is  committed  is  im- 
material, except  in  fixing  the  proper  nature  of  the  punishment. 
The  injury  suffered  by  the  complaining  party  is  neither  in- 
creased nor  diminished,  nor  in  anywise  aff'ected  by  the  state 
of  mind  towards  the  court  of  the  party  doing  the  forbidden 
act.  The  breach  consists  in  doing  or  failing  to  do  the  thing 
commanded,  and  not  in  the  intention  with  which  the  act  was 
done.^^  The  exercise,  therefore,  of  this  powder  to  punish  for 
contempt,  has  a  two-fold  aspect,  namely:  First,  the  proper 
punishment  of  the  guilty  party  for  his  disrespect  to  the  court 
or  its  order;  and  second,  to  compel  his  performance  of  some 
act  or  duty  required  of  him  by  the  court  which  he  refuses  to 
perform.^*^ 

§  59.  Nature  of  offense  of  contempt.— It  has  been  uniformly 
held  that  a  contempt  of  court  or  its  orders  is  an  offense  against 
the  United  States^^  within  no  limited  or  restricted  sense,  but 
in  the  general  sense  of  a  crime.^'' 

.".r)  Refrigerating  Co.  V.  Gillett,  SO  Sear's   Case,   5   Id.   579;    Ex  parte 

Fed.  683 ;  Toledo  A.  A.  and  N.  M.  Fisk.  113  U.  S.  713,  718.     Goodrich 

Ry.   Co.  V.  Pa.  Co.,  54  F.  R.  746 ;  v.  U.  S.,  42  P.  R.  392.     See  Boyd  v. 

Peo.  V.  Court  of  Oyer  and  Termi-  Glucklich,  116  F.  R.  131,  8  A.  B.  R. 

ner,   101   N.   Y.  245,   4   N.   E.   259;  393. 

Thompson  v.  Railroad  Co.    (N.  J.         ^•'^  United     States    v.     Jacobi,     4 

Ch.),  21  Atl.  182;  Railroad  Co.  v.  Amer.  Law  T.  R.  U.  S.  Cts.  148;  4 

Thompson   (N.  J.  Err.  and  App.).  Blackstone  124,   279;    In  re   Brass 

24  Atl.  544.  Crosby,  3  Wilson   188;    In  re  Wil- 

56  In  re  Chiles,  22  Wall.  157,  168.  liamson,    26    Pa.    St.   R.    18.     New 

57  In  re  Mulee,  7  Blatchf.  24;  Ex  Orleans  v.  Steamship  Co.,  20  Wall, 
parte  Kearney,  7  Wheat.  38;  Dix-  387;  Worden  v.  Searles.  121  U.  S. 
en's  Case,  3  Op.  Atty.  Genl.  623;  14;  In  re  Swan,  150  Id.  652;  In  re 
Rowan's  Case,  4  Id.  58;  Drayton  &  Acker    66  F.  R.  290. 


44  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2 

§60.  Pardon  of  contempts.— "When  a  court  commits  a 
party  for  a  contempt,  their  adjudication  is  a  conviction  and 
their  commitment  in  consequence  is  execution.  After  a  con- 
viction and  a  commitment  for  a  contempt,  the  court  has  no 
more  power  to  discharge  or  remit  the  sentence  than  it  has  in 
the  case  of  a  conviction  and  commitment  for  any  other  crime 
or  offense  against  the  United  States.  "^»  Under  the  Constitu- 
tion the  President  is  invested  with  power  "to  grant  reprieves, 
and  pardons  for  oft'enses  against  the  United  States,"  and  the 
exercise  of  this  prerogative  extends  as  well  to  cases  of  pun- 
ishment of  contempt  for  disobedience  of  lawful  process  of  a 
Federal  court  as  to  misbehavior  in  its  presence.^"  It  has  been 
held  further  that  a  "contempt  of  court  is  an  offense  against 
the  state,  and  not  an  offense  against  the  judge  personally. 
In  such  a  case  the  state  is  the  offended  party,  and  it  belongs 
to  the  state,  acting  through  another  department  of  its  gov- 
ernment, to  pardon  or  not  to  pardon  at  its  discretion  the 
offender,  "''i  These  observations  apply  only  where  the  term 
at  which  the  conviction  was  had  has  expired  and  by  reason 
thereof  the  case  has  passed  beyond  the  jurisdiction  of  the 
court.  The  term  of  the  court  of  bankruptcy  being  considered 
as  continuous  from  the  commencement  of  a  proceeding  to  the 
closing  of  an  estate,*'^  the  court  would  have  power  and  control 
over  such  matters  during  the  pendency  of  the  proceeding,  the 
rule  being  that  during  the  existence  of  the  term,  the  court 
has  general  and  full  power  over  this  as  over  any  other  kind 
of  judgment,  order  or  decree  in  either  civil  or  criminal  eases.*'-'^ 

The  fact  that  a  fine  has  been  imposed  as  a  punishment  for 
a  contempt,  does  not  remove  the  case  beyond  the  pardoning 
power  of  the  President,  because  the  amount  of  the  fine  is 
directed  in  the  order  imposing  it  to  be  paid  to  the  plaintiff 
in  the  suit,  towards  the  reimbursement  of  his  expenses  in  the 
attachment  proceedings  in  respect  of  such  contempt.*^-*     If  the 

^!>  Ex   parte   Kearney,   7   Wheat.         ci  state  v.  Sauvinct,  24  La.  Ann. 

38,  43.     See  Fisher  v.  Hayes,  6  F.  119. 
R.  63.  «2  In    re   Ives,    113   F.   R.   911,   7 

60  In  re  Mulee,  7  Blatchf.  23;  Ex  A.  B.  R.  692;  Jemison  Mercantile 

parte   Kearney,    7    Wheat.    38.    42;  Co.,  112  F.  R.  966,  7  A.  B.  R.  588. 
3  Op.  Atty.  Genl.  622,  4  Id.  458,  5         e.i  Fischer  v.  Hayes,  6  F.  R.  63 ; 

Id.  579;   Ex  parte  Fisk,  113  U.  S.  Ex  p.  Lange,  18  Wall.  167;    Bank 

713,  718.  of  U.  S.  V.  Moss,  6  How.  31. 

fi<  In  re  Mulee,  7  Blatchf.  24. 


Ch.  2  CONTEMPTS— POWER    TO    PUNISH.  45 

right  to  the  fine  could  be  regarded  as  a  vested  private  right 
ot  the  plaintiff  in  the  suit,  existing  in  the  shape  of  a  judgment, 
the  President  might  still  pardon  the  offense  and  imprisonment, 
with  the  exception  or  saving  as  to  the  fine,  in  which  case  the 
fine  would  remam  as  a  debt  recoverable  according  to  the 
appropriate  legal  remedies.^^ 

§  61.  Nature  of  punishment  for  contempt.— When  the  con- 
tempt consists  of  a  violation  of  the  order  of  the  court,  and 
is  not  committed  in  its  presence,  and  the  statute  does  not  pre- 
scribe the  form  of  the  order  of  commitment,  the  defendant 
may  be  imprisoned  until  he  be  discharged  by  order  of  court, 
or  until  further  order  of  court  ;*^*^  the  defendant  being  com- 
mitted to  the  custody  of  the  marshal  until  the  fine  has  been 
paid,  or  the  order  obeyed.^^  The  certified  copy  of  the  proceed- 
ings of  contempt  and  of  the  attachment  is  sufficient  to  justify 
not  only  the  United  States  Attorney  in  making  the  necessary 
complaint,  but  to  authorize  the  issuance  of  a  warrant  of  arrest 
b}''  the  proper  officer,  precisely  as  a  certified  copy  of  an 
indictment  would  be  in  any  other  case  of  crime.^^ 

§  62.  Punishment  not  imprisonment  for  debt.— The  Consti- 
tutions of  most  of  the  states  contain  limitations  forbidding 
imprisonment  for  debt.  While  the  Federal  Constitution  con- 
tains no  such  provision.  Section  990  of  the  Revised  Statutes 
provides  that  there  shall  be  no  imprisonment  for  debt  in  any 
state  on  process  issuing  from  a  court  of  the  United  States, 
where,  by  the  laws  of  such  state  imprisonment  for  debt  has 
been  or  shall  be  abolished.  Imprisonment  for  the  violation  of 
an  order  of  a  court  to  turn  over  money  to  a  trustee,  or  to  dis- 
close the  whereabouts  of  concealed  property,  can  not  be  con- 
sidered as  imprisonment  for  debt.^^ 

§  63.  Defense  to  order  committing  for  contempt.— It  has 
been  held  that  irrespective  of  a  constitutional  prohibition 
against  imprisonment  for  debt  and  of  the  fact  that  statutory 
methods  for  enforcing  decrees  for  the  payment  of  money  have 
been  provided,  a  failure  to  pay  through    absolute    inability 

63  Drayton  and  Sear's  Case,  5  Op.  e-  in  re  Chiles,  22  Wall.  157,  169. 

Atty.  Genl.  579.  6s  u.  S.  v.  Jacobi,  4  Amer.  Law 

66  In   re  Allen,   13   Blatchf.   272;  T.  Rep.,  U.  S.  Cts.,  148.  151. 

Green   v.    Elgie,    8   Jurist,    Part    I.  69  Mueller  v.  Nugent,  184  U.  S.  1, 

187;    In  re  Yates,  4  Johns.  317,  9  7  A.  B.  R.  224;   In  re  Schlesinger, 

Johns.  395.  102    F.    R.    117,    4    A.    B.    R.    361; 


46 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch.  2 


lacks  the  essential  element  of  a  contempt.'*'^  But  the  fact  that 
the  party  is  disabled  from  obeying  the  order  is  no  defense, 
where  such  disability  is  the  result  of  some  voluntary  act  of 
his  oMTi.'^ 


Ripon  Knitting  Wks.  v.  Schreiber, 
101  F.  R.  810,  2  N.  B.  N.  R.  899, 
4  A.  B.  R.  299.  See  Boyd  v.  Gluck- 
lich,  116  F.  R.  131,  8  A.  B.  R.  393. 
"0  In  re  Ockershausen,  59  Hun. 
200;    Walton   v.    Walton,   54   N.  J. 


Eq.  607;  Register  v.  State,  8  Minn. 
214. 

"1  Rapalje'on  Contempts,  Sec.  18; 
Galland  v.  Galland,  44  Cal.  475: 
Peo.  V.  Salomon,  54  111.  40; 
Snowman  v.  Harford,  57  Me.  397. 


CHAPTER  III. 

ACTS    OF    BANKRUPTCY— INSOLVENCY. 


§64.    (3a)   Acts   of   bankruptcy    de- 
fined. 

65.  Classes. 

66.  Estoppel. 

67.  Determination    of    insol- 
vency. 

68.  When    partnership  insol- 
vent. 

69.  Transfers  with  intent  to 

prefer. 

70.  Transfers  with  intent  to 

defraud — Concealment. 

71.  What  transfers  are  not. 

72.  Conveyance    of     partner- 
ship property. 

73.  Conveyances  to  relatives. 

74.  Chattel  mortgages. 

75.  Mortgages. 

76.  Pledges. 

77.  Sales. 

78.  Legal   proceedings. 

79.  Inability    to  defeat. 


80. 

Receiver  or  trusteeship. 

81. 

Intent  —  Allegation     and 

proof. 

82. 

General    assignment    for 

benefit  of  creditors. 

83. 

Admitting     inability     to 

pay  debts,  etc. 

84. 

b.  Time  for  filing  petition. 

85. 

Four  months  period. 

86. 

c.  Defense  of  solvency. 

87. 

Who  may  defend. 

88. 

When  defense  made. 

89. 

Defense  generally. 

90. 

d.  Testimony  on  denial  of  in- 

solvency. 

91. 

Practice. 

92. 

e.  Provisional  seizure  of  prop- 

erty. 

93. 

Practice. 

94. 

Costs. 

95. 

Costs  on  dismissal  of  petition. 

§64.     '(Sec.  3a)     Acts    of    bankruptcy    defined.— Acts    of 

'bankruptcy  by  a  person  shall  consist  of  his  having- 

'  (1)  conveyed,  transferred,  concealed,  or  removed,  or  per- 
'niitted  to  be  concealed  or  removed,  any  part  of  his  property 
'with  intent  to  hinder,  delay,  or  defraud  his  creditors,  or  any 
'  of  them  ;    or 

'  (2)  transferred,  while  insolvent,  any  portion  of  his  prop-. 
■  erty  to  one  or  more  of  his  creditors  with  intent  to  prefer  such 
'creditors  over  his  other  creditors;    or 

'  (3)   suffered  or  permitted,  while  insolvent,  any  creditor  to 
'obtain  a  preference  through  legal  proceedings,  and  not  hav- 
'ing  at  least  five  days  before  a  sale  or  final  disposition  of  any 
'  property  affected  by  such  preference  vacated  or  discharged  ' 
'such  preference;    or 

'  (4)  made  a  general  assignment  for  the  benefit  of  his  cred- 
'itors,  or,  being  insolvent,  applied  for  a  receiver  or  trustee  for 

47 


48 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch. 


'his  property  or  because  of  insolvency  a  receiver  or  trustee  has 
'been  put  in  charge  of  his  property  under  the  laws  of  a  state, 
'of  a  territory,  or  of  the  United  States.^ 

'  (5)  admitted  in  writing  his  inability  to  pay  his  debts  and 
*his  willingness  to  be  adjudged  a  bankrupt  on  that  ground. '^ 

§  65.  Classes. — Acts  of  bankruptcy  may,  in  general,  be 
considered  under  two  classes,  i.  e.,  those  resulting  from  in- 
solvency and  those  which  are  dishonest  or  fraudulent. 

The  first  three  detinitions  of  the  acts  of  bankruptcy  speci- 


1  Subdivision  4  was  amended  by 
the  act  of  February  5,  1903,  by 
the  enactment  of  the  matter  in  the 
text  in  lieu  of  the  following:  "(4) 
Made  a  general  assignment  for  the 
benefit  of  his  creditors.  " 

-  Analogous  provision  in  Act  of 
1867.  Sec.  39.  And  be  it  further 
enacted.  That  any  person  residing 
and  owing  debts  as  aforesaid,  who, 
after  the  passage  of  this  act.  shall 
depart  from  the  State,  district,  or 
Territory  of  which  he  is  an  inhab- 
itant, with  intent  to  defraud  his 
creditors,  or,  being  absent,  shall, 
with  such  intent,  remain  absent; 
or  shall  conceal  himself  to  avoid 
the  service  of  legal  process  in  any 
action  for  the  recovery  of  a  debt 
or  demand  provable  under  this 
act;  or  shall  conceal  or  remove 
any  of  his  property  to  avoid  its 
being  attached,  taken,  or  seques- 
tered on  legal  process;  or  shall 
make  any  assignment,  sale,  con- 
veyance or  transfer  of  his  estate. 
property,  rights,  or  credits,  either 
within  the  United  States  or  else- 
where, with  intent  to  delay,  de- 
fraud or  hinder  his  creditors:  or 
who  has  been  arrested  and  held  in 
custody  under  or  by  virtue  of 
mesne  process  or  execution,  issued 
out  of  any  court  of  any  State,  dis- 
trict, or  Territory,  within  which 
such  debtor  resides  or  has  prop- 
erty founded  upon  a  demand  in  its 
nature   provable   against   a   bank- 


rupt's estate  under  this  act,  and 
for  a  sum  exceeding  one  hundred 
dollars,  and  such  process  is  re- 
maining in  force  and  not  dis- 
charged by  payment,  or  in  any 
other  manner  provided  by  the  law 
ot  such  State,  district,  or  Terri- 
tory applicable  thereto,  for  a  pe- 
riod of  seven  days;  or  has  been 
actually  imprisoned  for  more  than 
f>even  days  in  a  civil  action, 
founded  on  contract,  for  the  sum 
of  one  hundred  dollars  or  up- 
wards, or  who,  being  bankrupt  or 
insolvent,  or  in  contemplation  of 
b.inkruptcy  or  insolvency,  shall 
make  any  payment,  gift,  grant, 
sale,  conveyance,  or  transfer  of 
money  or  other  property,  estate, 
rights,  or  credits,  or  give  any  war- 
rant to  confess  judgment;  or  pro- 
cure or  suffer  his  property  to  be 
taken  on  legal  process,  with  intent 
<:o  give  a  preference  to  one  or  more 
of  his  creditors,  or  to  any  person 
or  persons  who  are  or  may  be 
liable  for  him  as  indorsers,  bail, 
sureties,  or  otherwise,  or  with  the 
intent,  by  such  disposition  of  his 
property,  to  defeat  or  delay  the 
operation  of  this  act;  or  who,  be- 
ing a  banker,  merchant  or  trader, 
has  fraudulently  stopped  or  sus- 
pended and  not  resumed  payment 
of  his  commercial  paper,  within  a 
period  of  fourteen  days,  shall  be 
deemed  to  have  committed  an  act 
of    bankruptcy. 


Ch.  3  ACTS    OF    BANKRUPTCY— INSOLVENCY.  49 

tied  in  the  present  law,  follow  closely  those  given  in  section 
'39  of  the  act  of  1867,  while  the  fourth  and  fifth  definitions 
have  no  counterpart  in  that  act.  The  law  of  1867  specified 
three  acts  of  bankruptcy  which  are  omitted  from  the  present 
statute,  namely,  the  absconding  or  avoiding  the  service  of 
process  on  part  of  the  debtor,  the  arrest  and  holding  in 
custody  of  a  debtor,  under  process  of  execution  for  a  period 
of  seven  days;  and  the  fraudulent  suspension  of  payment  of 
commercial  paper  by  a  banker,  merchant  or  trader  for  a 
period  of  fourteen  days. 

§  66.  Estoppel. — Any  person  conniving  in  the  alleged  act  of 
bankruptcy  whether  it  be  actually  fraudulent  or  only  con- 
structively so  should  be  denied  the  relief  asked  if  based  on  the 
ground  of  such  act.^ 

§  67.  Determination  of  insolvency.— As  the  law  expressly 
defines  insolvency,  all  that  is  necessary  in  any  particular  case 
is  to  determine  whether  the  aggregate  of  the  alleged  insolv- 
ent's property,  exclusive  of  any  he  may  have  conveyed,  trans- 
ferred, concealed  or  removed,  or  permitted  to  be  concealed  or 
removed,  with  intent  to  defraud,  hinder  or  delay  his  creditors, 
is,  at  a  fair  valuation,  sufficient  in  amount  to  pay  his  debts ; 
if  not,  he  is  insolvent.  Hence  on  the  trial  of  a  contested 
involuntary  petition,  in  determining  the  issue  of  the  solvency 
or  insolvency  of  respondent,  all  the  property  which  he  owns 
is  to  be  reckoned  in  computing  the  amount  of  his  assets, 
including  property  exempt  from  execution  by  the  laws  of  the 
state,  but  excluding  such  as  he  may  have  transferred  or  con- 
cealed in  fraud  of  creditors,*  or  conveyed  without  considera- 
tion immediately  preceding  his  bankruptcy,  and  money  upon 
his  person.^ 

A  fair  valuation  of  the  goods  levied  on  should  be  taken, 
with  reference  to  their  actual  situation  and  liability  to  sale 
on  execution,  and,  if  such  sale  is  in  all  respects  a  fair  and 
reasonable  one,  the  debtor  is  bound  by  the  result  as  to  the 

3  In  re  Miner,  2  N.  B.  N.  R.  1073,  559,  F.  C.  11006;  In  re  Williams,  4 

104  F.  R.  520;     Simonson  v.  Sins-  N.  B.  R.  132,  F.  C.  17706.    See  Gen- 

heimer,  95  F.  R.  948;  In  re  Roma-  eral  Assignments,  post  §82. 

now,  92  F.  R.  510,  1  N.  B.  N.  213,  *  In  re  Baumann,  96  F.  R.  946,  3 

1    A.    B.    R.    461 ;     Massachusetts  A.  B.  R.  196. 

Brick   Co.,   5   N.   B.   R.   408.   F.    C.  •-•  In  re  Tudor,  1  N.  B.  N.  339. 
9259;  Perry  v.  Langley,  1  N.  B.  R. 


50 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch.  3 


valuation  and  can  not  prove  his  solvency  by  a  higher  estimate 
based  on  their  being  free  and  sold  at  retail  in  the  usual  course 
of  business.**  The  term  "fair  valuation"  is  the  equivalent  of 
the  present  market  value,  and  not  what  the  debtor  would  have 
been  able  to  realize  therefor  considering  his  situation,  the 
number  and  amount  of  his  obligations,  and  the  likeJ  In  mak- 
ing such  estimate  there  should  not  be  included  prospective 
profits  upon  goods  ordered  but  not  paid  for  or  delivered,'^  and 
in  case  of  credits  due  the  bankrupt  on  accounts,  the  estimate 
should  be  on  their  actual  and  not  their  nominal  value," 
Where  a  referee  has  twice  examined  the  question  and  finds 
that  the  debtor's  property  at  a  fair  valuation  was  insufficient 
to  pay  his  debts  the  finding  of  insolvency  should  not  be 
disturbed.  .^^ 

A  corporation  which  has  sufficient  j^roperty  to  pay  its  debts 


6  In  re  Martin,  1  N.  B.  N.  301. 
-  Duncan    v.  Landis,    106    F.  R. 
839,  5  A.  B.  R.  649. 

8  In  re  Bloch,   109   F.  R.   790,  6 

A.  B.  R.  300. 

9  In  re  Coddington,  118  F.  R.  281, 
9  A.  B.  R.  243. 

10  In  re  Rome  Planing  Mill,  2  N 

B.  N.  R.  531,  99  F.  K.  937,  3  A.  B. 
R.    766. 

Under  the  act  of  1867  it  was 
held  that  insolvency  consisted  in 
the  inability  to  pay  debts  accord- 
ing to  the  custom  of  the  place  of 
business,  although  the  assets  might 
be  largely  in  excess  of  liabilities; 
that  it  was  no  excuse  that  he  might 
have  paid  them  if  time  was  given, 
and  that  the  words  "insolvent" 
and  "insolvency"  were  not  synony- 
mous with  the  words  "bankrupt" 
and  "bankruptcy,"  but  less  re- 
stricted (Ecfort  v.  Greely,  6  N.  B. 
R.  433,  Fed.  Cas.  4260;  Toof  v. 
Martin,  6  N.  B.  R.  49,  13  Wall.  40; 
Martin  v.  Toof.  4  N.  B.  R.  158,  Fed. 
Cas.  9164;  Stranahan  v.  Gregory, 
4  N.  B.  R.  142,  Fed.  Cas.  13522;  In 
re  Lewis,  2  N.  B.  R.  145;  In  re 
Kingsbury,    3    N.    B.    R.    84,    Fed. 


Cas.  7816;  Merchants'  Nat.  Bk.  v. 
Truax,  1  N.  B.  R.  146,  Fed.  Cas. 
9451;  Warren  v.  Bk.,  7  N.  B.  R. 
481,  10  Blatch.  493,  Fed.  Cas.  17202; 
Jackson  v.  McCulloch,  13  N.  B.  R. 
283,  1  Woods  433,  Fed  Cas.  7140; 
Sawyer  v.  Turpin,  5  N.  B.  R.  339,  2 
Lowell  29,  Fed.  Cas.  12410;  In  re 
Woods,  7  N.  B.  R.  126,  Fed.  Cas, 
17990;  Webb  v.  Sachs,  15  N.  B.  R. 
168,  4  Sawy.  158,  Fed.  Cas.  17325; 
Hall  v.  Wager,  5  N.  B.  R.  181,  3 
Biss.  28,  Fed.  Cas.  5951;  In  re 
Black,  1  N.  B.  R.  81,  2  Ben.  196, 
Fed.  Cas.  1457;  RiSon  v.  Knapp, 
4  N.  B.  R.  114,  Fed.  Cas.  11861)  ; 
that  debts  could,  not  be  made  in 
full  out  of  debtor's  property  by 
levy  and  sale  on  execution  (In  re 
Wells,  3  N.  B.  R.  95,  Fed.  Cas. 
17388;  in  re  Oregon  Bull.  etc.  Co., 
13  N.  B.  R.  503.  Fed.  Cas.  10559; 
but  see  Harrison  v.  McLaren,  10 
N.  B.  R.  244,  Fed.  Cas.  6139)  ;  fail- 
ure to  keep  promises  to  pay  at  a 
specific  time  made  repeatedly  to 
demands  of  payment  (In  re  Arm- 
strong, 16  N.  B.  R.  275,  9  Ben.  212, 
Fed.  Cas.  539)  ;  being  required  by 
a  banker  to  give  collateral  security 


C'h.  3  ACTS    OF    BANKRUPTCY— CONVEYANCES.  51 

does  not  become  insolvent  within  the  meaning  of  the  law  upon 
the  appointment  of  a  receiver  in  a  state  court. ^^ 

§  68.  When  partnership  insolvent.— Under  the  act  of  1867 
a  partnership  was  held  insolvent  if  unable  to  pay  its  debts  in 
the  ordinary  course  of  business.  Under  the  present  act  all 
the  property  which  may  be  made  liable  for  the  firm  debts 
must  be  considered  in  determining  whether  or  not  the  co- 
partnership is  solvent.  Partners  are  liable  in  solido,  and  in 
order  that  a  firm  may  be  adjudged  a  bankrupt  it  must  be 
shown  not  only  that  the  co-partnership  is  insolvent,  but  that 
every  one  of  its  members  is  individually  insolvent.^  2  ^^g  j^. 
ability  of  a  partnership  to  meet  its  matured  obligations,  to- 
gether with  its  dissolution,  and  the  transfer  of  practically  all 
of  its  property  to  creditors,  either  by  way  of  payment  or 
security,  leaving  other  debts  unpaid,  are  facts  sufficient  to 
establish  its  insolvency.^^ 

§  69.  Acts  of  bankruptcy,  conveyances  and  transfers  with 
intent  to  prefer. — It  should  be  noted  that  all  preferences  given 
by  an  insolvent  within  four  months  prior  to  the  filing  of  the 
petition  are  acts  of  bankruptcy  if  given  with  an  intent  to 
prefer,  whether  they  can  or  can  not  be  set  aside  by  the 
trustee ;  and  in  order  that  they  may  be  set  aside,  the  creditor 
benefited  must  have  had  reasonable  cause  to  believe  that  it 
was  intended  to  give  a  preference.  Payments,  sales,  or  trans- 
fers of  any  character,  declared  void  by  the  bankrupt  law, 
are  only  void  against  persons  claiming  under  proceedings  in 
bankruptcy  or  in  the  course  of  administration  of  a  bankrupt's 
estate  in  a  court  of  bankruptcy  ;^^  but  if  made  by  a  person  so 
unsound  in  mind  as  to  be  wholly  incapable  of  managing  his 
affairs  they  can  not  be  made  the  basis  of  proceedings  in  bank- 
ruptcy, against  the  objections  of  his  guardian.i-'^     The  purpose 

for  a  draft  cashed  the  day  before  12  Davis  v.  Stevens,  104  F.  R.  235. 

(Merchants'  Bk.  v.  Cook,  16  N.  B.  3  N.  B.  N.  R.  131;   In  re  Blair.  99 

R.  391,  95  U.   S.  342).     The  fore-  F.    R.    76,    2    N.    B.    N.    R.    364,    3 

going  do  not  define  insolvency  un-  A.   B.    R.    588;    Vaccaro   v.    Bank, 

der  the  present  law,  but  the  acts  103  F.  R.  436,  2  N.  B.  N.  R.  1037, 

named  may  tend  to  show  that  the  4  A.  B.  R.  474;  see  In  re  Bennett, 

debtor's  property,  at  a  fair  valua-  12  N.  B.  R.  181,  2  Low.  400. 

tion.    is    insufficient    to    pay    his  i''  In  re  Miller,  104  F.  R.  764. 

debts.  1*  Berryman  v.  Allen.  15  N.  B.  R. 

11  In  re  Henry  Zeltner  Brewing  113. 

Co.,  117  F.  R.  799.  i'.  in  re  Funk,   101  F.  R.   244,  4 

A.  B.  R.  96. 


52  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  3 

of  the  bankrupt  act  being  to  secure  the  equal  distribution  of 
the  bankrupt's  estate  among  his  creditors,  every  act  of  an 
insolvent  which  tends  to  defeat  that  purpose  should  be  con- 
strued strictly  against  him.^^ 

The  word  "transfer"  is  used  in  its  most  comprehensive 
sense  and  is  intended  to  include  every  means  and  manner  by 
which  property  can  pass  from  the  possession  and  ownership 
of  another/'^  and  includes  sale  and  every  other  and  different 
mode  of  disposing  of  or  parting  with  property,  or  the  pos- 
session of  property,  absolutely  or  conditionally,  as  a  payment, 
pledge,  mortgage,  gift,  or  security.^^  Hence  the  payment  of 
money,^^  the  transfer  of  valuable  accounts,-^  or  of  property 
by  an  insolvent  to  a  creditor  with  intent  to  prefer  him  over 
other  creditors  is  an  act  of  bankruptcy,  and  it  is  immaterial 
whether  the  transfer  is  made  directly  or  indirectly  to  the 
creditor,  or  whose  claim  is  preferentially  paid  ;-i  and  the  same 
is  true  of  a  transfer  to  several  creditors  under  an  agreement 
that  they  should  surrender  the  notes  they  held  and  have  the 
I)roperty  fairly  appraised,  and,  if  its  value  exceeded  the  aggre- 
gate of  their  debts,  the  debtor  was  to  receive  the  excess  ;-2  or 
any  act  by  which  some  creditors  are  intentionally  preferred 
over  others.23  The  transfer  of  all  of  one's  property  affords  a 
violent,  if  not  a  conclusive  presumption  of  an  intent  to  prefer, 
where  there  are  other  creditors  unprovided  for,-^  or  under 
certain  circumstances  the  transfer  of  a  large  part  of  one's 
property.-^ 

§  70.  Transfers  with  intent  to  defraud.— Concealment.— If, 
while  insolvent,  one  conveys,  transfers,  conceals  or  removes,  or 
permits  to  be  concealed  or  removed  any  part  of  his  property, 
with  the  intent  to  hinder,  delay  or  defraud  his  creditors, 
or  to  give  a  preference  to  any  of  them,  or  to  defeat  or 
delay  the  operation  of  the  bankrupt  law,  he  commits  an  act 

16  Hall  V.  Wager,  5  N.  B.  R.  181,  In  re  Grant,  106  F.  R.  496,  5  A.  B. 
3  Biss.  28,  F.  C.  5951.  R.  837. 

17  Carson  et  al.  v.  Trust  Co..  182  22  in  re  Norcross,  1  N.  B.  N.  257, 
U.  S.  438,  45  L.  Ed.  1171,  A.  B.  R.  1  A.  B.  R.  644. 

IS  Sec.  la  (25)   act  of  1898.  -'3  In  re  Edelstein.  1  N.  B.  N.  168. 

i:i  Boyd  V.  Lemon  &  Gale  Co.,  114  24  in  re  Gilbert,  112  F.  R.  951,  S 

F.  R.  647,  8  A.  B.  R.  81.  A.  B.  R.  101;   In  re  Waite,  1  Law. 

20  In  re  McGee,  105  F.  R.  895,  5  207,  F.  C.  17044. 

A.  B.  R.  262.  25  Toof  v.  Martin,  13  Wall.  40,  20 

21  Goldman  v.  Smith,  1  A.  B.  R.     L.   Ed.   481. 
266,  1  N.  B.  N.  160.  93  F.  R.  182; 


Ch.  3  ACTS    OF    BANKRUPTCY— CONVEYANCES.  53 

of  bankruptcy,  however  innocent  the  act  of  the  preferred 
creditor  or  the  person  to  whom  the  transfer  is  niade;-^  and 
the  conveyance  of  his  property  affords  a  very  violent  pre- 
sumption of  a  fraudulent  intent  so  far  as  existent  creditors 
are  concerned.-^  The  following  have  been  held  to  be  acts  of 
bankruptcy  and  accordingly  void:  transfers  made  to  defeat 
the  operation  of  the  bankrupt  law  so  far  as  they  stand  in  the 
way  of  enforcing  its  provisions,  where  the  proceedings  are 
instituted  within  the  prescribed  time;^^  or  the  transfer  of 
property  for  an  inadequate  consideration  ;29  or  any  act  the 
effect  of  which  is  to  evade  the  provisions  of  the  law;^^  or  the 
absconding  of  an  insolvent,  carrying  with  him  money  or  prop- 
erty not  exempt,  which  constitutes  both  a  concealment  as  well 
as  a  removal  of  property  with  intent  to  defraud  ;^^  convey- 
ances not  made  in  the  usual  and  ordinary  course  of  business 
of  the  debtor,-^-  and  in  determining  whether  a  transaction  is 
so  made  the  question  is  not  whether  it  is  usual  in  the  general 
conduct  of  business  throughout  the  community,  but  whether 
it  is  according  to  the  usual  course  of  business  of  the  particular 
person  whose  conveyance  is  in  question.^^ 

The  fraudulent  concealment  of  property  which  is  an  act  of 
bankruptcy  may  be  shown  as  well  by  circumstantial  as  by 
direct  evidence,  and  where  the  evidence  is  wholly  circumstan- 
tial, it  is  impossible  and  unreasonable  and  therefore  unneces- 
sary to  aver  in  the  petition  the  precise  details  of  the  act  of 
concealment.^^ 

The  conveyance  of  all  of  one's  property  in  trust  to  sell  the 
same  and  pay  first  the  expenses,  second  the  debts  of  a  prefer- 
ential character  under  the  state  laws,  third  the  creditors,  all 
of  whom,  with  the  respective  amounts  due  each,  were  set  out 
in  the  conveyance,   and    fourth  to   pay  any  balance  to  the 

2G  In  re  Drummond,  1  N.  B.  R.  3o  Webb  v.  Sachs,  15  N.  B.  R.  168, 

10,  F.  C.  4093.  4  Sawy.  158,  F.  C.  17325. 

27  In  re  Alexander,  4  N.  B.  R.  45,  -ii  In  re  Filer,  108  F.  R.  209,  5 
F.  C.  161;   In  re  Gilbert,  supra.  A.  B.  R.  332. 

28  Stevenson  v.  McLaren,  14  N.  B.  32  Rison  v.  Knapp,  4  N.  B.  R.  114. 
R.  403;  Beattie  v.  Gardner,  4  N.  F.  C.  11861;  Babbitt  v.  Walbran  & 
B.  R.  106,  F.  C.  1195;  In  re  Cowles,  Co..  4  N.  B.  R.  30,  F.  C.  694. 

1  N.  B.  R.  42,  F.  C.  3927.  ^n  Rison  v.  Knapp,  supra. 

2!)  See  Citizens  Bank  of  Salem  v.  -.4  in  re  Bellah,  116  F.  R.  69,  8 

DePauw  Co.,  105  F.  R.  926,  5  A.  B.  A.  B.  R.  310. 
R.  345. 


54  THE    NATIONAL    BANKRUPTCY    LAW.  CTh.  3 

grantor,  has  been  held  not  to  work  a  preference  and  upon  that 
ground  not  an  act  of  bankruptcy;  nor,  if  the  defeasance  and 
reservation  to  the  grantor  after  satisfaction  of  the  beneficiaries 
is  bona  fide,  is  it  a  general  assignment  under  the  bankruptcy 
act;  but  it  must  be  regarded  as  a  deed  given  with  intent  to 
hinder,  delay  and  defraud  creditors  within  the  meaning  of 
the  law  and  so  an  act  of  bankruptcy,  because  it  puts  the 
administration  of  an  estate  in  the  hands  of  a  person  chosen  by 
the  debtor  instead  of  his  creditors,  as  directed  by  the  bankrupt 
law,  though  there  is  no  fraud  of  the  kind  requisite  to  avoid 
conveyances  at  common  law,  or  under  the  statute  of  frauds.^""' 

For  discussion  of  question  of  concealment,  see  chap.  XXIX, 
post. 

§  71.  Acts  of  bankruptcy,  transfers  or  conveyances  not.— 
An  insolvent  debtor  may  sell  or  incumber  his  estate  for  a 
present  and  sufficient  consideration,  if  the  transaction  is  bona 
fi(jp36  without  committing  an  act  of  bankruptcy ,^^  and  no 
concealment  can  be  implied  where  he  shows  good  faith  in  re- 
spect to  the  care  of  the  money  received.^^  The  following  trans- 
fers have  been  held  not  to  operate  as  a  preference  and,  there- 
fore do  not  constitute  acts  of  bankruptcy :  a  transfer  of  prop- 
erty by  an  insolvent,  when  there  is  no  other  creditor  having  a 
provable  debt  against  such  debtor  ;39  the  payment  by  an  in- 
solvent of  the  back  rent,  water  charges  and  other  incidental 
expenses  necessary  to  effect  the  sale  of  a  leasehold  ;^o  the 
conveyances  of  one's  property,  which  exceeds  in  value  his 
debts  to  another  who  agrees  to  pay  all  the  debts  and  support 
the  grantor  during  the  rest  of  his  life  ;*^  an  unexecuted  agree- 
ment by  a  railroad  company  to  transfer  certificates  of  stock  ;^2 
the  assignment  of  book  accounts  as  collateral  security  for  the 
payment  of  present  loans  and  advances  to  the  bankrupt;"*^  or 
any  transfer  of  one's  property  when  entirely  solvent. 

35  In  re  Rumsey  &  Sikemier  Co.,  In  re  Johann,  4  N.  B.  R.  143,  F.  C. 

2  N.  B.  N.  R.  128,  99  F.  R.  699,  3  7331. 

A.  B.  R.  704.  *o  In  re  Pearson,  1  N.  B.  N.  402. 
-io  Gattman  &  Co.  v.  Honea,  12  N.  2  A.  B.  R.  482,  95  F.  R.  425. 

B.  R.  493,  F,  C.  5271.  4i  in  re  Cornwell,  6  N.  B.  R.  305. 
?.-Githens  v.  Shiffler,  112  F.  R.  F.  C.  3250. 

505,  7  A.  B.  R.   453.  42  Winter  v.   I.  M.  &  N.  P.   Ry. 

38  Fox  V.  Eckstein,  4  N.  B.  R.  Co.,  7  N.  B.  R.  289,  2  Dill.  287,  F.  C. 
123,  F.  C.  5009.  17390. 

39  Beers  v.  Hanlin.  99  F.  R.  695;  ^:'-  Young  v.  Upson,  8  A.  B.  R.  377. 


Ch.  3  ACTS    OF    BANKRUPTCY— CONVEYANCES.  55 

i72. Conveyances  of  partnership  property.— xV  trans- 
fer of  tinn  pi-opcrty  from  one  member  to  another  is  not 
ordmarily  a  fraud  on  creditors,  nor  does  it  hinder  or  delay 
them,  nor  constitute  a  fraudulent  preference,  and  is  not  an 
act  of  bankruptcy,^^  but  if  made  to  enable  the  individual 
creditors  of  the  transferee  to  secure  a  preference,  it  is.*^  Nor 
does  it  constitute  an  act  of  bankruptcy  to  transfer  the  whole 
stock  of  a  dissolved  partnership  to  the  one  solvent  partner  to 
settle  the  affairs,  even  though  a  sale  is  made  by  such  partner 
in  gross.^*^ 

§  73. Conveyances  to  relatives.— A  voluntary  convey- 
ance made  by  a  person  not  indebted  at  the  time,  in  favor  of 
his  wife  or  children,  cannot  be  impeached  by  subsequent  cred- 
itors on  the  ground  of  its  being  voluntary ;  but  must  be  shown 
to  be  fraudulent  or  made  with  a  view  to  future  debts  ;^"  but  it 
will  be  fraudulent  as  to  creditors  and  an  act  of  bankruptcy 
if  the  grantor  be  indebted  at  the  time  to  such  extent  that  the 
settlement  will  embarrass  him  in  the  payment  of  his  debts, 
although  the  debts  due  may  be  subsequently  paid  in  the 
course  of  business.^^  A  conveyance  by  a  father  to  his  son  in 
consideration  of  support  by  the  son,  has  been  held  to  be 
fraudulent  as  to  creditors  and  an  act  of  bankruptcy;*-'  so  is 
any  transfer  on  the  part  of  an  insolvent,  to  a  relative,  which 
results  in  a  concealment  of  assets  or  a  fraud  on  the  creditors  ;^** 
or  where  an  insolvent  father  lends  money  to  his  son,  who  makes 
a  gift  of  the  amount  of  the  loan  to  his  mother  by  purchasing 
a  house  in  her  name  ;^^  or  the  transfer  of  property  to  a  relative 
in  payment  of  an  antecedent  debt.^^ 

§74. Chattel    mortgages.— The    giving  of  a  chattel 

mortgage  is  a  disposition  of  property  out  of  the  usual  course 
of  business,^^  and  when  given  by  an  insolvent  upon  all  his 
personal  property,  authorizing  the  mortgagee  to  sell  the  same 

44  In  re  Munn,  7  N.  B.  R.   468.  49  In  re  Johann,  4  N.  B.  R.  143, 

3  Biss.  442,  F.  C.  9925.  F.  C.  7331. 

4s  Collins  V.  Hood,  4  McLean  186.  >o  in  re  Rathbone,  2  N.  B.  R.  89, 

46  In  re  Weaver.  9  N.  B.  R.  132,  3  Ben.  50,  F.  C.  11581. 

F.  C.  17307.  51  In  re  Eldred.  3  N.  B.  R.  61,  F. 

47  Barker  v.  Smith.  12  N.  B.  R.     C.  4328. 

474.  2  Woods  87.  32  in  re  Grant.  106  F.  R.  496,  5 

48Antrines  v.  Kelly,  4  N.  B.  R.     A.  B.  R.  837. 
189.  53  u.  S.  V.  Bayer,  13  N.  B.  R.  88. 

F.  C.  14548. 


56  THE    NATIONAL    BANKRUPTCY    LAW.  (']L  o 

at  private  sale,  it  creates  a  preference  and  is  an  act  of  bank- 
ruptcy."^ AYhen  given  on  bankrupt's  stock  of  goods  to  secure 
an  alleged  debt,  the  purpose  being  to  hinder,  delay,  or  defraud 
the  creditors,  it  is  an  act  of  bankruptcy  ;•''■''  as  is  a  chattel 
mortgage  which  permits  the  mortgagor  to  dispose  of  the  goods 
in  due  course  of  trade,  without  reference  to  the  good  faith 
of  the  mortgage  debt,  or  the  intention  of  the  mortgagor  as  to 
fraud  f^  or  where  one  gives  a  bill  of  sale  of  personalty  in 
which  there  is  no  change  in  the  possession  of  the  property, 
the  first  owner  taking  back  a  writing  in  the  nature  of  a 
lease.^^  The  giving  of  a  chattel  mortgage  for  a  present  bona 
fide  consideration  is  not  forbidden  by  the  law  nor  is  it  an  act 
of  bankruptcy. 

§  75. Mortgages.— A  debtor  may  give  a  mortgage  for 

a  present  consideration  to  enable  him  to  carry  on  his  business, 
if  there  is  no  intent  to  delay  ereditors,^^  and  the  sale  of  a 
mortgage  for  its  cash  value  is  a  transfer  in  the  usual  and 
ordinary  course  of  business  and  not  an  act  of  bankruptcy/'^ 
The  giving  by  a  debtor  knowing  himself  to  be  insolvent  of  a 
mortgage  or  deed  of  trust  to  secure  a  creditor  on  a  pre- 
existing debt,  is  a  preference,  and  therefore  an  act  of  bank- 
ruptcy, irrespective  of  whether  the  creditor  knew  or  had 
reasonable  ground  to  believe  that  a  preference  was  intended.*'*^ 

§  76. Pledge. — It  is  not  a  fraud   upon    creditors   and 

therefore  not  an  act  of  bankruptcy  for  a  debtor  to  receive 
collateral  from  his  pledgee  for  collection,''^  nor  to  pledge  one's 
property  for  a  present  fair  consideration,  when  the  purpose 
is  not  to  hinder,  delay  or  defraud  creditors. 

§77. Sales. — The  law  does  not  contemplate  that  all 

sales  or  transfers  of  goods  by  an  insolvent  shall  constitute 
preferences  and  therefore  be  deemed  acts  of  bankruptcy,  but 


•"<  The   Griffin   Pants  Factory  v,  •■'*  In  re  Sanford,  7  N.  B.  R.  352, 

Nelms  Racket  Store  Co.,  2  N.  B.  N.  F.  C.  12310. 

R.  630.  ■■!'  Judson    v.   Kelty,    6   N.    B.    R. 

65  In  re  McKibben,  12  N.   B.  R.  165,  5  Ben.  348,  F.  C.  7567. 

97,  F.  C.  3859.  '">  In  re  Ed.  W.  Wright  Lumber 

■"'6  In  re  Foster,  18  N.  B.  R.  64.  Co.,  114  F.  R.  1011,  8  A.  B.  R.  345. 

F    C.  4964.  ''>i  Clark    v.    Iselin,    11    N.    B.    R. 

f.7  In  re  Gurney,  15  N.  B.  R.  373,  337,   21  Wall.  360. 
7  Biss.  414,  F.  C.  5873. 


Cji.oacts  of  bankruptcy— mortgage— pledge— sale.    5r 

only  such  as  are  made  within  four  months  of  the  filing-  of  the 
petition,  with  the  ulterior  purpose  of  hindering,  delaying,  or 
defrauding  some  or  all  of  his  creditors,  or  while  insolvent 
making  a  transfer  to  a  creditor  with  the  intent  to  prefer  such 
creditor.  Although  a  sale  is  made  in  contemplation  of  bank- 
ruptcy, it  is  not  prima  facie  fraudulent,  and  an  act  of  bank- 
ruptcy, unless  surrounded  by  unusual  circumstances,  and  is 
not  then  void  as  to  purchasers  in  good  faith,*^-  since  the  law 
does  not  forbid  an  insolvent  from  selling,  exchanging  or 
otherwise  disposing  of  his  property  at  any  time  prior  to  the 
filing  of  the  petition,  provided  such  action  leaves  his  estate  in 
as  good  condition  as  fonnerly/'^  x  merchant  in  embarrassed 
circumstances  may  sell  his  goods  at  less  than  cost  price  to 
raise  money  to  pay  debts,  the  purchaser  knowing  of  his  in- 
solvency;^^ or  he  may  continue  to  sell  his  stock  at  retail 
while  endeavoring  to  compromise  with  his  creditors,  in  the 
absence  of  a  fraudulent  intent;*'^  or  raise  money  to  defray 
expenses  in  contemplated  bankruptcy  proceedings,  provided 
he  does  not  sell  at  a  sacrifice  and  the  sum  raised  is  reason- 
able f'  or  he  may  exchange  goods  covered  by  a  warehouse 
receipt  in  a  warehouse  for  others  of  less  or  equal  value.^'^  An 
adjudication  will  not  be  made  where  debtor  sells  his  stock  for 
the  purpose  of  going  into  a  new  business,  although  to  prevent 
seizure  of  the  proceeds  on  state  process,  he  does  not  put  them 
into  tangible  shape,*'^  there  being  no  evidence  of  vendor's 
insolvency.^^ 

A  sale  will  be  held  to  be  an  act  of  bankruptcy  where  the 
purpose  is  to  hinder,  delay  or  defraud  the  creditors,  as  where 
household  furniture  in  a  dwelling  inhabited  by  the  owner  and 
another  person  is  transferred  to  such  other  person  by  a  bill 
of  sale  without  any  other  circumstances  to  indicate  the  actual 

fi2  In   re   Hunt,   2   N.   B.   R.   166.  <'>'•  In  re  Munger  v.  Champlin,  4 

F.  C.  6881.  N.  B.  R.  90,  F.  C.  9923. 

'-!  Cook  V.  Tullis,  9  N.  B.  R.  433,  go  in  re  Keefer,  4  N.  B.  R.  126, 

18   Wall.   332;    Clark  v.   Iselin,   11  F.  C.  7636. 

N.   B.   R.   337,   21   Wall.   360.     See  ei  Sharp     v.     Phila.     Warehouse 

Githens  v.  Shiffler,  112  F.  R.  505,  Co.,  19  N.  B.  R.  378. 

7  A.  B.  R.  453.  68  Fox   v.    Eckstein,    4    N.   B.    R. 

G4  Sedgwick  v.  Lynch,  8  N.  B.  R.  123,  F.  C.  5009. 

289,   F.  C.   12615.  eo  In  re  Valliquette,   4  N.  B.  R. 

92,  F.  C.  16823. 


58  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  3 

possession  ;'^'^  or  a  sale  by  an  insolvent  of  his  stock  with  intent 
to  prefer  some  of  his  creditors;"^  or  a  conveyance,  absolute  on 
its  face,  in  which  the  grantor  secretly  reserves  the  right  to 
retain  possession  for  a  limited  period,  under  a  parol  agree- 
ment, as  part  of  the  consideration;"-  or  a  sale  of  a  stock  of 
goods  in  gross,  out  of  the  usual  and  ordinary  course  of  busi- 
ness of  a  retail  dealer  ;"3  or  a  sale  shortly  before  bankruptcy 
where  vendor  and  vendee  conspired  to  defraud  creditors;"^ 
or  a  sale  of  an  entire  stock  below  cost,  the  purchaser  selling 
it  at  an  advance  and  the  last  purchaser  being  informed  at  the 
time  of  the  circumstances  of  the  first  purchase  ;^^  or  where  a 
purchaser  of  goods  assumes  debts  of  the  vendor  as  part  con- 
sideration, and  sells  the  goods  leaving  the  debts  unpaid, 
which  the  vendor  is  obliged  to  discharge,  commits  an  act  of 
bankruptcy,  and  is  liable  to  the  vendor  for  the  amount  of 
such  debts."*^ 

§78. Legal   proceedings.— Where   an   insolvent   suffers 

or  permits  any  creditor  to  obtain  a  preference  through  legal 
proceedings  and  does  not  at  least  five  days  before  a  sale  or 
final  disposition  of  any  property  affected  thereby,  vacate  or 
discharge  such  preference,  he  will  be  deemed  to  have  com- 
mitted an  act  of  bankruptcy.  The  words  "before  a  sale,"  as 
here  used,  means  "before  the  time  fixed  for  sale."  The  es- 
sential elements  of  this  act  of  bankruptcy  are  first,  insolvency, 
second,  a  judgment,  levy  and  threatened  sale  thereunder,  not 
more  than  five  days  distant,  and,  third,  that  such  a  sale  would 
effect  a  preference.  It  is  immaterial  that  the  debt  on  which 
the  judgment  rests  is  valid,  due  at  the  time  the  action  was 
commenced  and  that  the  judgment  was  entered  and  levy  made 
without  any  collusion  between  the  bankrupt  and  the  creditor, 
or  without  the  former  having  intended  to  give  a  preference, 
the  effect  of  the  act  rather  than  the  intent  of  the  parties 

70  Allen  V.  Massey,  4  N.  B.  R.  75,  "+  Dickinson  v.  Adams,  17  N.  B. 
F.  C.  231.  R.  380,  4  Sawy.  257,  F.  C.  3896. 

71  In  re  Morgan,  101  F.  R.  982,  2  ^r.  Walbrim  v.  Babbitt,  9  N.  B.  R. 
N.  B.  N.  R.  846,  4  A.  B.  R.  402.  1,  16  Wall.  577. 

72  Luklns  V.  Aird,  2  N.  B.  R.  2,  7o  Phelps  v.  Clasen,   3   N.   B.  R. 
24  Wall.  78.  22,  F.  C.  11074. 

73  In  re  Deane  &  Garret,  2  N.  B. 
R.  29,  F.  C.  3700. 


Ch.  3     ACTS    OF    BANKRUPTCY— LEGAL    PROCEEDINGS.  59 

■beinjjf  rejrartUHl,  insolvency  being  culniitted."^  This  provision 
is  limited  to  sneli  acts  as  by  constrnction  of  law  and  in  view 
of  the  bankruptcy  law  work  an  injury  to  other  creditors  by 
securing  to  them  a  preference  which  the  law  is  designed  to 
prevent.  This  would  not  apply  therefore  to  such  levies  and 
iiens  as  are  acquired  long  before  the  passage  of  the  act  and 
more  than  four  months  prior  to  the  petition,  which,  it  is  not 
the  purpose  of  the  law  to  aifect  or  disallow."^*^ 

The  failure  of  an  insolvent  to  discharge  an  attachment 
levied  by  a  creditor  five  days  before  the  day  of  sale  there- 
under, although  he  may  not  actively  procure  or  participate 
in  the  bringing  of  the  attachment  suit/^  or  the  sale  under  a 
judgment  execution,  is  an  act  of  bankruptcy  ;^^  this  is  also 
true  of  a  corporation,  although  it  cannot  file  a  petition  in 
voluntary  bankruptcy.^^  The  creditors  need  not  wait  until 
an  actual  levy  is  made  before  filing  a  petition,  but  if  money 
is  paid  by  the  bankrupt  or  another  by  his  direction,  or  other 
property  is  transferred  to  the  sheriff  holding  an  execution 
its  application  on  the  execution  completes  the  preference.^- 
Nor  need  they  wait  until  a  sale  has  taken  place,  but  if  five  days 
before  the  day  advertised  the  debtor  has  not  discharged  the 
preference,  they  may  file  a  petition  against  him.^^ 

Where  a  debtor,  while  solvent,  gives  judgment  notes  or  a 
warrant  of  attorney  and  subsequently  when  he  has  become 
insolvent,  judgment  is  entered  and  execution  is  levied  pur- 
suant thereto,  the  debtor  commits  an  act  of  bankruptcy,  since 
the  preference  complained  of  is  obtained  by  issuing  the 
execution   and   the   subsequent  sale,   and  not  by   giving  the 


"Wilson  Bros.  v.  Nelson,  183  U.  F.  R.  793;   s.  c.  1  N.  B.  N.  532,  2 

S.,    191,    7    A.    B.     R.     142;     In    re  A.  B.  R.  188,  93  F.  R.  953,  89  F.  R. 

Meyers,  1  N.  B.  N.  207.  1  A.  B.  R.  691. 

1;    Wilson  v.   Bank,   17   Wall.   473.  ><«  In   re  Moyer,  93  F.  R.  188,  ] 

distinguished  and   held   no  longer  N.  B.  N.  260,  1  A.  B.  R.  577;  In  re 

controlling.     See  In  re  Bamberger,  Whalen,  1  N.  B.  N.  228. 

2  N.  B.  N.  R.  95.  si  Parmenter    Mfg.    Co.    v.    Stoe- 

■s  In  re  Ferguson,  95  F.  R.  429,  ver,  2  N.  B.  N.  R.  174,  3  A.  B.  R. 

2  A.  B.  R.  586.  220,  97  F.  R.  330;  In  re  Storm,  103 

-^  In  re  Reichman,  1  N.  B.  N.  556,  F.  R.  618,  4  A.  B.  R.  601. 

1  A.  B.  R.  17,  91  F.  R.  624;   In  re  S2  in  re  Miller,  104  F.  R.  764,  5 

Ferguson,  95  F.  R.  429,  2  A.  B.  R.  A.  B.  R.  140. 

586;     In  re  Francis-Valentine  Co.,  S3  in  re  Rome  Planing  Mill  Co., 
1  N.  B.  N.  529,  2  A.  B.  R.  523,  94 


60  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  3 

judgniout  notes.^^  The  entry  of  judgment  on  a  warrant  of 
attorney,  or  otherwise,  there  being  no  actual  execution  there- 
on or  sale  thereunder,  would  possibly  not  constitute  an  act  of 
bankruptcy**^  under  the  third  subdivision  of  the  law,  but 
would  constitute  acts  of  bankruptcy  either  as  an  illegal  prefer- 
ence on  the  part  of  the  insolvent,  or  as  hindering  and  delay- 
ing other  creditors  ;^^  or  if  the  property  is  actually  taken, 
though  there  be  no  sale,  it  would  come  within  the  spirit  of 
subdivision  3  of  the  law,^^'  as  would  also  be  the  case  where 
money  due  the  bankrupt  is  turned  over  to  the  sheriff  by  the 
party  from  whom  it  is  due  to  be  applied  on  the  execution 
although  there  is  no  actual  levy  or  sale.***^  The  same  is  true 
where  executions  on  confessed  judgments  were  levied  but 
subsequently  at  the  instance  of  creditors'  attorney  withdrawn 
to  await  further  orders,  and  a  year  later  but  within  four 
months  of  the  bankruptcy  proceedings  other  executions  on  the 
same  judgments  were  levied  on  the  same  property,  the  first 
judgments  were  held  to  be  dormant  and  only  the  lien  under 
the  latter  executions  was  valid,  which,  not  having  been  dis- 
charged within  five  days  before  sale,  was  an  act  of  bank- 
ruptcy.^^ 

This  provision  does  not  apply  to  a  judgment  for  the  fore- 
closure of  a  lien  in  the  nature  of  a  mortgage  to  secure  a  note, 
and  a  levy  on  the  land  conveyed,  where  the  note  and  mortgage 
Avere  given  before  the  enactment  of  the  bankruptcy  law  and 
for  a  valid  debt,  although  a  creditor  may  recover  a  general 
judgment  as  well  as  the  judgment  of  foreclosure,  yet  if  the 
levy  made  affects  only  the  property  bound  by  the  lien,  the 
debtors'  failure  to  release  such  levy  is  not  an  act  of  bank- 
ruptcy."*^ 

3  A.  B.  R.  123,  96  F.  R.  812;  In  re  tra,   Duncan  v.   Landis,  106  F.  R. 

Elmira   Steel    Co.,    109    F.   K.    456,  839,  5  A.  B.  R.  649. 

5  A.  B.  R.  484.  «■'  In  re  Anderson,  2  N.  B.  N.  R. 

«4  Wilson    V.    Nelson,    183    U.    S.  1000. 
191,  7  A.  B.  R.   142;    reversing  98         ><g  Scheuer  v.  Smith  &  Montgom- 

F.  R.  76:  1  N.  B.  N.  567,  1  A.  B.  R-  ery  Book  &  Stationery  Co.,  112  F. 

63;    In   re  Moyer,  93  F.  R.  188,  1  R.  407,  7  A.  B.  R.  384. 
N.  B.  N.  260,   1  A.   B.  R.  577;    In         «7  In  re  Harper,   105   F.  R    900, 

re  Thomas,  103  F.  R.  272,  2  N.  B.  5  A.  B.  R.  567. 
N.  R.  1021,  4  A.  B.  R.  571;    In  re         f<«  In  re  Miller,  5  A.  B.  R.  140. 
Reichman,'91  F  R.  624,  1  A.  B.  R.         ^^  In  re  Ferguson,  95  F.  R.  429,  2 

17;    In   re  American  Brewing  Co.,  A.  B.  R.  586. 

112  F.  R.  752,  7  A.  B.  R.  463;  con-         no  in  re  Chapman,  99  F.  R.  395,  3 

A.  B.  R.  607. 


Ch.  o         acts  of  bankruptcy— receivership.  61 

§79. Inability  to  defeat.— Preference.— The  dominant 

fact  in  this  provision  of  tlie  law  is  the  actual  result  that  has 
been  attained  by  the  creditor.  If  through  legal  proceed- 
ings he  has  succeeded  in  obtaining  a  preference  the 
debtor  is  required  to  vacate  or  discharge  it  within 
the  specified  time,  and  if  he  fails  so  to  do  he  com- 
mits an  act  of  bankruptcy.  How  he  is  to  vacate  or 
discharge  a  preference  is  not  specified,  but  whatever  the 
nature  of  the  legal  proceedings  employed  by  the  creditor  may 
be,  if  the  result  thereof  gives  such  creditor  a  preference  over 
others,  it  must  be  discharged  by  the  debtor  within  the  time 
alloted.  It  has  been  held  that  if  he  has  a  defense  to  the 
debt  he  must  set  it  up ;  or,  if  he  can  overthrow  the  preference 
because  of  defects  in  creditors'  procedure  he  should  pursue 
that  method,  and  if  neither  of  these  weapons  is  available  he 
may  file  his  petition  in  voluntary  bankruptcy.  His  failure  to 
move  may  be  regarded  as  a  confession  that  he  is  hopelessly 
insolvent  and  is  conclusive  proof  that  he  consents  to  the 
preference  that  he  declines  to  strike  down.^^ 

§80. Receiver  or  Trusteeship.— The  appointment  of  a 

receiver  or  trustee  to  take  charge  of  one's  property,  whether 
voluntarily  and  at  the  instance  of  the  insolvent,  or  involun- 
tarily and  at  the  instance  of  others,  constitutes  an  act  of 
bankruptcy,  but  in  either  case  the  insolvency  of  the  debtor  is 
a  prerequisite.  In  the  case  of  a  party  who  is  solvent,  such 
appointment  would  not  be  an  act  of  bankruptcy  under  the 
fourth  subdivision  of  section  3(a)  of  the  law,  but  might  be 
held  to  be  a  transfer  with  intent  to  hinder,  delay  or  defraud 
creditors  through  the  substitution  of  the  procedure  of  the 
state  court  for  the  more  expeditious  and  economic  method  pro- 
vided by  the  bankruptcy  law,'^^  or  result  in  a  preference 
through  the  payment  on  certain  claims  entitled  to  priority 
under  the  state  law,  an  amount  greater  than  would  be  allowed 
under  the  bankruptcy  law.'^^     Under  that  provision  of  the  act 

91  In  re  Moyer,  1  N.  B.  N.  260,  A.  B.  R.  804 ;  In  re  Henry  Zeltner 
1  A.  B.  R.  577,  93  F.  R.  188 ;  In  re  Brewing  Co.,  117  F.  R.  799,  9  A. 
Reichman,  91  F.  R.  624,  1  N.  B.  N.  B.  R.  63;  contra  In  re  Burrell  et 
556,  1  A.  B.  R.  17.  al.,  9  A.  B.  R.  178. 

92  See    In    re    Metallic    Bedstead  9,3  See  Mather  v.  Coe,  1  N.  B.  N. 
Co.,  supra;   In  re  Harper  Bros..  2  554,  92  F.  R.  333,  1  A.  B.  R.  504. 
N.  B.  N.  R.  605,  100  F.  R.  266,  3 


62  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  3 

of  1867  which  provided  that  to  "procure  or  suffer  his  prop- 
erty to  be  taken  on  legal  process  with  intent  to  defeat  or  delay 
the  operation  of  this  act"  the  procurement  of  a  receivership 
was  held  to  be  an  act  of  bankruptcy.^^  In  the  absence  of  an 
equivalent  provision  under  the  act  of  1898,  it  was  held  that 
the  failure  to  resist  a  bill  for  receivership  was  neither  a  con- 
veyance, transfer,  concealment  or  removal  of  property  by  the 
respondent,  and  if  it  should  be  held  to  be  a  transfer,  it  was  a 
transfer  permitted  rather  than  made,  on  failing  to  oppose  the 
bill  therefor,  which  was  not  forbidden;  nor  was  it  a  general 
assignment  for  the  benefit  of  creditors,"^  nor  such  an  admis- 
sion as  would  bring  it  within  the  purview  of  subdivision  5  of 
this  section,  although  it  might  be  the  unanimous  and  voluntary 
act  of  the  members  of  the  corporation.^^  Although  a  corpo- 
ration has  been  dissolved  and  a  receiver  appointed,  it  might 
nevertheless  be  adjudged  bankrupt  if  the  petition  is  filed 
within  four  months  after  the  act  of  bankruptcy.''" 

§  81. Intent— allegation  and  proof.— In  the  first  and 

second  acts  of  bankruptcy  set  forth  in  the  law,  an  intent  on 
the  part  of  the  bankrupt,  either  to  hinder,  delay  or  defraud 
his  creditors,  or  to  prefer  over  other  creditors,  is  necessary  to 
constitute  the  act  of  bankruptcy.^^  The  petition  must  allege 
issuable  facts  with  reasonable  and  sufficient  certainty,  as  it  is 
not  sufficient  to  allege  merely  that  the  debtor  had,  within  four 
months  last  past,  paid  or  transferred,  while  insolvent,  large 
amounts  and  values  of  his  property  to  creditors  without 
averring  that  it  was  done  with  intent  to  prefer  them  over 
other  creditors."^  The  rule  is  that  the  specific  fact  relied  on 
as  an  act  of  bankruptcy  should  be  alleged  with  time,  place, 
person  and  circumstances,^  but  where  it  is  a  case  of  fraudu- 

»■!  Sec.  39,  act  of  1898;  In  re  Bin-  oo  In    re    Baker   Ricketson    Co., 

inger,   F.  C.   1420.  supra. 

!»5  In    re    Baker-Ricketson  Co.,  2  »'  In  re  Storck  Lumber  Co.,  114 

N.  B.  N.  R.  133,  97  F.  R.  489,  4  A.  F.  R.  360,  8  A.   B.  R.  86. 

E.   R.   605;    Empire   Metallic  Bed-  u-^  Wilson   v.   Nelson,   183    U.    S. 

stead  Co.,  2  N.  B.  N.  R.  304,  98  F.  191,   7  A.   B.  R.  142;    but  see  The 

R.  981;  Vaccaro  v.  Bk.,  2  N.  B.  N.  Griffin  Pants  Factory  v.  The  Nelms 

R.  1037,  103  F.  R.  436.  4  A.  B.  R.  Racket   Store  Co.,   2    N.   B.    N.   R. 

474;    Davis  v.    Stevens,   104   F.   R.  630;   Johnson  v.  Wald,  2  A.  B.  R. 

235;   In  re  Henry  Zeltner  Brewing  84,  93  F.  R.  640. 

Co.,  supra;  In  re  Gilbert,  112  F.  R.  ^'■>  In  re  Ewing,  115  F.  R.  707. 

951,  8  A.  B.  R.  101.  1  In   re    Nelson,    98    F.    R.    76,   1 

N.  B.  N.  567,  1  A.  B.  R.  63. 


Cll.  3  ACTS    OF    BANKRUPTCY— INTENT— PROOF.  63 

lent  concealment,  and  the  evidence  is  wholly  circumstantial,  it 
is  impossible  and  unreasonable,  and  therefore  unnecessary,  to 
aver  in  the  petition  the  precise  details  of  the  act  of  conceal- 
ment.- Where  on  a  hearing  before  a  referee  on  the  issues 
joined  on  a  petition  in  involuntary  bankruptcy  the  testimony 
of  the  alleged  bankrupts  discloses  an  additional  act  of  bank- 
ruptcy, not  specified  in  the  petition,  an  ajiiendment  may  be 
permitted  to  include  such  act,^  if  four  months  have  not  elapsed 
since  the  commission  of  such  act. 

The  petitioner  in  an  involuntary  proceeding  which  alleges 
that  the  debtor  transferred,  while  insolvent,  a  portion  of  his 
property  to  one  or  more  of  his  creditors  with  intent  to  prefer 
such  creditor,  has  the  burden  of  proving  the  insolvency  of  the 
debtor  as  well  as  the  intent  to  create  the  preference.  The 
intent  sufficiently  appears  from  the  insolvency  and  the  prefer- 
ence, if  no  attempt  is  made  by  the  defendant  to  show  an 
absence  of  intent,  but  he  has  a  right  to  show  such  absence  by 
reason  of  his  entire  ignorance  of  insolvency  and  a  reasonable 
expectation  of  ability  to  pay  his  debts.'* 

Upon  an  involuntary  petition,  alleging  as  an  act  of  bank- 
ruptcy, that  the  debtor  has  transferred  property  with  intent 
to  give  a  preference,  or  that  he  has  suffered  or  permitted  a 
preference  to  be  obtained  through  legal  proceedings  and  has 
not  within  five  days  of  the  final  disposition  of  the  affected 
property  vacated  such  preference,  the  petitioning  creditors 
nuist  assume  the  burden  of  proving,  in  the  former  case,  the 
transfer,  the  debtor's  intent  to  prefer  a  creditor — the  cred- 
itor's intent  in  receiving  it,  or  that  he  had  reasonable  cause 
to  believe  a  preference  was  intended  being  immaterial— and 
the  debtor's  insolvency  at  the  date  of  transfer,  and,  in  the 
latter  case,  that  a  preference  was  obtained  by  a  creditor 
through  legal  proceedings,  by  which  are  meant  any  proceed- 
ing in  a  court  of  justice,  interlocutory  or  final,  resulting  in 
the  seizure  of  the  debtor's  property  and  its  diversion  from 
his  general  creditors,  that  the  debtor  suffered  or  permitted 
the  preference,  which  does  not  require  any  affirmative  act  on 
the   debtor's  part  but  that  he  remain  passive,   and  did  not 

2  In  re  Bellah,  116  F.  R.  69.  8  Wall.  584;  see  Toof  v.  Martin,  13 
A.  B.  R.  310.  Wall.   40;    Parsons   v.   Topliff,   119 

3  In  re  Miller,  104  F.  R.  764.  Mass.   243,  249;    In  re  Gilbert,  112 

4  In   re   Bloch,   109   F.   R.   790.   G  F.  R.  951,  8  A.  B.  R.  101. 
A.   B.   R.   300;    Wager  v.   Hall,   1<> 


Gi 


THE    NATIONAL    BANKRUPTCY    LAW, 


Ch.3 


vacate  or  discharge  it  at  least  five  days  before  the  sale  or 
final  disposition  of  the  property  affected,  and  that  he  was  in- 
solvent at  the  time  the  preference  was  obtained,  it  not  being 
sufficient  that  he  was  insolvent  when  the  petition  was  filed. 
If  the  debtor  fails  to  produce  his  books  and  papers  and 
submit  to  an  examination,  he  incurs  the  obligation  of  proving 
his  own  solvency  and  the  creditors  are  relieved  of  the  burden 
of  proving  his  insolvency.^ 


5  In  re  Rome  Planing  Mill  Co., 
3  A.  B.  R.  123,  96  F.  R.  812. 

Intent  Necessary  Under  the 
Act  of  1867. — That  act  provided 
that  a  person  should  be  deemed 
to  have  committed  an  act  of  bank- 
ruptcy who  had  "procured  or  suf- 
fered his  property  to  be  taken  on 
legal  process,  with  intent  to  give  a 
preference  to  one  or  more  of  his 
creditors,"  thus  making  the  "in- 
tent" an  essential  element.  The 
act  of  1898  provides  that  the  act  of 
bankruptcy  shall  consist  in  his 
having  "suffered  or  permitted, 
while  insolvent,  any  creditor  to  ob- 
tain a  preference  through  legal 
proceedings,  and  not  having  at 
least  five  days  before  a  sale  or  final 
disposition  of  any  property  af- 
fected by  such  preference  vacated 
or  discharged  such  preference," 
making  the  effect  of  the  act  with- 
out regard  to  the  intention  of  the 
parties  the  test.  Hence  the  de- 
cisions under  the  act  of  1867  are 
not  controlling  nor  even  very  val- 
uable under  the  present  act; 
though  some  (In  re  Black,  1  N.  B. 
R.  81,  2  Ben.  196,  Fed.  Cas.  1457; 
In  re  Wells,  3  N.  B.  R.  95,  Fed.  Cas. 
17388;  Warren  v.  Bk.,  7  N.  B.  R. 
481,  10  Blatch.  493,  Fed.  Cas.  17202, 
96  U.  S.  539;  Wilson  v.  Bk.,  5  N. 
B.  R.  270,  17  Wall.  473;  In  re  Craft, 
1  N.  B.  R.  89,  2  Ben.  214,  Fed.  Cas. 
3316 ;  Vogel  V.  Lathrop,  4  N.  B.  R. 
146,  Fed.  Cas.  16985;  Bk.  v.  Camp- 
bell, 6  N.  B.  R.  353.  14  Wall.  87; 


Webb  v.  Sachs,  15  N.  B.  R.  168,  4 
Sawy.  158,  Fed.  Cas.  17325;  In  re 
Dibble,  2  N.  B.  R.  185,  3  Ben.  203, 
Fed.  Cas.  3884;  Haughey  v.  AlDin, 
2  N.  B.  R.  129,  2  Bond  244,  Fed. 
Cas.  6222;  In  re  Leeds,  1  N.  B.  R. 
138,  Fed.  Cas.  8205;  In  re  Woods, 
7  N.  B.  R.  126,  Fed.  Cas.  17990), 
may  be  usefully  consulted,  in  so  far 
as  they  hold  that  the  facts  imply 
intent;  but  others  (Wright  v.  Fil- 
ley,  4  N.  B.  R.  197,  Fed.  Cas.  18077; 
Wilson  V.  Bk.,  9  N.  B.  R.  97,  17 
Wall.  473;  Rankin  v.  Florida  R. 
R.  Co.,  1  N.  B.  R.  196,  Fed.  Cas. 
11567;  Louchheim  Bros.  v.  Henzey, 
18  N.  B.  R.  173;  Bk.  v.  Warren,  17 
N.  B.  R.  75,  96  U.  S.  539;  Shimer 
v.  Ruber,  19  N.  B.  R.  414,  Fed.  Cas. 
12787;  In  re  King,  10  N.  B.  R.  103, 
Fed.  Cas.  7783),  so  far  as  they 
hold  that  mere  passivity  on  the 
debtor's  part  is  not  sufficient,  do 
not  state  the  law  under  the  present 
act,  which  is  just  the  reverse,  that 
passive  non-resistance  to  proceed- 
ings which  will  work  a  preference 
is  sufficient  (In  re  Meyers,  1  N.  B. 
N.  207,  1  Am.  B.  R.  1).  Under  the 
former  act  the  entry  of  a  judgment 
upon  a  warrant  of  attorney  was 
held  to  constitute  an  act  of  bank- 
ruptcy where  the  creditors  had 
reasonable  cause  to  believe  the 
debtor  insolvent,  even  though  at 
the  time  of  the  execution  of  the 
bond  there  was  no  reason  to  so 
believe  (In  re  Lord,  5  N.  B.  R. 
318,   Fed.   Cas.   8503);    and,   where 


Cu.  3 


GENERAL    ASSIGNMENTS. 


65 


§  82. General  assignment  for  the  benefit  of  creditors.— 

A  general  assignment  for  the  benefit  of  creditors  is  an  act  of 
bankruptcy,  although  made  without  preferences,  without 
actually  intending  to  defraud  creditors,  and  without  insolv- 
ency.^ It  is  not  necessary  to  aver  or  prove  that  the  debtor 
was  insolvent  at  the  time  of  the  assignment  or  at  the  time  of 
filing  the  petition,'^  nor  is  it  a  defense  to  deny  the  insolvency 
where  an  assignment  is  the  act  charged.^  Where  one  of  the 
members  of  a  firm,  who  was  insolvent,  as  liquidating  partner, 
makes  a  general  assignment  for  the  benefit  of  creditors,  which 
purported  to  convey  all  the  firm's  property,  the  question  of 
the  validity  of  such  assignment  as  to  the  partners  not  joining 
is  immaterial,  for  the  language  of  the  act  applies  to  any  in- 
strument which  is  or  purports  to  be  a  general  assignment  and 
such  assignment  is  an  act  of  bankruptcy  by  the  firm  and  the 
executing  partner,  but  not  of  the  other  partner,  though  he 
knew  of  and  made  no  attempt  to  prevent  such  assignment;^ 
and  if  made  by  the  partnership  and  the  individuals  composing 


a  debtor  had  committed  no  act  of 
bankruptcy  and  would  not  volun- 
tarily petition,  a  creditor  might 
sue  him  so  as  to  force  him  to  com- 
mit an  act  of  bankruptcy  and  then 
himself  proceed  against  him  in  in- 
voluntary bankruptcy  (Warren  v. 
Bk.,  7  N.  B.  R.  481,  10  Blatch. 
493,  Fed.  Cas.  17202;  Coxe  v.  Hale, 

8  N.  B.  R.  562,  Fed.  Cas.  3310); 
but  the  confession  of  a  judgment 
as  security  for  a  loan  of  mony 
made  cotemporaneously  with  such 
confession  was  held  not  to  be  an 
act  of  bankruptcy  (Clark  v.  Iselin, 

9  N.  B.  R.  19,  10  Blatch.  204,  Fed. 
Cas.  2825 ;  In  re  Leeds,  1  N.  B.  R. 
138,  Fed.  Cas.  8205). 

6  In   re  Meyer,   98   F.   R.   976,   3 

A.  B.  R.  559;    In  re  Sievers,  1  N. 

B.  N.  68,  1  A.  B.  R.  117,  91  F.  R. 
366;  s.  c.  as  Davis  v.  Bohle,  1  N. 
B.  N.  216,  1  A.  B.  R.  412,  92  F.  R. 
325;  Lea  Bros.  v.  Geo.  M.  West 
Co.,  1  N.  B.  N.  79,  1  A.  B.  R.  261, 
91  F.  R.  237;  s.  c.  1  N.  B.  N.  409, 


2  A.  B.  R.  463,  174  U.  S.  590;  Lei- 
digh  Car  Co.  v.  Stengel,  1  N.  B.  N. 
387,  2  A.  B.  R.  383,  95  F.  R.  637; 
In  re  Gutwillig,  1  N.  B.  N.  40,  1 

A.  B.  R.  8,  90  F.  R.  475,  s.  c.  1  N.  B. 
N.  554,  1  A.  B.  R.  388,  92  F.  R.  337; 
In  re  Simonson,  Whiteson  &  Co., 
1  N.  B.  N.  230,  1  A.  B.  R.  197,  92 
F.  R.  904 ;  Bray  v.  Cobb,  1  N.  B.  N. 
209,  1  A.  B.  R.  153,  91  F.  R.  102; 
In  re  Smith,  1  N.  B.  N.  356,  2  A. 

B.  R.  9,  92  F.  R.  135;  In  re  Mercur, 
1  N.  B.  N.  527,  2  A.  B.  R.  626,  95  F. 
R.  634;  Day  v.  Beck  &  Gregg  Hard- 
ware Co.,  114  F.  R.  834;  Green 
River  Deposit  Bank  v.  Craig,  110 
F.  R.  137,  6  A.  B.  R.  381. 

7  Leidigh  Car  Co.  v.  Stengel, 
supra;  Lea  Bros.  v.  Geo.  M.  West 
Co.,  supra;  Simonson  v.  Sinshei- 
mer  et  al.,  100  F.  R.  426,  3  A.  B.  R. 
824. 

8  Lea  Bros.  v.  Geo.  M.  West  Co , 
supra;   Bray  v.  Cobb,  supra. 

9  In  re  Meyer,  1  A.  B.  R.  565,  98 
F.  R.  976. 


66 


THE    NATIONAL    BANKRUPTCY    LAW, 


Ch.  3 


it,  the  act  of  bankruptcy  is  committed  by  ail;^*^  but,  if  one 
of  two  persons  jointly  and  severally  liable  for  a  debt,  who 
are  not  partners,  does  an  act  which  would  subject  him  to 
adjudication  in  bankruptcy,  such  act  does  not  affect  his  asso- 
ciate.^^ The  confession  of  judgment  to  a  trustee  for  the 
benefit  of  all  creditors,  has  been  held  in  Pennsylvania  to  be 
the  equivalent  of  a  general  assignment.^-  An  application  by 
a  corporation  to  a  state  court  for  its  dissolution  and  the 
appointment  of  a  receiver  upon  the  ground  of  its  insolvency 
is  not  equivalent  to  a  general  assignment,  and  hence  is  not 
an  act  of  bankruptcy  upon  that  ground.^^  But  where  the 
officers  of  a  corporation,  acting  under  authority  of  a  resolu- 
tion of  the  board  of  directors,  and  in  pursuance  of  a  vote 
taken  at  a  meeting  of  the  stockholders,  though  against  the 
objection  of  a  minority  of  the  stockholders  make  a  general 
assignment,  it  is  an  act  of  bankruptcy  on  which  a  petition 


10  In  re  Green,  106  F.  R.  313,  5 

A.  B.  R.  848. 

11  James  v,  Atlantic  Delaine  Co., 
11  N.  B.  R.  390,  F.  C.  7179. 

12  Green  River  Deposit  Bank  v. 
Craig,  110  F.  R.  137,  6  A.  B.  R.  381. 

13  In  re  Empire  Metallic  Bed- 
stead Co.,  1  N.  B.  N.  386,  2  A.  B.  R. 
329,  2  N.  B.  N.  R.  304,  95  F.  R.  957, 
98  F.  R.  981,  reversing  1  N.  B.  N. 
301;  In  re  Harper  Bros.,  2  N.  B.  N. 
R.  605,  100  F.  R.  266,  3  A.  B.  R. 
804;  In  re  Baker-Ricketson  Co.,  2 
N.  B.  N.  R.  133,  97  F.  R.  489,  4  A. 

B.  R.  605. 

The  making  of  a  general  assign- 
ment for  the  benefit  of  creditors 
being  expressly  made  an  act  of 
bankruptcy  by  the  act  of  1898,  the 
decisions  under  the  act  of  1867, 
which  did  not  contain  this  express 
provision,  are  rendered  useless, 
though,  under  the  provisions  of 
that  act,  such  assignments  vv^ere 
held  acts  of  bankruptcy  as  being 
intended  to  interfere  with  the  op- 
eration of  the  bankrupt  law  (In 
re  Kasson,  18  N.  B.  R.  379.  Fed. 
Cas.  7617 ;  Rowe  v.  Page,  13  N.  B. 


R.  366 ;  In  re  Langley,  1  N.  B.  R. 
155;  In  re  Mandelsohn,  12  N.  B. 
R.  533,  3  Sawy.  342,  Fed.  Cas.  9420; 
Ins.  Co.  V,  Ins.  Co.,  14  N.  B.  R. 
311,  Fed.  Cas.  5486;  McDonald  v. 
Moore,  15  N.  B.  R.  26,  8  Ben.  579, 
Fed.  Cas.  8763;  Piatt  v.  Preston, 
19  N.  B.  R.  241,  Fed.  Cas.  11219, 
5046;  Pool  v.  McDonald,  15  N.  B. 
R.  560.  Fed.  Cas.  11268;  Cragin  v. 
Thompson,  12  N.  B.  R.  81,  2  Dill. 
513,  Fed.  Cas.  3320;  In  re  Smith, 
3  N.  B.  R.  98,  4  Ben.  1,  Fed.  Cas. 
12974;  In  re  Crofts  Bros.,  17  N. 
B.  R.  324,  8  Biss.  188,  Fed.  Cas. 
3404;  Jones  v.  Clifton,  18  N.  B.  R. 
125,  Fed.  Cas.  7453;  In  re  Law- 
rence. 18  N.  B.  R.  516,  Fed.  Cas. 
8133;  Jackson  v.  McCullough,  13 
N.  B.  R.  283,  1  Woods  433,  Fed.  Cas. 
7140;  Contra,  In  re  Hawkins,  2 
N.  B.  R.  122;  Farrin  v.  Crawford. 
2  N.  B.  R.  181,  Fed.  Cas.  4686;  Sedg- 
wick v.  Place,  1  N.  B.  R.  204,  Fed. 
Cas.  12622;  Langley  v.  Perry,  2 
N.  B.  R.  180,  Fed.  Cas.  8067;  In  re 
Marter,  12  N.  B.  R.  185,  Fed.  Cas. 
9143;  In  re  Kimball,  16  N.  B.  R. 
188,  Fed.  Cas.  7770). 


Ch.  3  ACTS    OF    BANKRUPTCY— ADMISSION.  67 

in  iuvoluntary  bankruptcy  against  the  corporation  may  be 
maintained.^  ^ 

Creditors  on  being  made  parties  to  proceedings  in  a  state 
court  under  a  general  assignment  who  do  not  repudiate  the 
assignment,  nor  begin  proceedings  in  bankruptcy,  but  file 
their  claims  and  participate  in  the  administration  of  the 
estate,  suffering  the  assignee  to  sell  property  and  collect  the 
proceeds,  involving  a  delay  of  several  months  and  the  incur- 
ring of  costs  and  expenses,  are  estopped  thereafter  from  filing 
a  petition  in  involuntary  bankruptcy  against  the  assignor, 
based  solely  on  such  assignment,^ ^  though,  if  they  had  merely 
filed  their  claims  and  nothing  had  been  done  to  affect  the 
status  of  any  of  the  parties,  it  has  been  held  that  this  would 
not  be  so.^^  Where  pending  a  proposition  for  compromise, 
the  petitioning  creditors  sold  to  the  assignee  small  bills  of 
goods  to  replenish  the  stock  and  make  it  more  salable,  and 
received  from  him  the  price  thereof,  they  would  not  be 
estopped.^'^ 

§  83. Admitting  in  writing  inability  to  pay  debts  and 

willingness  to  be  adjudged  bankrupt  on  that  ground.— Three 
things  are  essential  to  constitute  this  act  of  bankruptcy :  first, 
it  must  be  written;  second,  it  must  contain  an  admission 
either  expressly  or  of  so  strong  an  implication  as  to  leave  no 
question  of  doubt;  and,  third,  a  willingness  to  be  adjudged 
bankrupt.  The  force  of  such  statement  is  in  no  wise  impaired 
by  setting  forth  the  reasons  for  such  inability.^  ^ 

The  law  requires  no  technical  form  of  proof  of  assent  by  a 
corporation  any  more  than  by  an  individual,  but  only  that 
the  admission  and  consent  be  in  writing.  Such  an  admission 
is  within  the  authority  of  the  directors  of  a  corporation 
charged  with  the  management  of  its  affairs  and  is  not  a  cor- 
porate function  to  be  exercised  only  by  the  whole  body  of 

14  Clark  V.  Mfg.  Co.,  101  F.  R.  A.  B.  R.  461;  but  see  Spicer  v. 
962.  4  A.  B.  R.  351.  Ward,  3  N.  B.  R.  127,  F.  C.  13241. 

15  In  re  Simonson  v.  Sinsheimer,  le  in  re  Curtis,  1  N.  B.  N.  163. 
95  F.  R.  948;  Leidigh  Carriage  Co.  1  A.  B.  R.  440,  91  F.  R.  737,  Id. 
V.  Stengel,  1  N.  B.  N.  387,  95  F.  R.  94,  F.  R.  630. 

637.  2  A.  B.  R.  383;    Massachusetts  i^  Simonson    v.    Sinsheimer,    100 

Briclt   Co.,   5   N.   B.   R.    408,   F.    C  F.  R.  426,  3  A.  B.  R.  824. 

9259;    Perry  v.  Langley,  1  N.  B.  R.  i**  In  re  Kersten,  110  F.  R.  929, 

559,  F.  C.  11006;   In  re  Romanow,  6  A.  B.  R.  516. 

92   F.   R.   510,    1  N.    B.    N.   213,    1 


68  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  3 

corporate  members,  but  a  vote  of  the  majority  of  the  board  of 
directors  will  suffice,  where  the  method  of  voting  is  in 
accordance  with  the  custom  and  not  contrary  to  any  specific 
provision  with  reference  thereto.^^ 

Where  a  resolution  is  unanimously  passed  by  stockholders 
authorizing  one  of  its  officers  to  appear  in  court  in  event  of  a 
petition  being  filed  against  it  and  to  admit  in  writing  its  in- 
ability to  pay  its  debts  and  willingness  to  be  adjudged  a  bank- 
rupt on  that  ground,  it  is  not  an  act  of  bankruptcy  since  it 
is  merely  a  qualified  authority  to  admit,  and,  if  after  such  peti- 
tion has  been  filed,  such  officer  appears  and  makes  the  admis- 
sion, the  petitioner  cannot  avail  himself  of  it  since  it  was  not 
executed  until  after  the  petition  was  filed.-^  A  statement 
signed  by  one  of  two  partners,  which  purports  to  be  made  in 
behalf  of  both  is  undoubtedly  binding  in  case  of  express  au- 
thority, and  the  authority  may  be  presumed  from  acquies- 
cence or  failure  to  disaffirm  when  the  opportunity  for  such 
issue  is  presented.^i 

The  application  in  a  state  court  by  a  corporation  for  its 
dissolution  and  the  appointment  of  a  receiver  of  its  property, 
though  a  written  admission  of  its  inability  to  pay  its  debts, 
does  not  also  amount  to  a  willingness  to  be  adjudged  bank- 
rupt on  that  ground  and  is  not  an  act  of  bankruptcy  ;-2  but 
where  by  the  laws  of  the  state  under  which  the  corporation  is 
formed,  defining  and  limiting  the  power  of  the  officers  and 
directors,  a  written  admission  of  the  corporation's  inability  to 
pay  its  debts  and  willingness  to  be  adjudged  bankrupt  on  that 
ground  is  in  excess  of  their  authority,  such  an  act  does  not 
constitute  an  act  of  bankruptcy,  nor  will  a  subsequent  ratifi- 
cation by  the  stockholders  have  a  retroactive  effect  to  sustain 
the  petition  and  cut  off  the  rights  of  creditors  who  opposed 
the  adjudication.23 

10  In  re  Marine  Machine  &  Con-  N.  B.  N.  R.  133,  97  F.  R.  489,  4  A. 

veyar  Co.,  91  F.  R.  630,  1  A.  B.  R.  B.  R.  605. 

91;    Rollins  Gold  &  Silver  Mining  21  In  re  Kersten,  supra. 

Co.,  102  F.  R.  982,  2  N.  B,  N.  R.  22  in  re  Empire  Bedstead  Co.,  1 

988,  4  A.  B.  R.  327;   In  re  Mutual  N.  B.  N.  386,  2  A.  B.  R.  329,  95  F. 

Mercantile  Agency,  111  F.  R.  152,  R.  957,  2  N.  B.  N.  R.  304,  98  F.  R. 

6  A.   B.  R.   607;    In  re  Kelly  Dry  981,   rev'g  1   N.   B.   N.   301;    In   re 

Goods  Co.,  102  F.  R.  748,  4  A.  B.  R.  Baker-Ricketson  Co.,  supra. 

528;     In  re  Peter  Paul  Book  Co.,  2,'i  in  re  Bates  Mach.  Co.,  1  N.  B. 

104  F.  R.  786,  5  A.  B.  R.  105.  N.  135,  1  A.  B.  R.  129,  91  F.  R.  625. 

20  In  re  Baker  Ricketson  Co.,  2 


Ch.  3  FOUR    MONTHS'    PERIOD.  69 

§84.  'b.  Time  for  filing  petition.— A  petition  may  be  filed 
'against  a  person  who  is  insolvent  and  who  has  committed  an 
'act  of  bankruptcy  within  four  months  after  the  commission 
'of  such  act.  Such  time  shall  not  expire  until  four  months 
'after  (1)  the  date  of  the  recording  or  registering  of  the  trans- 
'fer  or  assignment  when  the  act  consists  in  having  made  a 
'transfer  of  any  of  his  property  with  intent  to  hinder,  delay, 
'or  defraud  his  creditors  or  for  the  purpose  of  giving  a  prefer- 
*ence  as  hereinbefore  provided,  or  a  general  assignment  for 
'the  benefit  of  his  creditors,  if  by  law  such  recording  or  regis- 
'tering  is  required  or  permitted,  or,  if  it  is  not,  from  the  date 
'when  the  beneficiary  takes  notorious,  exclusive,  or  continuous 
'possession  of  the  property  unless  the  petitioning  creditors 
'have  received  actual  notice  of  such  transfer  or  assignment.'-^ 

§85.  Four  Months'  Period.— The  purpose  of  this  section 
is  to  remove  all  incentive  to  the  dishonest  debtor  of  secretly 
committing  acts  of  bankruptcy  in  the  hope  that  the  time 
within  which  proceedings  might  be  instituted  will  elapse  be- 
fore the  creditors  obtain  knowledge  thereof,  and  extends  the 
time  for  instituting  proceedings  four  months  from  the  date 
the  creditor  obtains  knowledge  of  the  offense. 

The  bankruptcy  proceedangs  are  commenced  and  jurisdiction 
acquired  by  the  filing  of  the  petition-^  within  four  months 
of  the  act  of  bankruptcy  relied  on,  and  the  delay  until 
the  expiration  of  this  time  in  issuing  the  subpoena  does  not 
validate  the  act  of  bankruptcy  or  vitiate  the  proceedings.^^ 
The  four  months  within  which  the  petition  must  be  filed  are 
computed  by  excluding  the  day  the  petition  is  filed,  and  in- 
cluding the  day  on  which  the  act  of  bankruptcy  was  com- 
mitted.-^^ A  failure  to  file  a  duplicate  petition  within  such  four 
months  is  fatal  and  the  error  can  not  be  corrected.^'^  Thus  a 
petition  filed  February  20,  1899,  based  on  a  confession  of  judg- 

24  Analogous  provision  in  act  of  have  been  committed. 

1867.     Sec.  39.     .     .     .     he     .     .     .  25  in  re  Appel,  2  N.  B.  N.  R.  907, 

shall  be  adjudged  a  bankrupt,  on  103  P.  R.  931. 

the  petition  of  one  or  more  of  his  2g  in   re  Lewis,   1   N.  B.  N.   135, 

creditors,  the  aggregate  of  whose  556,  1  A.  B.  R.  458,  91  P.  R.  632, 

debts     provable     under     this     act  26a  See  Dutcher  v.  Wright,  94  U. 

amount   to    at  least   two   hundred  S.  553. 

and  fifty  dollars,  provided  such  pe-  27  in  re  Stevenson,  1  N.  B.  N.  313, 

tition  is  brought  within  six  months  2  A.  B.  R.  66,  94  P.  R.  Ill;   In  re 

after  the  act  of  bankruptcy  shall  Dupree,  1  N.  B.  N.*513,  97  P.  R.  28. 


70  THE    NATIONAL    BANKRUPTCY    LAW.  ClI.  3 

ment  October  20,  1898,  is  in  time  y^^  or  a  petition  filed  December 
30  based  on  a  preference  effected  by  a  debtor  discounting  his 
own  notes  at  his  own  bank  with  his  individual  checks  and 
thereby  paying  certain  creditors,  the  checks  being  dated  Au- 
gust 27  and  29  but  charged,  when  paid,  September  1,-'^  or  a 
petition  filed  February  1,  1899,  based  on  a  failure  to  vacate  an 
execution,  the  sale  having  been  fixed  for  October  27,  though 
the  attachment  was  made  July  5,  judgment  entered  Septem- 
ber 21  and  execution  levied  October  15.^*^  In  the  last  case  the 
failure  to  vacate  the  execution  before  sale  was  the  act  of  bank- 
ruptcy, and  hence  the  four  months'  period  ran  not  from  the 
attachment,  but  from  a  date  connected  with  the  proceedings 
after  judgment.^i  The  time  of  beginning  the  proceedings  for 
a  lien  on  bankrupt's  property,  as  an  attachment,  and  not  the 
beginning  of  the  action  in  which  the  lien  proceedings  were  had 
and  which  may  have  been  long  pending,  fixes  the  time  when 
the  four  months  begin,^^  qj.  i\^q  execution  and  delivery  of  a 
deed,  and  not  the  date  named  therein.-"^^  Acts  which  took 
place  more  than  four  months  before  the  petition  was  filed  are 
not  acts  of  bankruptcy ,^^  consequently  where  prior  to  that 
period  bankrupt  transfers  property,  the  possession  of  the  party 
to  whom  it  was  transferred  being  as  notorious  as  it  was  sus- 
ceptible or  as  notorious,  exclusive  and  continuous  as  the  nature 
of  the"  property  permitted,  the  transfer  is  not  an  act  of  bank- 
ruptcy.^^ An  insolvent  corporation  sold  its  real  estate  and 
used  the  proceeds  in  paying  some  of  its  creditors  to  the  ex- 
clusion of  others,  such  payments  being  set  up  as  transfers  with 
intent  to  prefer  and  that  the  conveyance  was  with  the  intent 
to  delay  and  defraud,  the  petition  being  filed  more  than  four 
months  after  the  payment,  though  within  four  months  of  the 
record  of  the  deed,  it  was  held  not  to  be  within  the  required 
time.^^ 

28  In  re  Stevenson,  supra.  33  In  re  Rodney,  6  N.  B.  R.  165. 

29  In  re  Edelstein,  1  N.  B.  N.  168.  F.  C.  12032. 

30  Parmenter  Mfg.  Co.  v.  Stoever,  34  in  re  Richards,  2  N.  B.  N.  R. 
2  N.  B.  N.  R.  174,  3  A.  B.  R.  220,  38,  96  F.  R.  935,  3  A.  B.  R.  145. 

97  F.  R.  330.  35  In  re  Woodward,   1  N.  B.  N. 

31  See  also  In  re  Fellerath,  1  N.     352,  2  A.  B.  R.  233. 

B.  N.  292,  2  A.  B.  R.  40,  95  F.  R.  36  in    re    Mingo    Val.    Creamery 

121.  Ass'n,  2  N.  B.  N.  R.  679,  100  F.  R. 

32  In  re  Higgins,  2  N.  B.  N.  R.  282. 
115,  3  A.  B.  R.  364,  97  F.  R.  775. 


Ch.  3       ACTS  OF  BANKRUPTCY— DEFENSE.  71 

§  86.  *c.  Defense  of  solvency.— It  shall  be  a  complete  de- 
'fense  to  any  proceedings  in  bankruptcy  instituted  under  the 
'first  subdivision  of  this  section  to  allege  and  prove  that  the 
'partj^  proceeded  against  was  not  insolvent  as  defined  in  this 
'Act  at  the  time  of  the  filing  the  petition  against  him,  and  if 
'solvency  at  such  date  is  proved  by  the  alleged  bankrupt  the 
'proceedings  shall  be  dismissed,  and  under  said  subdivision  one 
'the  burden  of  proving  solvency  shall  be  on  the  alleged  bank- 
'rupt.'37 

§  87.  Who  may  defend.— The  bankrupt  or  any  creditor  may 
appear  and  plead  to  the  petition  within  ten  days  after  the 
return  day,  or  within  such  further  time  as  the  court  may  allow. 
Under  this  provision  the  creditor  may  appear  and  assist  in 
the  defense  of  the  case,  if  he  so  desires.^^ 

§  88.  When  defense  of  solvency  may  be  made.— This  para- 
graph places  the  burden  upon  the  debtor  to  prove  his  solvency 
in  case  the  act  of  bankruptcy  charged  is  that  he  has  conveyed, 
transferred,  concealed  or  removed  any  part  of  his  property 
with  intent  to  hinder,  delay  or  defraud  his  creditors,  and  if 
successful  in  such  proof,  the  petition  will  be  dismissed.^^  The 
making  of  a  general  assignment  for  the  benefit  of  creditors  is 
an  act  of  bankruptcy  or  insolvency  in  fact,  and  hence  a  denial 
of  insolvency  is  not  a  good  plea  in  bar  in  such  case,^*^  Ordi- 
narily an  answer  to  a  petition  is  sufficient  which  contains  a 
general  denial,  and  states  that  the  respondent  has  not  com- 
mitted the  acts  of  bankruptcy  set  forth  and  avers  that  he 
should  not  be  declared  bankrupt  for  any  cause  alleged.*^ 
Where  it  is  shown  that  bankrupt's  assets,  at  a  fair  valuation, 

37  Analogous  provision  of  act  of  ss  Sees.  18b,  59f  of  act  of  1898. 

1867.  Sec.  41.     .     .     .     and  if  upon  39  Lea  Bros.  v.  West  Co.,  1  N.  B. 

such  hearing  or  trial,  the  debtor  N.  79,  1  A.  B.  R.  261,  91  F.  R.  237, 

proves  to   the   satisfaction  of   the  s.  c.  1  N.  B.  N.  298,  2  A.  B.  R.  463. 

court  or  of  the  jury,  as  the  case  174  U.  S.  590;  In  re  Schenkein,  113 

may  be,  that  the  facts  set  forth  in  F.  R.  421;    In  re  West,  108  F.  R. 

the  petition  are  not  true,  or  that  940,  5  A.  B.  R.  734. 

the  debtor  has  paid  and  satisfied  4o  Lea  Bros.  v.  West  Co.,  supra; 

all  liens  upon  his  property,  in  case  Bray  v.  Cobb,  1  N.  B.  N.  209,  1  A. 

the  existence   of  such   liens  were  B.  R.  153,  91  F.  R.  102. 

the  sole  ground  of  the  proceeding.  n  In  re  Hawkeye  Smelting  Co., 

the  proceedings  shall  be  dismissed  8  N.  B.  R.  385. 
and  the  respondent  shall   recover 
costs. 


^2  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  3 

exceed  his  liabilities,  the  petition  must  be  dismissed,"*-  but 
where  the  valuation  is  greatly  inflated,  as  demonstrated  by 
subsequent  appraisal  and  sale,  the  total  value  being  less  than 
the  liabilities,  the  finding  of  insolvency  will  not  be  disturbed.**^ 
In  the  case  of  one  adjudged  bankrupt  upon  his  own  petition, 
the  adjudication  can  not  be  assailed  by  proof  that  he  was  not, 
in  fact,  insolvent;  nor  can  the  question  of  solvency  be  ex- 
amined on  a  motion  to  set  aside  an  adjudication  of  bankruptcy 
against  a  corporation  procured  by  petition  of  a  trustee,'** 

§  89.  Defense  generally.— Under  the  former  act  it  was  held 
that  in  order  to  authorize  the  making  of  an  order  to  show 
cause,  the  deposition  of  acts  of  bankruptcy  should  be  such  as 
constitute  legal  testimony,'*^  the  omission  to  file  the  same  be- 
ing held  a  substantial  defect  which  could  not  be  remedied.'*^ 
Each  distinct  charge  may  be  denied  in  a  general  manner  where 
several  distinct  allegations  of  bankruptcy  are  set  forth  in  the 
petition,  if  an  answer  of  denial  in  the  nature  of  a  special  plea 
to  each  allegation  is  not  filed  ;*^  and  as  many  defenses  as  there 
are  may  be  set  up  to  the  petition,  but  each  defense  must  be 
pleaded  separately."*^ 

The  burden  of  refuting  the  allegations  contained  in  the 
petition  is  on  the  respondent,-**-*  and  if  no  evidence  is  introduced 
the  petitioning  creditor  is  entitled  to  an  adjudication.^** 

§  90.     'd.    Testimony  on  denial  of  insolvency.— Whenever 

'a  person  against  whom  a  petition  has  been  filed  as  hereinbe- 
'fore  provided  under  the  second  and  third  subdivisions  of  this 
'section  takes  issue  with  and  denies  the  allegation  of  his  in- 
'  solvency,  it  shall  be  his  duty  to  appear  in  court  on  the  hearing, 
'with  his  books,  papers,  and  accounts,  and  submit  to  an  ex- 
'amination,  and  give  testimony  as  to  all  matters  tending  to 
'establish  solvency  or  insolvency,  and  in  case  of  his  failure  to 

42  In   re   Rogers   Milling   Co..    2  4c  in  re  Brown,  15  N.  B.  R.  416, 

N.  B.  N.  R.  973,  102  F.  R.   687.  4  F.  C.  1981. 

A.  B.  R.  540.  47  In  re  Hawkeye  Smelting  Co.,  S 

4H  In  re  Rome  Planing  Mill  Co.,  N.  B.  R.  385. 

2  N.  B.  N.  R.  531,  99  F.  R.  937,  3  4s  in  re  Quimette,  3  N.  B.  R.  140, 

A.  B.  R.  766.  1  Sawy.  47,  F.  C.  10622. 

44  In  re  Ins.  Co.,  16  N.  B.  R.  541,  49  In  re  Price  &  Miller,  8  N.  B. 
9  Ben.  270,  F.  C.  628.  R.  514,  F.  C.  11411. 

45  In  re  Rosenfields,  11  N.  B.  R.  r.o  in  re  Jelsh  et  al.,  9  N.  B.  R. 
86,  F.  C.  12061.  412,  F.  C.  7257. 


Cn.  3  ACTS    OF    BANKRUPTCY— DEFENSE.  73 

'so  attend  and  submit  to  examination  the  burden  of  proving 
'his  solvency  shall  rest  upon  him.' 

§  91.  Practice. — This  paragraph  is  restricted  to  the  second 
and  third  acts  of  bankruptcy  specified  in  Sec.  3a,  and  places 
the  burden  of  proof  upon  the  creditors  unless  the  bankrupt 
fails  to  submit  to  examination,  when  it  is  shifted  to  him.^^ 
Under  this  provision  the  bankrupt  may  be  called  and  cross- 
examined  for  the  purpose  of  establishing  his  insolvency.^- 
The  bankrupt  or  any  creditor  may  appear  and  plead  to  the 
petition  within  ten  days  after  the  return  day  or  within  such 
further  time  as  the  court  may  allow,^^  and  if  they  appear  and 
controvert  the  facts  alleged  in  the  petition,  the  judge  must 
determine  the  issues  presented  by  the  pleadings  and  make  the 
adjudication  or  dismiss  the  petition.^*  A  person-  against  whom 
an  involuntary  petition  has  been  filed  is  entitled  to  have  a  trial 
by  jury  in  respect  to  the  question  of  his  insolvency,  upon  the 
filing  of  a  written  application  therefor,  at  or  before  the  time 
in  which  an  answer  may  be  filed,^^  and  if  not  filed  within  such 
time  a  jury  trial  will  be  deemed  to  have  been  waived.^^  The 
respondent's  default  puts  the  burden  of  proving  his  solvency 
on  him ;  but  does  not  convert  the  proceeding  into  one  of  vol- 
untary bankruptcy.^^ 

Upon  the  question  of  the  examination  of  the  bankrupt,  see 
Chap.  XXI,  post. 

§92.     'e.     Provisional   seizure   of   property— bond.— When- 

'ever  a  petition  is  filed  by  any  person  for  the  purpose  of  hav- 
'ing  another  adjudged  a  bankrupt,  and  an  application  is  made 
'to  take  charge  of  and  hold  the  property  of  the  alleged  bank- 
'rupt,  or  any  part  of  the  same,  prior  to  the  adjudication  and 
'pending  a  hearing  on  the  petition,  the  petitioner  or  applicant 
'shall  file  in  the  same  court  a  bond  with  at  least  two  good  and 
'sufficient  sureties  who  shall  reside  within  the  jurisdiction  of 
'said  court,  to  be  approved  by  the  court  or  a  judge  thereof,  in 
'such  sum  as  the  court  shall  direct,  conditioned  for  the  pay- 
'ment,  in  case  such  petition  is  dismissed,  to  the  respondent,  his 

51  Street  Co.  v.  Lea  Bros.,  supra.  ss  Sec.  19a  of  act  of  1898, 

52  In  re  Coddington,  118  F.  R.  se  See.  19;  Bray  v.  Cobb,  91  F.  R. 
281,  9  A.  B.  R.  243.  102,  1  N.  B.  N.  209,  1  A.  B.  R.  153. 

53  Sec.  18b  of  act  of  1898.  57  in  re  Taylor,  2  N.  B.  N.  R.  929, 

54  Sec.  18d  of  act  of  1898.  102  F.  R.  728,  4  A.  B.  R.  515. 


74  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  3 

'or  her  personal  representatives,  all  costs,  expenses,  and  dam- 
'ages  occasioned  by  such  seizure,  taking,  and  detention  of  the 
'property  of  the  alleged  bankrupt.' 

§  93. Practice. — During  the  pendency  of  proceedings 

and  until  adjudication  of  bankruptcy,  the  defendant  retains 
control  and  title  to  the  property ,^^  unless  the  petitioner  file 
with  his  petition  an  application  to  take  charge  of  and  hold 
the  property  pending  the  adjudication,  in  which  event  he  must 
accompany  it  by  a  bond;  or  if  upon  satisfactory  proof  it  is 
shown  that  the  bankrupt,  against  whom  an  involuntary  peti- 
tion has  been  filed  and  is  pending,  has  committed  an  act  of 
bankruptcy,  or  is  neglecting,  or  permitting  his  property  to 
deteriorate  in  value,  the  judge  may  issue  a  warrant  under 
which  the  marshal  may  seize  and  hold  such  property  subject 
to  further  orders.  Before  such  warrant  is  issued,  however, 
the  petitioner  applying  therefor  must  enter  into  a  bond  con- 
ditioned to  indemnify  the  bankrupt  for  any  damages  that  may 
result  by  reason  of  such  seizure  if  wrongfully  obtained.'^® 
Courts  are  to  appoint  receivers  or  the  marshals,  upon  appli- 
cation of  parties  in  interest,  where  they  find  it  absolutely  neces- 
sary for  the  preservation  of  estates,  to  take  charge  of  the  prop- 
erty or  bankrupts  after  filing  of  the  petition,  and  until  it  is  dis- 
missed or  the  trustee  has  qualified.^^ 

§  94. Costs. — In  involuntary  cases,  where  the  debtor 

resists  the  adjudication  and  the  court,  after  hearing,  adjudges 
him  bankrupt,  the  petitioning  creditor  may  recover  and  be  paid 
out  of  the  estate,  similar  costs  as  are  now  allowed  to  a  party 
recovering  in  a  suit  in  equity ;  and,  if  the  petition  be  dismissed, 
the  debtor  recovers  like  costs  against  the  petitioning  creditor,^i 
but  not  counsel  fees^-  or  damages.^^ 

§95.  'Costs  on  dismissal  of  petition.— If  such  petition  be 
'dismissed  by  the  court  or  withdrawn  by  the  petitioner,  the 
'respondent  or  respondents  shall  be  allowed  all  costs,  coun- 
'sel  fees,  expenses,  and  damages  occasioned  by  such  seizure, 

58  Sec.  70a  act  of  1898.  1  A.  B.  R.  580,  93  F.  R.  186;  Dun- 
so  See   Sees.    50   and    69,   act   of  don  v.  Coats,  6  N.  B.  R.  304,  F.  C. 

1898;  see  Beach  v.  Macon  Grocery  4142;    In   re  Sheehan,   8  N.   B.  R. 

Co.,  116  F.  R.  143.  353,  F.  C.  12738. 

60  Sec.  2  (3),  act  of  1898.  es  in  re   Morris,   115   F.   R.    591, 

61  G.  O.,  XXXIV.  7  A.  B.  R.  709. 

62  In  re  Ghiglione,  1  N.  B.  N.  351, 


Ch.  3 


ACTS  OP  BANKRUPTCY— DEFENSE. 


75 


'taking,  or  detention  of  such  property.  Counsel  fees,  costs, 
'expenses  and  damages  shall  be  fixed  and  allowed  by  the 
'court,  and  paid  by  the  obligors  in  such  bond.'*^* 


64  Analogous  provision  .of  act  of 
1867.  Sec.  41.  .  .  .  If,  upon 
such  hearing  or  trial,  the  debtor 
proves  to  the  satisfaction  of  the 
court  or  of  the  jury,  as  the  case 
may  be,  that  the  facts  set  forth  in 
the  petition  are  not  true,  or  that 
the  debtor  has  paid  and  satisfied 


all  liens  upon  his  property,  in  case 
the  existence  of  such  liens  were 
the  sole  ground  of  the  proceedings, 
the  proceedings  shall  be  dismissed 
and  the  respondent  shall  recover 
costs.  See  In  re  Nixon,  110  F.  R. 
633,  6  A.  B.  R.  693. 


CHAPTER  IV. 


WHO  MAY   BECOME    BANKRUPTS. 


i  96. 

(4a)   Voluntary  bankrupts. 

115. 

Trader. 

97. 

Who  may  file  petition. 

116. 

Mercantile. 

98. 

The  petition. 

117. 

Mining. 

99. 

Classes  of  persons. 

118. 

Railroads. 

100. 

Aliens. 

119. 

Printers    and    pub- 

101. 

Chinese. 

lishers. 

102. 

Corporations. 

120. 

Failure     to     allege 

103. 

Farmers. 

class. 

104. 

Indians. 

121. 

Consent    order — ad- 

105. 

Infants. 

judication. 

106. 

Lunatics. 

122. 

Executors  —  administra- 

107. 

Married  women. 

tors. 

108. 

(b)   Involuntary  bankrupts. 

123. 

Farmers   and    tillers   of 

109. 

Liability  of  stockholders,  etc. 

the  soil. 

110. 

Determining      character 

124. 

Indians. 

of  proceedings. 

125. 

Infants. 

111. 

Aliens. 

126. 

Indorsers. 

112. 

Banks. 

127. 

Lunatics. 

113. 

Corporations. 

128. 

Married  women. 

114. 

Admission  of  insol- 

129. 

Wage-earners, 

vency. 


§  96.  '  (Sec.  4a)  Who  may  become  voluntary  bankrupts.— 
'Any  person  who  owes  debts,  except  a  corporation,  shall  be  en- 
titled to  the  benefits  of  this  Act  as  a  voluntary  bankrupt. '^ 


lAct  of  1867.  Sec.  11.  And  be 
it  further  enacted,  That  if  any  per- 
son residing  within  the  jurisdic- 
tion of  the  United  States,  owing 
debts  provable  under  this  act  ex- 
ceeding the  amount  of  three  hun- 
dred dollars,  shall  apply  by  peti- 
tion addressed  to  the  judge  of  the 
judicial  district  in  which  such 
debtor  has  resided  or  carried  on 
business  for  the  six  months  next 
immediately  preceding  the  time  of 
the  filing  of  such  petition,  or  for 
the  longest  period  during  such  six 
months,  setting  forth  his  place  of 


residence,  his  inability  to  pay  all 
his  debts  in  full,  his  willingness 
to  surrender  all  his  estate  and  ef- 
fects for  the  benefit  of  his  creditors 
and,  his  desire  to  obtain  the  benefit 
of  this  act,  and  shall  annex  to  his 
petition  a  schedule  .  .  .  (here 
follows  contents  of  schedule)  the 
filing  of  such  petition  shall  be  an 
act  of  bankruptcy,  and  such  peti- 
tioner shall  be  adjudged  a  bank- 
rupt. Sec.  37.  And  be  it  further 
c-nacted,  That  the  provisions  of 
this  act  shall  apply  to  all  moneyed 
business    or    commercial    corpora- 


76 


Ch.  4     WHO    MAY    BECOME    VOLUNTARY    BANKRUPTS.  77 

§  97.  Who  may  file  petition.— Under  this  section,  any  per- 
son except  a  corporation  may  become  a  voluntary  bankrupt, 
provided  he  owes  debts;  that  is,  any  debt,  demand  or  claim, 
provable  in  bankruptcy ;-  and  a  state  court  has  no  authority  to 
abridge  this  right  by  proceedings  to  enjoin  one  from  applying 
for  its  benefits.^  If  the  bankrupt  owes  no  debt,  or  the  only 
debt  scheduled  is  one  that  is  not  released  by  a  discharge,  the 
court  would  have  no  right  to  entertain  the  petition,  or  if  such 
fact  is  discovered  by  a  creditor  after  the  adjudication,  on 
proper  motion  it  will  be  set  aside  and  the  petition  dismissed."* 
If  he  is  unable  to  pay  the  necessary  filing  fees,  he  may  be  re- 
lieved therefrom,  upon  submitting  an  affidavit  with  his  peti- 
tion stating  that  he  is  without  and  cannot  obtain  the  money 
with  which  to  pay  such  fees.^  If,  however,  it  subsequently  de- 
velops during  the  pendency  of  proceedings  that  the  bankrupt 
has  or  can  obtain  the  money  to  pay  these  fees,  or  money  comes 
to  the  estate,  the  court  will  order  them  paid,  and,  on  default, 
dismiss  the  petition.^ 

§  98.  The  petition.— Provision  for  filing  the  petition  is  made 
under  §  §  912-914. 

§  99.  Classes  of  persons.— The  uniformity  required  in  bank- 
rupt laws  is  geographical,  not  personal,  and  the  question  of 
the  classes  of  persons  to  be  affected  is  one  largely,  if  not 
wholly,  within  the  discretion  of  Congress;'''  and  the  operation 
of  the  act  of  1898  being  uniform  throughout  the  United  States 
and  the  classification  imposed  by  Congress  reasonable,  having 
regard  to  the  proper  objects  of  such  law,  the  act  is  constitu- 
tional.^ 

tions    and    joint-stock    companies,  2  See.  1  (11),  act  of  1898. 

and  that  upon  the  petition  of  any  3  Fillingen  v.  Thornton,  12  N.  B. 

officer  of  any  such  corporation  or  R.  92. 

company,  duly  authorized  by  a  vote  *  In  re  Yates,  114  F.  R.  365,  8  A. 

of  a  majority   of  the  corporators  B.  R.  69;   In  re  Maples,  105  F.  R. 

at  any  legal  meeting  called  for  the  919,  5  A.  B.  R.  426. 

purpose,   or  upon   the   petition   of  5  Sec.  51  (2),  act  of  1898. 

any  creditor  or  creditors  of  such  e  g.  q.  XXXIV. 

corporation  or  company,  made  and  '  Sturgis     v.     Crowninshield,     4 

presented    in   the   manner   herein-  Wheat.  122,  194. 

after  provided  in  respect  to  debt-  «  Leidigh  Car  Co.  v.  Stengel,   1 

ors,  the  like  proceedings  shall  be  N.  B.  N.  387,  2  A.  B.  R.  383.  95  F. 

had  and  taken  as  are  hereinafter  R.  637 ;  In  re  Cal.  Pac.  R.  R.  Co  , 

provided  in  the  case  of  debtors.  11  N.  B.  R.  193,  3  Sawy.  240,  F.  C. 


78  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  4 

§  100.     AUens.— See  this  head  post  §  111. 

§101.  Chinese.— The  Chinese  Exclusion  Act  does  not  pre- 
vent, a  Chinaman  from  taking  advantage  of  the  bankruptcy 
law.9 

§  102.  Corporations. — Corporations  cannot  become  volun- 
tary bankrupts,  but  there  is  nothing  to  prevent  them  from 
authorizing  their  officers  to  admit  their  inability  to  pay  their 
debts  and  willingness  to  be  adjudged  involuntary  bankrupts. 
See  "Corporations,"  post  6,  §  113. 

§  103.  Farmers. — A  person  engaged  chiefly  in  farming  or 
the  tillage  of  the  soil  may  become  a  voluntary  bankrupt,  but 
cannot  be  adjudicated  an  involuntary  bankrupt.  See  "Farm- 
ers," post  §  123. 

§  104.  Indians.— Citizenship  is  not  a  prerequisite  to  the 
adjudication  of  one  a  bankrupt,  but  merely  that  he  should  be 
a  person  with  the  necessary  residence  or  domicile.  While  an 
Indian  is  a  person  within  the  meaning  of  the  constitution  and 
laws  of  the  United  States^ '^  a  court  of  bankruptcy  would  cer- 
tainly have  no  jurisdiction  over  one  who  retained  his  nomadic 
life  and  tribal  relations.  Furthermore,  all  agreements  or  con- 
tracts for  the  payment  or  delivery  of  money  or  other  thing  of 
value  made  by  an  Indian,  without  compliance  with  the  statute 
as  to  approval  by  the  Secretary  of  the  Interior  and  Commis- 
sioner of  Indian  Affairs,  are  absolutely  null  and  void,i^  and 
subject  the  other  party  to  a  severe  penalty .i-  Hence,  a  claim 
against  an  Indian  for  a  debt  contracted  in  contravention  of 
this  statute  could  not  support  an  involuntary  petition  and 
would  not  be  the  basis  of  a  voluntary  petition.  But  an  Indian 
who  has  become  a  citizen  is  equally  liable  as  any  other  person 
to  the  provision  of  the  law.  Where,  however,  an  Indian  has 
not  become  a  citizen  but  has  adopted  the  habits  and  manners 
of  civilized  people,  and  such  an  agreement  has  been  approved 
in  conformity  with  the  statute,  a  court  of  bankruptcy  would 
have  jurisdiction  so  far  as  such  claim    or    claims  only  are 

2315 ;  Hanover  Nat.  Bank  v.  Moy  lo  U.  S.  v.  Crook,  5  Dill.  453,  Art. 

ses,  186  U.  S.  181,  8  A.  B.  R.  1;  In  1.  Const.  Sec.  2;    Elk  v.  Wilkins. 

re  Smoke,  2  N.  B.  N.  R.  831,  4  A.  112  U.  S.  112. 

B.  R.  477.  >i  U.  S.,  R.  S.  Sec.  210. 

n  In  re  Kai  Y.  Chung,  1  N.  B.  N.  12  U.  S.,  R.  S.  Sec.  2105. 
33. 


Ch.  4   WHO    MAY    BECOME    INVOLUNTARY    BANKRUPTS.  79 

concerned,  and  which  would  support  a  voluntary  petition,  or 
an  involuntary  petition  if  sufficient  in  amount,  but  to  that 
extent  only,^^  as  the  weight  of  authority  supports  the  right 
of  an  Indian  off  his  reservation  to  institute  proceedings  in  the 
United  States  courts.^"' 

§  105.  Infants. — If  a  minor  is  liable  for  his  contracts,  or  for 
what  are  commonly  understood  to  be  his  debts,  as  for  neces- 
saries, and  the  like,  he  is  included  within  the  provisions  of  the 
bankrupt  act,^^  at  least  as  to  voluntary  bankruptcy.  A  debt 
contracted  by  him  during  infancy  may  be  acknowledged  on 
reaching  his  majority  when  it  would  support  a  petition  in 
bankruptcy. 

§  106.  Lunatics. — As  a  lunatic,  or  person  non  compos 
mentis,  is  unable  to  perform  the  duties  and  assume  the  burden 
and  obligations  imposed,  which  accompany  the  benefits  to 
be  derived  from  the  law,  neither  he  nor  his  committee  or  guard- 
ian would  be  authorized  to  file  a  voluntary  petition.!*^  But  if 
the  bankrupt  becomes  non  compos  mentis  after  the  filing  of 
the  petition,  the  proceedings  are  conducted  and  concluded  the 
same  as  though  he  had  not  become  insane.  See  this  head,  post 
§127. 

§  107.  Married  women. — Formerly  married  women  were 
only  in  a  very  restricted  way  capable  of  contracting  debts  and 
so  were  not  included  within  the  bankruptcy  laws,  but  the  mar- 
ried women  acts  have  now  generally  emancipated  them  from 
such  restrictions.  Wherever  and  to  whatever  extent  they  may 
contract  debts,  there  and  to  that  extent  they  are  within  the 
present  act,  and  may  become  voluntary  bankrupts  or  be  made 
involuntary  bankrupts.^'^ 

§108.  *(b)  Who  may  become  involuntary  bankrupts.— 
'Any  natural  person,  except  a  wage-earner  or  a  person  engaged 
'chiefly  in  farming  or  the  tillage  of  the  soil,  any  unincor- 
'porated  company,  and  any  corporation  engaged  principally 

13  See  in  re  Rennie,  1  N.  B.  N.  Duguid,  100  F.  R.  274,  2  N.  B.  N. 
335,  2  A.  B.  R.  182;  In  re  Russie,  R.  607,  3  A.  B.  R.  794;  see  In  re 
96  F.  R.  608,  3  A.  B.  R.  6.  Penzansky,  8  A.  B.  R.  99. 

14  Fellows  V.  Blacksmith,  19  is  In  re  Eisenberg,  117  F.  R.  786, 
Howard,  366;   Elk  v.  Wilkins,  112  8  A.  B.  R.  551. 

U.  S.  112.  17  See     cases     under    the     hQad 

15  In  re  Brice,  1  N.  B.  N.  310,  2     "Married  women,"  post  §128. 
A.  B.  R.  197,  93  F.  R.  942;   In  re 


80  THE    NATIONAL    BANKRX3PTCY    LAW.  Ch.  4 

'in  manufacturing,  trading,  printing,  publishing,  mining  or 
'mercantile  pursuits,  owing  debts  to  the  amount  of  one  thou- 
'sand  dollars  or  over,  may  be  adjudged  an  involuntary  bank- 
'rupt  upon  default  or  an  impartial  trial,  and  shall  be  subject  to 
'  the  provisions  and  entitled  to  the  benefits  of  this  act.  Private 
'bankers,  but  not  national  banks  or  banks  incorporated  under 
'State  or  Territorial  laws,  may  be  adjudged  involuntary  bank- 
'rupts. '^^ 

§  109.  Liability  of  stockholders,  etc.— 'The  bankruptcy  of  a 
'corporation  shall  not  release  its  officers,  directors,  or  stock- 
'  holders,  as  such,  from  any  liability  under  the  laws  of  a  State 
'  or  Territory  or  of  the  United  States. ' 

§110.  Determining  character  of  proceedings.— The  dis- 
tinction between  voluntary  and  involuntary  bankruptcy  is 
determined  by  the  person  filing  the  petition ;  if  by  the  debtor, 
it  is  voluntary,  and  if  by  the  creditor  it  is  involuntary,  and  re- 
spondent's  failure  to  appear  in  an  involuntary  proceeding  will 
not  convert  it  into  a  voluntary  one;^^  but  once  there  is  an 
adjudication  all  distinction  ceases,  and  the  rights  and  responsi- 
bilities of  all  bankrupts  and  their  creditors  become  identical, 
§  111.  Aliens.— Citizenship  is  not  a  prerequisite  to  jurisdic- 
tion by  courts  of  bankruptcy,  hence  an  alien  may  become 
either  a  voluntary  or  involuntary  bankrupt  r*^  if  residing 
within  the  United  States  in  order  to  become  a  voluntary  bank- 
is  The  first  paragraph  of  Subdi-  ment  of  his  commercial  paper, 
vision  "b"  was  amended  by  the  act  within  a  period  of  fourteen  days, 
of  February  5,  1903,  by  including  shall  be  deemed  to  have  committed 
"mining"  corporations  as  a  class  an  act  of  bankruptcy,  and,  sub- 
that  may  become  involuntary  ject  to  the  conditions  hereinafter 
bankrupt.  The  second  paragraph  prescribed,  shall  be  adjudged  a 
with  reference  to  the  effect  of  the  bankrupt,  on  the  petition  of  one  or 
bankruptcy  of  a  corporation  on  more  of  his  creditors,  the  aggre- 
the  liability  of  the  stockholders  is  gate  of  whose  debts  provable  un- 
new,  being  inserted  by  the  amend-  der  this  act  amount  to  at  least  two 
ment.  hundred  and  fifty  dollars,  provided 

Act  of  1867.     (See  sec.  37,  ante     such  petition  is  brought  within  six 
p.    76.)      Sec.     39.      .      .      .     Any     months  after  the  act  of  bankrupt- 
person   residing   and   owing  debts     cy  shall  have  been  committed, 
as  aforesaid,  who  (is  guilty  of  cer-         i9  In  re  Taylor,  2  N.  B.  N.  R.  929, 
tain  named  acts)     ...     or  who     102  F.  R.  728,  4  A.  B.  R.  515. 
being     a     banker,     merchant     or         20  in   re  Goodfellow,   2  N.  B.  R. 
trader,    has    fraudulently    stopped     114,  1  Low  510,  F.  C.  5536. 
or  suspended  and  not  resumed  pay- 


Ch.  4   WHO    MAY    BECOME    INVOLUNTARY    BANKRUPTS.  81 

rupt  he  must  have  had  the  same  length  of  residence,  domicile 
or  principal  place  of  business  as  any  other  resident  of  the 
United  States.  But  if  residing  abroad,  a  voluntary  petition 
may  be  filed  in  his  behalf  with  the  single  requirement  that  he 
have  property  within  the  jurisdiction  of  the  United  States. 
To  give  jurisdiction  in  an  involuntary  proceeding  there  need 
be  neither  residence,  domicile  nor  place  of  business,  but 
merely  that  the  debtor  has  committed  an  act  of  bankruptcy 
and  has  property  within  the  jurisdiction  of  the  court  of  bank- 
ruptcy or  that  he  has  been  adjudged  bankrupt  by  a  court  of 
competent  jurisdiction  without  the  United  States  and  has  prop- 
erty within  the  United  States. 

§  112.  Banks. — National  banks  and  banks  incorporated  un- 
der the  state  and  territorial  laws  cannot  be  adjudged  involun- 
tary bankrupts  under  this  law,  but  their  liquidation  when  in- 
solvent is  expressly  provided  for  by  the  United  States,  state 
and  territorial  laws. 

The  laws  of  the  United  States  provide  that,  when  any 
national  banking  association  shall  be  dissolved,  and  its  rights, 
privileges  and  franchises  declared  forfeited,  as  prescribed  in 
section  5239  of  the  Revised  Statutes  of  the  United  States,  and 
when  any  creditor  of  any  national  banking  association  shall 
have  obtained  a  judgment  against  it  in  any  court  of  record,  on 
proper  showing,  or  whenever  the  comptroller  of  currency  shall 
become  satisfied  of  the  insolvency  of  a  national  banking  asso- 
ciation, he  may,  after  due  examination  of  the  affairs,  in  either 
case,  appoint  a  receiver,  who  shall  proceed  to  close  up  such 
association  and  enforce  the  personal  liability  of  the  stock- 
holders, as  provided  for  in  section  5234  of  the  Revised  Stat- 
utes of  the  United  States.-^ 

The  various  states  and  territories  wherein  state  and  terri- 
torial banks  have  been  organized  have  prescribed  special  pro- 
visions of  law  applicable  to  such  institutions  on  becoming  in- 
solvent, and  providing  for  their  liquidation.^^ 

21  See  Act  of  June  30,  1876,  1  held  that  the  court  had  no  jurisdic- 
Supp.  R.  S.  107,  ch.  156,  as  amend-  tion  to  adjudge  a  national  bank 
ed  by  Act  of  August  3,  1892,  2  bankrupt  for  suspension  of  pay- 
Supp.  R.  S.  63,  ch.  360,  and  by  ments  (Smith  v.  Mfr.  Nat.  Bk., 
Act  of  March  2,  1897,  2  Id.  565,  ch.  9  N.  B.  R.  122,  F.  C.  13076) ;  but 
354.  that    it    might     adjudge     private 

22  Under  the  act  of  1867  it  was  bankers  involuntary  bankrupts,  the 


82  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  4 

A  "private  banker"  is  a  person  or  firm,  engaged  in  banking 
without  having  special  privileges  or  authority  from  the  state,^^ 
and  may  be  adjudged  involuntary  bankrupt.  The  term  has  a 
definite  signification  and  has  been  held  to  apply  to  individuals 
or  to  a  firm  only,  and  not  to  comprehend  a  corporation.  Ac- 
cordingly a  corporation  could  not  be  adjudged  a  bankrupt  as 
a  "private  banker."-^ 

§  113  Corporations.— Under  the  present  law  a  corporation 
cannot'  become  a  voluntary  bankrupt,  but  if  engaged  princi- 
pally in  manufacturing,  trading,  printing,  publishing,  mining, 
or  mercantile  pursuits,  it  may  be  adjudged  an  involuntary 
bankrupt.  The  term  corporation  as  here  used  comprehends  all 
bodies  having  any  of  the  powers  and  privileges  of  private  cor- 
porations not  possessed  by  individuals  or  partnerships,  and  in- 
cludes limited  or  other  partnership  associations  organized 
under  laws  making  the  capital  subscribed  alone  responsible 
for  the  debts  of  the  association.-^  In  determining  what  classes 
of  corporations  are  included,  it  becomes  necessary  to  ascer- 
tain the  meaning  of  several  of  the  terms  used. 

§  114. Admission  of  insolvency  by  corporation.— Like 

an  individual,  a  corporation  may  admit  its  insolvency  and  a 
willingness  to  be  adjudged  bankrupt,  but  such  act  will  not 
make  the  proceedings  in  effect  voluntary,^*^  although  it  is  ques- 
tionable whether  an  adjudication  should  be  made  on  an  invol- 
untary petition  alleging  such  facts  on  the  admission  of  the 
directors  where  the  petition,  for  instance,  was  filed  by  three 
creditors,  one  being  the  president  of  the  corporation  and  the 
others  acting  under  his  direction,  since  it  would  in  effect  be 

bank  being  a  private  corporation,  with  whom  settlements  were  made 

though  its  object  was  of  a  public  within  four  months  of  bankruptcy. 

nature  and  the  government  shares  (Harmanson,  Ass.  v.  Bain  et  al.,  15 

with  the  corporators  in  the  stock.  N.  B.  R.  173,  1  Hughes,  188,  F.  C. 

(Sweatt  V.   Boston,   etc.,  R.  R.,   5  6072.) 

N.    B.    R.    234,    3    Cliff.    339,    F.   C.  2:\  People  v.  Doty,  80  N.  Y.,  225, 

13684).     An    incorporated    society  228;    Perkins  v.   Smith,  116  N.  Y. 

doing  a  general  banking  business,  441,  448. 

which   had   ceased   in  1862  on  ac-  24  in  re  Surety  &  Guarantee  Co. 

count  of  the  war  and  resumed  in  Trust  Co.,     9    A.    B.   R.    129;     See 

1865  for  the  purpose  of  liquidation  Davis  v.  Stevens,  104  F.  R.  235,  4 

only,   but  was   hampered   by   stay  A.  B.  R.  763. 

laws  and  adjudged  a  bankrupt  in  2.".  1  (6),  Act  of  1898. 

1872,  was  not  to  be  regarded  as  a  26  in   re   Kelly   Dry   Goods    Co., 

bank  or  trader  as  against  persons  102  F.  R.  747,  4  A.  B.  R.  528. 


Ch.  4  WHO    MAY    BECOME    INVOLUNTARY    BANKRUPTS. 


83 


the  voluntary  act  of  the  corporation  and  appear  to  be  an 
attempt  to  evade  the  law.^'^  An  admission  of  insolvency  and 
willingness  to  be  adjudged  bankrupt,  as  stated  in  letters  to 
creditors  signed  by  the  president  and  authorized  by  a  meeting 
of  the  majority  of  directors,  will  support  a  petition  although 
some  of  the  directors  may  not  have  had  notice  of  the  meet- 
ing."^ 

§115. Trader.— A  ''trader"    is  defined   as    one   who 

makes  it  his  business  to  buy  merchandise  or  goods  and  chat- 
tels, and  to  sell  the  same  again  for  the  purpose  of  making  a 
profit,  the  quantum  of  dealing  being  immaterial  when  the  in- 
tention to  deal  generally  exists,^^  as  a  baker,  who  buys  flour 
and  makes  it  into  bread  for  sale,^^  a  butcher,^!  a  stair- 
builder,32  one  engaged  in  the  manufacture  of  lumber,^^  and  the 


27  In  re  Bates  Mach.  Co.,  1  N.  B. 
N.  135,  91  F.  R.  625,  1  A.  B.  R.  129. 

2s  In  re  Marine  Mach.  &  Con- 
veyor Co.,  91  F.  R.  630,  1  N.  B.  N. 
135,  1  A.  B.  R.  421.  See  also  Re- 
ceiver, ante,  p.  19. 

29  3  Camp.  233,  Bouv.  Law  Diet; 
In  re  New  York  &  Westchester 
Water  Co.,  98  F.  R.  711,  3  A.  B.  R. 
508;  In  re  Surety  &  Guaranty  Co., 
9  A.  B.  R.  129;  In  re  Cowles,  1  N. 
B.  R.  42,  F.  C.  3297,  3  Starkie,  56, 
2  Car.  &  P.  135.  1  Term  R.  572. 

30  In  re  Cocks,  3  Ben.  260,  F.  C. 
2933;  In  re  Anketell,  19  N.  B.  R. 
268,  F.  C.  394. 

31  In  re  Bassett,  8  F.  R.  266. 

32  In  re  Garrison,  7  N.  B.  R.  287, 
5  Ben.  430,  F.  C.  5254. 

33  In  re  Cowles,  1  N.  B.  R.  42, 
F.  C.  3297.  The  following  were 
held  under  the  act  of  1867  not  to 
be  included  within  the  term 
"tradesmen"  or  "merchants":  One 
who  merely  makes  up  the  product 
of  his  own  land  (In  re  Chandler.  4 
N.  B.  R.  213,  1  Lowell,  478.  F.  C. 
2591) ;  a  firm  owning  and  operat- 
ing a,  farm,  the  members  of  which 
owned  stock  in  and  were  officers 
of    a    solvent    manufacturing   cor- 


poration (In  re  Stickney,  17  N.  B. 
R.  305,  F.  C.  13439) ;  a  person  who 
owns  oil  lands  which  he  divides 
into  leaseholds  and  receives  rent 
m  oil,  however  extensive  his  trans- 
actions and  credits  (In  re  Woods, 
7  N.  B.  R.  126,  F.  C.  17990);  one 
who  sold  a  carriage,  a  slave,  two 
pairs  of  horses,  a  piano,  a  lot  of 
cigars,  and  some  harness,  for 
which  he  had  contracted  debts,  in 
the  absence  of  a  showing  that  they 
had  been  bought  for  the  purpose  of 
eale  (In  re  Rogers,  3  N.  B.  R.  139, 
1  Lowell,  423,  F.  C.  12001);  a 
debtor  who  conducted  a  business 
on  a  cash  basis  and  a  considerable 
time  prior  to  filing  his  petition  had 
given  it  up,  leaving  nothing  out- 
standing either  as  assets  or  debts 
(In  re  Reach,  3  N.  B.  R.  3,  1 
Lowell,  335,  F.  C.  7629)  ;  a  stock 
and  gold  broker  who  was  not  a 
member  of  the  stock  exchange, 
but  conducted  his  business  through 
other  brokers  who  were  and  who 
kept  no  books  (In  re  Moss,  19  N. 
B.  R.  132,  F.  C.  9877);  or  a  com- 
mon carrier  (In  re  Union  R.  R. 
Co.,  10  N.  B.  R.  178,  F.  C.  14376). 


84  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  4 

like.  The  buying  and  selling  of  stock,  bonds  and  other  securi- 
ties^^ or  the  engaging  in  the  insurance,^^  or  theatricals*^  busi- 
ness and  the  like,  are  not  trading  pursuits  within  the  meaning 
of  the  law. 

§116. Mercantile.— "Mercantile"  is  defined  as  per- 
taining to  merchants,  or  the  business  of  merchants,^'  a  mer- 
chant being  one  whose  business  it  is  to  buy  and  sell  merchan- 
dise, including  all  those  things  merchants  sell,  either  whole- 
sale or  retail,  as  dry  goods,  hardware,  groceries,  drugs,  etc.,^^ 
or  a  hotelkeeper,"^  or  one  who  keeps  a  livery,  or  boards  horses 
belonging  to  other  persons  ;^*^  a  saloon-keeper  who  buys  cigars 
and  liquors  in  quantities  and  sells  them  at  retail  ;^^  or  one 
whose  business  was  the  gathering  of  information  and  printing 
and  publishing  a  book  of  ratings  with  reference  to  the  stand- 
ing of  merchants.^2 

The  terms  "trading"  or  "mercantile  pursuits"  are  restricted 
to  dealing  in  the  ordinary  subjects  of  commerce,  and  inci- 
dental purchases  or  sales  by  a  person  not  otherwise  so  en- 
gaged do  not  constitute  such  dealing.  Since  the  powers  of 
a  corporation  are  to  be  determined  by  its  charter  and  the 
statute  applicable  thereto,  a  water  company,  for  instance,  em- 
powered "to  buy,  sell,  use  and  deal  in  water  for  power,  manu- 
facturing and  hydraulic  purposes"  where  it  confined  itself 
entirely  to  obtaining  and  furnishing  water  for  cities  and 
municipal  boroughs  and  their  inhabitants,  was  held  not  to  be 
engaged  principally  in  trading  or  mercantile  pursuits,  as  the 
question  is  not  how  extensive  are  such  a  company's  powers, 
but  in  what  pursuits  is  it  principally  engaged.^^  "While  the 
charter  of  a  corporation  gives  it  authority  to  engage  in  a  busi- 
ness which  would  bring  it  within  the  terms  of  the  statute,  un- 
less it  has  in  fact  so  engaged  in  business,  the  court  would  have 

3*  In  re  Surety  &  Guaranty  Co.,  4o  in    re    Morton    Boarding    Sta- 

supra;  In  re  Cleland,  L.  R.  2,  Ch.  bles.  108  F.  R.  791,  5  A.  B.  R.  736; 

App.  465.  In  re  Odell.  9  Ben.  209,  F.  C.  10426. 

35  In  re  Cameron  Town  Mut.  *i  In  re  Sherwood,  17  N.  B.  R 
Fire,  Lightning  &  Windstorm  Ins.  112,  9  Ben.  66,  F.  C.  12773. 

Co.,  96  F.  R.  756,  2  A.  B.  R.  372.  42  in  re  Mutual  Mercantile  Agen- 

36  In  re  Oriental  Society,  104  F.     cy.  111  F.  R.  152,  6  A.  B.  R.  607. 
R.  975,  5  A.  B.  R.  219.  *3  in    re   N.    Y.     &     Westchester 

37  Webst.  Diet.  Water  Co.,  2  N.  B.  N.  R.  414,  98  F. 
»38  Bouv.  Law  Diet.  R.  711,  3  A.  B.  R.  508. 

38  Campbell  v.  Finck,  2  Duv.  107. 


Ch.  4   WHO    MAY    BECOME    INVOLUNTARY    BANKRUPTS.  85 

no  jurisdiction  ;^^  nor  would  it  have  of  a  corporation  organized 
for  the  purpose  of  giving  theatrical  performances,  and  en- 
gaged solely  in  such  business;'*^  nor  a  club  organized  prin- 
cipally for  social  intercourse;^^  a  laundry ;^'^  a  saloon  or  res- 
taurant;^^ a  corporation  authorized  to  buy,  own  and  deliver 
merchandise,  but  which  it  never  did  own  in  fact  ;'*^  or  one  en- 
gaged in  the  carriage  by  water  of  passengers,^^  a  broker  en- 
gaged in  buying  and  selling  stock,  bonds  and  securities  ;^^  or 
a  company  organized  for  the  sole  purpose  of  insuring  the  prop- 
erty of  its  members  and  paying  losses  by  assessment  upon 
such  members,^-  though  an  ordinary  stock  insurance  company 
probably  would  be.^^  It  has  been  held,  however,  that  an  incor- 
porated sanatorium  company  conducting  its  business  for  profit, 
and  not  on  charitable  lines,  is  a  corporation  engaged  prin- 
cipally in  trading  or  mercantile  pursuits  and  may  be  proceeded 
against  in  involuntary  bankruptcy. ^^ 

§  117. Milling. — By  the  amendatory  act  of  February 

5,  1903,  corporations  engaged  in  mining  are  included  in  the 
class  of  those  who  may  be  adjudged  involuntary  bankrupts. 
Prior  to  that  date  it  was  generally  held  that  since  they  were 
not  engaged  in  manufacturing,  trading  or  mercantile  pursuits 
they  were  excepted  from  the  provisions  of  the  law.^^ 

44  In  re  Tontine  Surety  Co.,  116  ss  in  re  Merchants'  Ins.  Co.,  6  N. 
F.  R.  401,  8  A.  B.  R.  421.  B.  R.  43,  3  Biss.  162,  F.  C.  9441. 

45  In  re  Oriental  Society,  104  P.  54  in  re  San  Gabriel  Sanatorium 
R.  975,  5  A.  B.  R.  219.  Co.,  1  N.  B.  N.  390,  2  A.  B.  R.  408, 

48  In  re  Fulton  Club,  113  F.  997,  95  F.  R.  271. 
7  A.  B.  R.  670.  55  In  re  Keystone  Coal  Co.,  109 

47  In  re  White  Star  Laundry  Co.,  F.  R.  872,  6  A.  B.  R.  377,  reversing 
117  F.  R.  570,  9  A.  B.  R.  30.  3  N.  B.  N.  R.  349;  In  re  Woodside 

48  In  re  Chesapeake  Oyster  &  Coal  Co.,  105  F.  R.  56,  5  A.  B.  R. 
Fish  Co.,  112  F.  R.  960,  7  A.  B.  R.  186;  In  re  Elk  Park  Mining  and 
173.  Milling  Co.,  101  F.  R.  422,  4  A.  B. 

49  In  re  Tontine  Surety  Co.,  R.  131;  In  re  Rollins  Gold  &  Sil- 
supra.  ver   Mining  Co.,   102  F.  R.   982,  4 

50  In  re  Phila.  &  Lewes.  Transp.  A.  B.  R.  327 ;  In  re  Chicago  Joplin 
Co.,  114  F.  R.  403.  Lead    &   Zinc   Co.,    104    F.    R.    67 ; 

51  In  re  Surety  &  Guaranty  Trust  McNamara  v.  Helena  Coal  Co.,  5 
Co.,  9  A.  B.  R.  129;  See  In  re  A.  B.  R.  48;  In  re  Tecopa  Mining 
Moss,  19  N.  B.  R.  132,  F.  C.  9877.  &  Smelting  Co.,  110  F.  R.   120,  6 

52  In  re  Cameron  Town  Mut.  F.  A.  B.  R.  250 ;  Herron  Co.  v.  Su- 
L.  &  W.  Ins.  Co.,  1  N.  B.  N.  383,  2  perior  Court.  8  A.  B.  R.  492. 

A.  B.  R.  373,  96  F.  R.  756. 


86  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  4 

§  118. Railroads.— Railroads  and  transportation  com- 
panies do  not  come  within  any  of  the  classes  specified  in  the 
law  and  accordingly  cannot  be  adjudicated  involuntary  bank- 
rupts.^*' In  view  of  the  difference  in  phraseology  between  the 
acts  of  1867  and  1898,  the  decisions  under  the  former  that  in- 
corporated steamship  and  steamboat  companies  and  canal 
corporations,  not  of  a  public  character,  and  railroads,  came 
within  the  act  as  "moneyed,  business  or  commercial"  corpora- 
tions, no  longer  apply.^" 

§  119. Printers  and  publishers.— The  decisions  that  the 

publishers  of  a  daily  paper  and  the  proprietors  of  a  book  and 
job  printing  office  were  not  manufacturers  within  the  meaning 
of  the  act  of  1867^^  are  no  longer  of  value,  since  such  corpora- 
tions are  now  specifically  included  within  the  law  and  may 
now  be  proceeded  against  in  involuntary  bankruptcy.^'' 

§  120. Failure  to  allege  class.— A  court  of  bankruptcy 

is  a  court  of  record,  and,  although  its  jurisdiction  is  limited, 
it  is  not  an  inferior  court  in  the  sense  that  all  facts  essential  to 
its  jurisdiction  must  affirmatively  appear  on  the  face  of  the 
record,  and  a  decree  cannot  be  impeached  collaterally,  as  for 
want  of  jurisdiction,  merely  because  the  petition  omitted  to 
allege  that  the  corporation  belonged  to  one  of  the  classes  that 
might  be  adjudged  involuntary  bankrupt.*^^  While  there  is 
some  diversity  of  opinion  as  to  whether  the  petition  should 
aver  the  bankrupt's  business  or  that  he  does  not  come  within 
the  excepted  classes,  the  better  practice  is  to  set  forth  such 
information,  though  its  omission    would    not    be  fatal    if  the 

56  In  re  Philadelphia  &  Lewes  R.  107,  5  Blatch.  390,  F.  C.  124; 
Transp.  Co.,  114  F.  R.  403;   N.  Y.     Rankin  v.  Florida,  etc.,  R.  R.  Co., 

6  Westchester  Water  Co.,  2  N.  B.  1  N.  B.  R.  196,  F.  C.  11567;  Ala.  & 
N.  R.  414,  98  F.  R.  711,  3  A.  B.  R.  Chatt.  R.  R.  Co.  v.  Jones,  5  N.  B. 
508;  Cong.  Rec,  Vol.  31,  p.  6247.  R.  97,  F.  C.  126. 

57  Sweatt  V.  Boston,  etc.,  Co.,  5  ^s  in  re  Kenyon  et  al.,  6  N.  B.  R. 
N.  B.  R.  234,  3  Cliff.  339,  F.  C.  238;  In  re  The  Capital  Pub.  Co., 
13684;  In  re  Cal.  Pac.  R.  R.  Co.,  11  18  N.  B.  R.  319. 

N.  B.  R.  193,  3  Sawy.  240,  F.  C.  so  See  In  re  Mutual  Mercantile 
2315;  Winter  v.  I.  M.  &  N.  Ry.  Co.,     Agency,  111  F.  R.  152,  6  A.  B.  R. 

7  N.  B.  R.  289,   2  Dill.  487,  F.  C.     607. 

17890;    In  re  Southern  Minn.  Ry.  «"  In  re  Columbia    Real    Estate 

Co.,  10  N.  B.  R.  86,  F.  C.  13138;  In  Co.,  101  F.  R.  965.  4  A.  B.  R.  411; 

re  Opelousas  &  Great  West.  R.  R.  In  re  Elmira  Steel  Co.,  109  F.  R. 

Co.,  3  N.  B.  R.  31.  F.  C.  10547;  In  456,  5  A.  B.  R.  484;    In  re  Stern, 

re  Ala.  &  Chatt.  R.  R.  Co.,  6  N.  B.  116  F.  R.  604,  8  A.  B.  R.  569. 


Ch.  4    WHO    MAY    BECOME    INVOLUNTARY    BANKRUPTS.  87 

form*^^  for  a  creditor's  petition  prescribed  by  the  United  States 
Supreme  Court  is  otherwise  followed,  since  that  makes  no  pro- 
vision for  such  information.^- 

§  121. Consent  order— adjudication.— On  a  petition  in 

involuntary  bankruptcy  against  a  corporation,  there  can  be 
no  adjudication  or  reference  of  the  case  by  the  clerk  to  the 
referee,  on  a  written  admission  by  the  respondent  of  the  acts 
of  bankruptcy  charged  and  a  waiver  of  service  and  of  the  time 
for  appearance,  because  creditors  as  well  as  the  alleged  bank- 
rupt have  the  right  to  appear  and  plead  to  the  petition  within 
ten  days  after  the  return  day,  and  hence  that  day  must  be 
fixed  by  the  issuance  of  a  subpoena  and  the  case  must  remain 
in  the  clerk's  office  until  the  ten  days  have  passed ;^3  nor  in 
any  involuntary  proceeding  is  a  consent  order  sufficient  to 
warrant  adjudication  of  the  debtor,  nor  will  other  parties  than 
the  one  against  whom  the  petition  is  filed  be  adjudicated  un- 
less included  in  the  petition,  though  they  are  connected  with 
him  as  partners,  parties  in  interest  or  otherwise.^*  That  a 
person  or  corporation  comes  within  an  excepted  class  under 
the  statute,  is  not  a  personal  privilege  which  can  be  waived  or 
only  be  set  up  by  the  bankrupt  in  person,  but  the  question  is 
jurisdictional  and  may  be  raised  by  any  creditor.^^ 

§  122.     Executors  and  administrators.— Except  in  pending 

cases^'^  the  act  of  1898  does  not  appear  to  have  contemplated 
the  administration  of  decedents'  estates  in  bankruptcy,  but 
seems  to  have  left  their  administration  to  the  proper  state 
tribunals.  No  provision  appears  to  have  been  made  for  pro- 
ceedings in  bankruptcy,  in  the  case  of  an  executor,  or  like  offi- 
cer, authorized  by  the  court  appointing  him  to  carry  on  de- 
cedent's business  temporarily,  becoming  as  to  such  business 
bankrupt.  If  the  debtor  died  after  committing  the  act  of 
bankruptcy,  proceedings  cannot  be  instituted  against  the  ex- 
ecutor, or  administrator,  and  his  estate  cannot  be  administered 

61  Form  3.  re  Pilger,  118  F.  R.  206,  9  A.  B.  R. 

62  In    re    Columbia   Real    Estate     244. 

Co.,  supra;  Green  River  Deposit  63  in  re  L.  Humbert  Co.,  100  F. 
Bank  v.  Craig.  3  N.  B.  N.  R.  897,     R.  439. 

110  F.  R.  137.  6  A.  B.  R.  381;  Con-         64  Mahoney  v.  Ward,  2  N.  B.  N. 
tra  In  re  Taylor,  102  F.  R.  728,  2     R.  538,  100  F.  R.  278.  3  A.  B.  R.  770. 
N.  B.  N.  R.  929,  4  A.  B.  R.  515 ;  In         es  in  re  Taylor,  supra. 

66  Sec.  8,  act  of  1898. 


88  THE    NATIONAL    BANKRUPTCY    LAW.  Oh.  4 

in  bankruptcy  ;^'  but  in  a  pending  case,  they  may  appear  or  be 
made  parties  to  represent  a  deceased  bankrupt.  Executors  ap- 
pointed by  will  for  the  limited  purpose  of  adjusting  the  testa- 
tor's banking  business  would  not  come  within  the  class  of 
executorships  designed  to  be  administered  under  the  bankrupt 
act.^^ 

§  123.  Fanners  and  tillers  of  the  soil.— Such  may  partake 
of  the  benefit  of  the  act  by  becoming  voluntary  bankrupts,  but 
cannot  be  made  involuntary  bankrupts.  The  business  in  which 
the  person  was  engaged  at  the  time  of  the  commission  of  the 
act  of  bankruptcy  determines  his  status,  and  not  that  in  which 
he  was  engaged  when  the  petition  was  filed.''^ 

A  person  engaged  chiefly  in  farming  is  one  whose  chief  oc- 
cupation or  business  is  farming,  and  one's  chief  occupation  or 
business,  so  far  as  worldly  pursuits  are  concerned,  is  that  which 
is  of  principal  concern  to  him,  of  some  permanency  in  its 
nature  and  which  he  deems  of  paramount  importance  to  his 
welfare  and  on  which  he  chiefly  relies  for  his  livelihood  or  as 
the  means  of  acquiring  wealth,  great  or  small."*^  In  the  expres- 
sion "persons  engaged  chiefly  in  farming  or  the  tillage  of  the 
soil,"  the  latter  phrase  does  not  limit  the  former;  and  hence 
a  person  whose  principal  occupation  is  raising  cattle  and  hogs 
for  the  market,  his  farm  being  chiefly  devoted  to  pasture,  and 
for  raising  grass,  hay  and  corn  to  feed  and  fatten  the  stock,  is 
not  subject  to  be  adjudged  a  bankrupt  upon  the  petition  of 
his  creditors,  being  a  farmer,  though  not  a  tiller  of  the  soil;'^^ 
but  a  merchant,  who  commits  an  act  of  bankruptcy,  may  be 
adjudged  a  bankrupt  on  a  petition  duly  filed  by  his  creditors 
within  the  statutory  period  thereafter,  notwithstanding  the 
fact  that,  after  the  act  of  bankruptcy,  he  abandoned  the 
business  in  which  he  had  been  engaged,  and  became  chiefly 
occupied  in  farming  and  so  continued  to  the  filing  of  the 
petition.'''^ 

6T  In  re  Pierce,  2  N.  B.  N.  R.  979,  to  in  re  Mackey,  110  F.  R.  355,  6 

102  F.  R.  977.  A.  B.  R.  577;   In  re  Drake,  114  F. 

08  Graves  et  al.  v.  Winter  et  al.,  R.  229,  8  A.  B.  R.  137. 

9  N.  B.  R.  357,  F.  C.  5710.  7i  in   re   Rugsdale,    16   N.   B.   R. 

G9  In  re  Lockhardt,  101  F.  R.  807,  215,  F.  C.  12123. 

4  A.  B.  R.  307 ;  See  In  re  Taylor,  72  in  re  Lockhardt,  101  F.  R.  807, 

2  N.  B.  N.  R.  929,  102  F.  R.  728,  4    A.   B.  R.   307;     In    re    Mackey, 

4  A.  B.  R.  515.  supra. 


Ch.  4  WHO    MAY    BECOME    INVOLUNTARY    BANKRUPTS.  89 

§  124.     Indians.— See  Indians,  ante  §  104. 

§  125.  Infants. — An  infant  cannot  be  adjudged  bankrupt 
in  an  involuntary  proceeding,"^  and  where  one  member  of  a 
partnersliip  in  such  proceedings  is  an  infant,  an  adjudication 
should  be  made  against  the  partner,  or  partners,  who  are  of 
age,  and  against  the  firm,  and  the  petition  dismissed  without 
costs  to  the  infant,  with  a  specific  statement  that  it  is  dis- 
missed because  of  his  infancy;  nor  can  an  infant  member  of 
a  partnership  join  in  a  voluntary  petition  by  the  firm,  or  be 
included  in  an  adjudication  thereon.^*  In  the  case  of  a  debt 
incurred  by  an  infant  which  could  not  be  repudiated  upon 
reaching  his  majority,  it  would  be  such  a  debt  as  would 
support  an  involuntary  petition  after  he  becomes  of  age,  but 
it  is  doubtful  whether  it  would  before  that  period. 

§126.  Endorsers.— An  endorser's  liability  on  a  note  con- 
stitutes a  debt  which  may  be  made  the  foundation  of  either 
voluntary  or  involuntary  proceedings  in  bankruptcy  ;'^^  but 
it  has  been  held  that  a  mere  accommodation  endorser  cannot 
be  adjudged  bankrupt  for  failure  to  pay  such  paper,'^^  though 
this  seems  questionable. 

§  127.  Lunatics.— A  court  of  bankruptcy  will  not  take  ju- 
risdiction of  a  petition  in  involuntary  bankruptcy  against  a 
person  who  is  insane,  or  who  prior  to  the  filing  of  the  petition, 
has  been  formally  so  adjudged  by  a  competent  court  and  for 
whose  person  and  estate  a  guardian  has  been  appointed.  A 
transfer  of  property  by  such  person,  if  at  the  time  wholly 
incapable  of  managing  his  business  affairs,  cannot  be  held  an 
act  of  bankruptcy  on  which  a  petition  in  involuntary  bank- 
ruptcy may  be  maintained  by  his  creditors  against  such 
guardian's  objections.'^''     If,  however,  the  bankrupt  does  not 

73  In  re  Eidemiller,  105  F.  R.  ts  in  re  Nicodemus,  3  N.  B.  R.  55, 
595,  5  A.  B.  R.  570.  F.  C.  10254. 

74  In  re  Dunnigan,  1  N.  B.  N.  'S  Jn  re  Clemens,  9  N.  B.  R.  57. 
528,  2  A.  B.  R.  628,  95  F.  R.  428;  2  Dill,  533,  F.  C.  2877. 

In  re  Duguld,  100  F.  R.  274,  2  N.  "  In  re  Funk,  101  F.  R.  244,  4 

B.  N.  R.  607,  3  A.  B.  R.  794;  Con-  A.  B.  R.  96;    comp.  In  re  Weitzel, 

suit  In  re  Derby,  8  N.  B.  R.  106,  14  N.  B.  R.  466,  7  Biss.  289,  F.  C. 

6  Ben.  232,  F.  C.  3815;    Farris  v.  17365;  In  re  Pratt,  6  N.  B.  R.  276. 

Richardson,    6   Allen,    118;     In    re  2   Lowell,    96,   F.   C.    11371;    In   re 

Smedley,  10  L.  T.  N.  S.  432;  In  re  Murphy,  10  N.  B.  R.  48,  F.  C.  994G; 

Cotton,  2  N.  Y.  Leg.  Obs.  370;    In  In  re  Eisenberg,  117  F.  R.  786,  8 

re  Book,  3  McLean,  317.  A.  B.  R.  551. 


90  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  4' 

become  insane  until  after  the  filing  of  the  petition,  it  will  have 
no  effect  upon  the  proceedings^ 

§  128.  Married  women. — A  married  woman  cannot  be  ad- 
judged a  bankrupt  where  by  the  law  of  her  domicile  she  is 
incapable  of  making  a  contract,'^''  though  in  those  states  where 
she  is  authorized  to  contract,  she  may  be,  and  there  appears 
to  be  no  reason  why  a  partnership  between  a  man  and  his 
wife  may  not  be  so  adjudged.^o  ghe  may  avail  herself  of  her 
coverture  to  defeat  debts  in  bankruptcy,^!  and  a  petition 
foimded  upon  a  debt  evidenced  by  notes  which  do  not  show 
on  their  face  an  intention  to  bind  her  separate  estate  must 
allege  that  the  notes  were  given  for  the  benefit  of  her  sepa- 
rate estate  or  else  were  given  by  her  in  the  course  of  business 
if  she  be  a  trader.^^ 

§  129.  Wage  earner. — This  term  comprehends  any  one  who 
works  for  wages,  salary,  or  hire,  at  a  rate  not  to  exceed  $1,500 
per  annum,*^  and  while  such  a  person  may  become  a  volun- 
tary bankrupt,  he  cannot  be  adjudicated  an  involuntary 
bankrupt.^* 

78  Sec.  8,  act  of  1898.  82  In  re  Howland,  2  N.  B.  R.  114, 

70  In  re  Goodman,  8  N.  B.  R.  380,  F.  C.  6791 ;  In  re  Collins,  10  N.  B. 

5  Biss.  401,  F.  C.  5540.  R.  325,  3  Biss.  415, 

80  In  re  Kinkead,  7  N.  B.  R.  439,  83  Sec.  1  (27),  act  of  1898. 

3  Biss.  405,  F.  C.  7824.  84  In  re  Pilger,  118  F.  R.  206. 

81  In  re  Slichter  et  al.,  2  N.  B.  R. 
107,  F.  C.  12943. 


CHAPTER  V. 


PARTNERS. 


§130.  (5a)   May  be  adjudged  bank-  152. 

rupt.  153. 

131.  What  is  a  partnership.  154. 

132.  Determination   of   exist-  155. 

ence  of.  156. 

133.  Period  in  which  may  be  157. 

adjudged  banlcrupt.  158. 

134.  Bankruptcy     works    dissolu-  159, 

tion. 

135.  What   partners    may   be   ad-  160. 

judged     involuntary    bank- 
rupts. 161. 

136.  What  partners  not. 

137.  Who    may    file    a    voluntary  162. 

petition — in  general.  163. 

138.  By  individual   partners.  164. 

139.  Proceedings  against  firm  by 

member.  165. 

140.  Effect  of  proceedings  on  nom-  166. 

inal,     secret     or     dormant  167. 
partners. 

141.  Effect  of  death  or  insanity  of  168. 

a  partner.  169. 

142.  Proceedings   against   solvent  170. 

partner. 

143.  Proceedings    in    case    of   de-  171. 

funct  firms  or  retired  part- 
ners. 172. 

144.  Necessary   averments  of  pe- 

tition. 173. 

145.  Acts  of  bankruptcy,  174. 

146.  Insolvency.  175. 

147.  Discharge    of   a   partnership 

and  members.  176, 

148.  Effect    of    dealings    between 

partners.  177. 

149.  Composition. 

150.  b.  Administration  of  estate.  178. 

151.  Choice  of  trustee. 


c.  Jurisdiction  over  partners. 
In  general. 

d.  Keeping  of  accounts. 

e.  Payment  of  expenses. 
Of  administration. 

f.  Distributions  of  proceeds. 
Rule  of. 

Absence  of  firm  assets  and 
solvent  partner. 

Assumption  of  firm  assets 
and  debts  by  one  member. 

Individual  debts  not  allow- 
able out  of  firm  assets. 

Firm  debts. 

Joint  and  individual  debts. 

Firm  debts  provable  against 
individual  estate. 

Not  provable. 

Effect  of  proving. 

Payment  of  solvent  partner's 
liability. 

Individual  property. 

Partnership  property. 

Conversion  of  joint  into  sep- 
arate estate  and  vice  versa. 

Disposition  of  assets  on  death 
of  partner. 

Trustee's  right  to  partnership 
property. 

g.  Marshaling  of  assets. 
Claims  between  estates. 
Where  one  is  member  of  two 

firms. 

Claim  of  partner  against 
bankrupt  partner. 

h.  Settling  business  where 
firm  not  bankrupt. 

Proceedings  where  all  mem- 
bers not  adjudicated. 


§130.     '(Sec.   5a)     Partners.— A    partnership,    durino:    the 
*  continuation  of  the  partnership  business,  or  after  its  disso- 

91 


92  THE  NATIONAL  BANKRUPTCY  LAW.  ClI.  5 

'lulion  and  before  the  final  settlement  thereof,  may  be  ad- 
' judged  a  bankrupt.' 

§  131.  What  is  a  partnership.— A  partnership  is  usually- 
defined  to  be  a  voluntary  contract  between  two  or  more  com- 
petent persons,  to  place  their  money,  effects,  labor  and  skill, 
or  some  one  or  all  of  them,  in  lawful  commerce  or  business, 
with  the  understanding  that  there  shall  be  a  communion  of 
the  profits  thereof  between  them.  But  partnership  and  com- 
munity of  interest,  independently  considered,  are  not  always 
the  same  thing;  for  the  first  as  between  the  partners  them- 
selves, is  founded  upon  the  copartnership  agreement  which 
prescribes  the  relation  they  bear  to  each  other,  and  of  itself 
creates  the  community  of  interest;  but  the  last  may  exist, 
notwithstanding  there  has  been  no  agreement  between  the 
parties.  Part  owners  of  a  ship,  for  example,  are  uniformly 
treated  as  tenants  in  common,  and  not  as  partners,  although 
it  cannot  be  denied  that  there  is  a  community  of  interest 
between  them  in  every  part  of  the  vessel,  and  each  is  entitled 
to  a  share  of  her  earnings  in  proportion  to  his  individual 
interest,  and  must  also  share  the  loss.  Joint  owners  of 
merchandise  may  consign  it  for  sale  abroad  to  the  same  con- 
signee; and  if  each  gives  separate  instructions '  for  his  own 
share,  it  is  well  settled  law  that  these  interests  are  several,  and 
that  they  are  not  to  be  treated  as  partners  in  the  adventure.^ 

While  every  partnership  is  founded  on  a  community  of 
interest,  it  is,  nevertheless,  incorrect  to  suppose  that  every 
community  of  interest  necessarily  constitutes  the  relation  of 
partnership  within  the  meaning  of  the  commercial  law.  When- 
ever it  appears  that  there  is  a  community  of  interest  in  the 
capital  stock,  and  also  a  community  of  interest  in  the  profit 
and  loss,  then  it  is  clear  that  the  case  is  one  of  actual  partner- 
ship between  the  parties  themselves,  and  of  course  it  is  so  as 
to  third  parties.  The  authorities  are  uniform,  however,  that 
it  is  seldom  or  never  essential  that  both  of  these  ingredients 
should  concur  in  the  case  in  order  to  establish  that  relation. 
Cases  occur,  undoubtedly,  where  a  community  of  interest  in 
the  property,  without  any  regard  to  the  profits,  will  almost 
necessarily  lead  to  the  conclusion  that  the  relation  between 
the  parties  was  that  of  partnership ;  and,  under  some  circum- 
stances, that  conclusion  will  follow,  although  the  sale  of  the 

1  Berthold  v.  Goldsmith,  24  How.  536. 


Ch.  5  WHAT    IS    A    PARTNERSHIP.  93 

property  for  the  joint  interest  may  not  be  contemplated  by 
the  parties.  Participation  in  the  profits,  however,  will  not 
alone  create  a  partnership  between  the  parties  themselves  as 
to  the  property,  contrary  to  their  intention.^  It  has  also  been 
held  that  where  it  is  known  that  a  person  augments  the  capital 
of  a  partnership  and  enhances  its  credit  he  cannot  be  ex- 
empted from  liability  for  its  debts.^ 

Actual  participation  in  the  profits  as  principal  creates  a 
partnership  as  between  the  parties  and  third  persons,"^  what- 
ever may  be  the  intention  in  that  behalf,  and  that  is  so 
although  the  dormant  partner  is  not  liable  for  the  loss  beyond 
the  amount  of  the  profits.  Every  man  who  has  a  share  of  the 
profits  of  a  trade  or  business  ought  also  to  bear  his  share  of 
the  loss,  for  the  reason  that  in  taking  a  part  of  the  profits,  he 
takes  a  part  of  the  fund  of  the  trade  on  which  the  creditor 
relies  for  payment.^  Actual  partnership,  as  between  a  creditor 
and  the  dormant  partner,  is  considered  by  the  law  to  exist 
where  there  has  been  a  participation  in  the  profits,  although 
the  participant  may  have  expressly  stipulated  with  his  asso- 
ciates against  all  the  usual  incidents  to  the  partnership 
relation.®  Where  the  ultra  vires  acts  of  a  corporation  in 
entering  into  and  executing  the  contract  of  partnership  in- 
duced general  creditors  to  extend  credit  to  a  firm,  the  cor- 
poration cannot  repudiate  such  acts,  and  transform  itself  into 
a  general  creditor.'^ 

The  mere  possession  by  a  person,  without  consideration,  of 
goods  sold  a  firm,  does  not  prove  him  a  partner.^ 

§  132.  Determination  of  existence  of  partnership.— In  the 
absence  of  a  written  agreement  of  partnership,  if  the  fact  of 
partnership  be  denied,  the  court  will,  on  demand,  submit  to 

2  Berthold  v.  Goldsmith,  supra.  s  Grace   v.    Smith,    2   W.    Black. 

sWallerstein  v.  Ervin,  112  F.  R.  998;    Waugh  v.  Carver,  H.  Blaclv. 

124,  7  A.  B.  R.  256,  citing  Ex  parte  235. 

Sillitoe,  1  Glyn  &  J.  374,  Ex  parte  e  pond   v.   Pittard,   3   Mees.   and 

Hargreaves,  1  Cox.  Ch.  440,  In  re  Wels.  357;    Berthold  v.  Goldsmith, 

Mason    (1899),  1  Q.  B.  810.  Strat-  24  How.  536. 

ton  V.  Tabb.,  8  111.  App.  225,  and  '  In  re  Ervin,   109  F.  R.  135,  6 

ethers.  A.  B.  R.  356.  3  N.  763,  affirmed  in 

4  In  re  Francis,  7  N.  B.  R.  359,  2  Wallerstein    v.    Ervin,    112    F.    R. 

Sawy.   286;     In  re  Blumenthal,  18  124,  7  A.  B.  R.  256,  and  cases  cited. 

N.  B.  R.  555 ;  see  Moore  v.  Walton,  s  Lott  v.  Young,  109  F.  R.  798,  6 

n  N.  B.  R.  402,  F.  C.  9779.  A.  B.  R.  436. 


94  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

the  jury  the  finding  of  the  facts^  necessary  to  establish  the 
relation,  under  instructions  from  the  court  as  to  what  in  law^*^ 
will  constitute  a  partnership;  but  if  the  facts  be  undisputed, 
whether  the  members  are  in  fact  partners,  is  a  question  of  law 
for  the  court. 

§  133.  Period  in  which  partnership  may  be  adjudged  bank- 
rupt.— Bankruptcy  proceedings  may  be  instituted  by  or  against 
a  partnership  as  long  as  any  party  has  a  right  to  sue  for  a 
settlement  or  to  enforce  an  executory  agreement  or  to  recover 
reimbursement  for  moneys  paid  on  a  partnership  debt,  or  un- 
administered  partnership  assets  remain,  or  partnership  debts 
enforceable  against  any  partner  anywhere  within  the  territo- 
rial jurisdiction  of  the  United  States  exist,^^  notwithstanding 
the  fact  that  the  partnership  may  have  been  dissolved.  Under 
the  act  of  1867,  it  was  held  that  a  partnership,  though  dis- 
solved, might  be  adjudged  a  bankrupt,  if  it  had  assets,^-  but 
not  if  the  contrary  was  shown,^^  though  there  were  certain 
cases  which  held  that  while  there  might  be  no  assets,  but  there 
were  debts,  it  could  be,^^  which  last  ruling  seems  to  have 
proceeded  on  the  theory  that  since  there  were  possible  assets, 
a  partnership  bankruptcy  might  be  necessary  after  all  and 
it  might  as  well  be  granted  at  once.      The  insertion  of  the 

9  McDonald  v.  Matney,  82  Mo.  2  N.  B.  R.  75,  2  Ben.  514,  F.  C. 
358;  Meridian  Nat.  Bank  v.  Gal-  3402;  In  re  Bidwell,  2  N.  B.  R.  78, 
laudet,  120  N.  Y.  298.  F,  C.  1392;  In  re  Mitchell,  3  N.  B. 

10  Chisholm  v.  Cowles,  42  Ala.  R.  Ill,  F.  C.  9656  ;  Ex  p.  Hall,  F.  C. 
179;  Kingsbury  v.  Thorp,  61  Mich.  5919;  In  re  Hartough,  3  N.  B.  R. 
216.  107,   F.   C.   6164.     See   also   In   re 

11  In  re  Webster,  2  N.  B.  N.  R.  Hathorn,  2  Woods,  73,  F.  C.  6214 ; 
54;  In  re  Levy,  2  A.  B.  R.  21,  95  F.  In  re  McFarland,  10  N.  B.  R.  381, 
R.  812,  ref.  dec.  1  N.  B.  N.  287 ;  In  F.  C.  8788. 

re  Meyers,  1  N.  B.  N.  515,  96  F.  R.  i3  In  re  Winkens,  2  N.  B.  R.  113, 

408;    In  re  Hirsch,  2  N.  B.  N.  R.  F.  C.  17875;  In  re  Abbe,  2  N.  B.  R. 

137,  3  A.  B.  R.  344,  97  F.  R.  571;  In  26,  F.  C.  4;   Hopkins  v.  Carpenter, 

re  Elliott,  2  N.  B.  N.  R.  350;  In  re  18  N.  B.  R.  339.  F.  C.  6686;   In  re 

Freund,  1  N.  B.  N.  105,  1  A.  B.  R.  Work,  F.  C.  18044;   In  re  Daggett, 

25;  Contra,  when  only  debts  exist;  8  N.  B.  R.  433,  F.  C.  3536;    In  re 

In  re  Altman,  1  N.  B.  N.  358,  1  A.  Temple,  17  N.  B.  R.  345,  4  Sawy. 

B.  R.  689.  92,  F.  C.  13825. 

12  In  re  Greenfield.  5  Ben.  552,  F.  i*  In  re  Noonan,  10  N.  B.  R.  330, 

C.  5772;  In  re  Marks,  F.  C.  9094,  3  Biss.  491,  F.  C.  10292;  In  re  Wil- 
In  re  Gorham,  18  N.  B.  R.  419,  9  liams,  3  N.  B.  R.  74,  1  Lowell,  406, 
Biss.  23,  F.  C.  5624;  In  re  Crockett,     F.  C.  17703;  Hunt  v.  Pooke,  5  N.  B. 


Ch.  5         BANKRUPTCY  OF  PARTNERSHIP.  95 

words  "before  final  settlement"  in  the  present  act  was  prob- 
ably done  to  remove  the  doubt  which  existed  under  the 
former  act. 

§  134.  Bankruptcy  works  dissolution.— A  partnership  is 
dissolved  immediately  on  the  adjudication  of  bankruptcy  of 
the  firm,  or  any  of  its  members;  but,  the  assets  of  the  firm 
can  be  administered  in  bankruptcy  only  when  the  partnership 
is  so  adjudged,^ ^  or  by  consent  of  the  partner  or  partners  not 
adjudged  bankrupt.^ ^  The  rights  of  the  firm  creditors  are 
not  afi'eeted  by  a  dissolution  of  the  firm,^'^  and  where  one 
partner  only  is  bankrupt,  the  settlement  of  the  joint  atfairs 
is  intrusted  to  the  solvent  partner.^s  A  proceeding  instituted 
by  one  partner  for  the  purpose  of  vexing  and  harassing  his 
copartner!^  or  merely  to  dissolve  the  partnership^^  will  be 
dismissed. 

§  135.  What  partners  may  be  adjudged  involuntary  bank- 
rupt.— All  the  members  of  a  firm  may  be  adjudged  bankrupts, 
though  one  has  assumed  the  firm  debts  and  purchased  the 
assets  ;2i  or  where  a  special  partner  contributes  a  certain  sum 
in  cash  and  a  certain  amount  in  goods  ;22  and  the  firm  creditors 
may  prove  against  the  assuming  member  as  if  they  were  his 
individual  creditors.^^ 

If  a  liquidating  partner  makes  a  general  assignment  of  the 
firm's  property,  he,  together  with  the  partnership,  should  be 

R.    161,   F.    C.    6896;     Hudgins   v.  511,  F.  C.  17664 ;  Blackwell  v.  Clay- 
Lane,  11  N.  B.  R.  462,  2  Hughes,  well,  15  N.  B.  R.  300. 
361,  F.  C.  6827.  is  In  re  Hamlin,  16  N.  B.  R.  522, 

15  In  re  Lentz,  2  N.  B.  N.  R.  190  8  Blss.  122,  Fed.  Cas.  5994. 

97  F.  R.  486;  In  re  Shepard,  3  N.  B.  20  Amsinck  v.  Bean,  11  N.  B.  R. 

R.    172,    3    Ben.   347,   F.   C.   12754;  496,  22  Wall.  395. 

Amsinck  v.  Bean,  22  Wall.  395,  11  21  in   re  Shepard,  3   B.  R.  42,  3 

N.  B.  R.  495,  10  Blatch.  361.  8  N.  B.  Ben.  347,  F.  C.  12754;   In  re  Stow- 

R.  228;  Forsith  v.  Merritt,  3  N.  B.  ers,  1  Lowell,  528,  F.  C.  13516. 

R.  48,  1  Lowell,  336.  22  in  re  Merrill,  13  N.  B.  R.  91, 

16  Sec.  5h  of  act  of  1898.  12  Blatchf.  221,  F.  C.  9467. 

17  Hudgins  V.  Lane,  11  N.  B.  R.  23  in  re  Long,  9  N.  B.  R.  227,  7 
462,  2  Hughes,  361,  F.  C.  6827;  In  Ben.  141.  F.  C.  8476;  In  re  Down- 
re  McFarland,  10  N.  B.  R.  381,  F.  ing,  3  B.  R.  182,  1  Dill.  33,  F.  C. 
C.  8788.  4044;    In  re  Collier,  12  B.  R.  266, 

IS  Sec.  5h,  act  of  1898;  Wilkins  F.  C.  3002;  In  re  Rice,  9  B.  R.  373, 
V.  Davis.  15  N.  B.  R.  60,  2  Lowell,     F.    C.    11750. 


96  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

adjudged;-^  or  persons  doing  business  without  authority 
under  a  corporate  name,  may  be  proceeded  against  as  a  part- 
nership, or  individually;-^  and  although  one  of  the  members 
has  already  been  adjudicated,  the  firm  may  still  be  declared 
bankrupt.2^  The  partners  cannot  put  an  end  to  the  power  of 
the  bankruptcy  court  to  administer  the  partnership  estate  by 
a  mere  dissolution  of  the  firm.^^ 

§  136. What  partners  may  not.— On  a  petition  filed 

against  a  partnership  and  its  members,  a  partner  who  has 
not  committed  or  participated  in  committing  the  act  of  bank- 
ruptcy cannot  be  adjudged  bankrupt,^^  and  where  there  has 
been  no  settlement,  after  dissolution  of  a  firm,  one  partner  is 
not  entitled  to  an  adjudication  against  his  former  partner  on 
account  of  money  or  assets  that  have  come  into  his  hands 
over  and  above  his  share,  or  on  account  of  obligations  entered 
into  during  the  continuation  of  the  partnership,  for  which 
both  are  jointly  liable.^^  As  a  minor  cannot  generally  be 
made  an  involuntary  bankrupt,^"  if  one  member  of  a  firm  be 
such,  the  petition  should  be  dismissed  as  to  him  without  costs, 
with  a  specific  statement  that  the  dismissal  is  on  account  of 
his  minority,  and  continued  against  the  adult  partners  and 
against  the  firm,  clause  "h"  of  this  section  not  applying  in 
this  instance.^^  If  there  are  distinct  firms  of  A  and  B  and  A 
and  C,  the  three  persons  cannot  be  joined  in  one  proceeding, 
though  the  latter  firm  has  assumed  the  debts  of  the  former.^^ 

21  In    re    Meyer.    98    F.   R.    976,  232,  F.  C.  3815;  Farris  v.  Richard- 

aff'g  1  N.  B.  N.  304,  92  F.  R.  896,  son,  6  All.  118;  but  see  In  re  Brice, 

1  A.  B.  R.  565.  1  N.  B.  N.  310,  2  A.  B.  R.  197,  93  F. 

25  Davis  V.  Stevens,  104  F.  R.  R.  942;  In  re  Book,  3  McLean,  317, 
235;    In  re  Mandenhall,  9  N.  B.  R.  F.  C.  1637. 

497,  F.  C.  9425.  3i  In  re  Duguid.   2  N.  B.  N.   R. 

26  Hunt  V.  Pooke,  5  N.  B.  R.  161,  607,  100  F.  R.  274,  3  A.  B.  R.  794; 
F.  C.  6896.  In  re  Dunnigan,  1  N.  B.  N.  528,  2 

27  In  re  Noonan,  10  N.  B.  R.  330,  A.  B.  R.  628.  95  F.  R.  428;  In  re 
F.  C.  10292.  Derby,  8  N.  B.  R.  106,  6  Ben.  232, 

28  In  re  Meyer.  98  F.  R.  976;  F.  C.  3815;  Farris  v.  Richardson, 
aff'g  1  N.  B.  N.  304,  1  A.  B.  R.  565,  6  All.  118;  Lovell  v.  Beauchamp 
92  F.  R.  896.  (1894),  A.  C.   607;    but  see  In  re 

29  Sigsby  v.  Willis.  3  N.  B.  R.  51,  Brice,  1  N.  B.  N.  310,  2  A.  B.  R. 
3  Ben.  371.  F.  C.  12849.  197.  93  F.  R.  942. 

30  In  re  Duguid,  2  N.  B.  N.  R.  ^^  In  re  Wallace.  12  N.  B.  R.  191, 
607,  100  F.  R.  274.  3  A.  B.  R.  794;  F.  C.  17095. 

In  re  Darby.  8  N.  B.  R.  61,  6  Ben. 


Ch.  5         BANKRUPTCY  OF  PARTNERSHIP.  97 

§  137.  Who  may  file  a  voluntary  petition— in  general.— The 
general  form  of  the  creditor's  petition,33  adapted  to  the  par- 
ticular case,  should  be  used  in  partnership  proceedings,  and 
the  answer  in  the  form  prescribed.^^  All  the  partners  should 
join  in  the  petition  in  voluntary  proceedings,  though  it  may 
be  filed  by  one  or  more  of  the  partners,  in  which  case  it  is,  in 
its  initiation,  voluntary,  and  will  remain  so  in  its  entirety  if, 
on  notice,  the  other  partner,  or  partners,  actively  join  with 
the  petitioners,  or  by  acquiescence  consent  to  the  adjudica- 
tion of  the  partnership,  but,  if  the  non-petitioning  partner,  or 
partners,  refuse  to  join  in  the  proceedings  and  contest  the 
adjudication,  it  becomes  as  to  him,  or  them,  involuntary .^^  A 
creditor  cannot  compel  a  debtor  to  go  into  voluntary  bank- 
ruptcy, or  partners  to  petition  for  the  adjudication  of  copart- 
ners.^^  In  involuntary  proceedings,  the  same  rule  prevails 
as  in  other  cases.^"  An  order  by  consent  will  not  authorize 
the  adjudication  of  other  parties  than  those  against  whom 
the  petition  is  filed,  though  they  be  connected  with  the  latter 
as  partners.-^^ 

A  voluntary  petition,  presented  in  the  names  of  a  partner- 
ship and  the  individual  partners,  and  accompanied  by  sched- 
ules setting  forth  the  debts  and  assets  of  the  firm  and  also 

33  Form  3.  B.  N.  R.  979;  In  re  Noonan.  10  N. 

34  Form  6.  B.  R.  330,  F.  C.  10297;   In  re  Dag- 

35  G.  O.  VIII;  Form  2;  In  re  Bor-  gett,  8  N.  B.  R.  433,  F.  C.  3536. 
den,  2  N.  B.  N.  R.  741,  4  A.  B.  R.  ■^^  In  re  Harbaugh,  15  N.  B.  R. 
31,  101  F.  R.  553;   In  re  Meyers.  2  246,  F.  C.  6045. 

N.  B.  N.  R.  Ill,  3  A.  B.  R.  260,  97         ^^  In  re  Malot,  16  N.  B.  R.  485, 

F.  R.  757 ;  In  re  Webster,  2  N.  B.  F.  C.  9282. 

N.  R.  54;  In  re  Murray,  1  N.  B.  N.         -is  In   re   Elliott,    2    N.   B.   N.   R. 

570.  96  F.  R.  600,  s.  c.  1  N.  B.  N.  350;  Mahoney  v.  Ward,  2  N.  B.  N. 

532,  3  A.  B.  R.  90 ;  In  re  Russell,  1  R.  538,  100  F.  R.   278,  3  A.  B.  R. 

N.  B.  N.  532,  3  A.  B.  R.  91,  97  F.  R.  770;  In  re  Kruegar,  5  N.  B.  R.  539, 

32;  In  re  Altman,  1  N.  B.  N.  358,  1  2  Lowell,   66,   F.   C.  7941;     In    re 

A.  B.  R.  689,  s.  c.  1  N.  B.  N.  407,  2  Prankard,    1    N.    B.    R.    51,    F.    C. 

A.  B.  R.  407,  95  F.  R.  263;    In  re  11366;    In   re  Freund.   1   N.   B.  N. 

Meyer,  98  F.  R.  976;   aff'g  1  N.  B.  105,  1  A.  B.  R.  25;  In  re  O'Brian.  2 

N.  304,  1  A.  B.  R.  565.  92  F.  R.  896;  N.  B.  N.  R.  312;   but  see  as  to  se- 

In  re  Wilson,  13  N.  B.  R.   253,   2  cret  partners.  In  re  Mandenhall,  9 

Lowell,  453.  F.  C.  17784;   Medsker  N.   B.   R.    497,   F.    C.    9425;    In   re 

V.  Bonebrake,  108  U.  S.  66;    In  re  Harris,  2  N.  B.  N.  R.  868,  4  A.  B. 

Henry,    17   N.    B.    R.    463,    9    Ben.  R.  132. 
449,  F.  C.  6370;    In  re  Pierce,  2  N. 


98  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

of  the  partners,  is  sufficient  without  individual  petitions,  and 
the  court  of  bankruptcy  may  administer  upon  the  separate 
estates  of  the  partners  as  well  as  upon  the  estate  of  the  firm 
in  a  single  proceeding,  and  grant  discharges  from  separate 
and  joint  debts,  and  apportion  the  costs  equitably  between 
the  individual  and  joint  estates,  and  it  has  been  held  that  but 
one  filing  fee  of  $30  is  necessary .^^ 

§  138. Petition  by  individual  partners.— Two  or  more 

persons  cannot  apply  for  bankruptcy  in  the  same  petition, 
except  as  incidental  to  a  partnership;  so  that  joint  contract- 
ors, not  partners,  must  file  separate  petitions  and  the  creditors 
can  prove  against  each  estate  separately  ;^<^  but,  where  com- 
munity rights  exist,  it  has  been  held  that  husband  and  wife 
may  unite  in  a  joint  petition.^^  An  individual  petition  for 
the  separate  discharge  of  a  partner  after  an  adjudication  of 
the  firm  may  be  maintained,  even  though  the  firm,  as  such, 
may  not  have  been  discharged ;  but,  in  such  case,  the  petition 
and  the  notice  to  creditors  must  state  an  adjudication  of  the 
firm  as  bankrupt,  show  its  members,  and  pray  for  the  dis- 
charge of  the  petitioner  from  both  firm  and  individual  debts, 
in  order  that  the  creditors  may  have  full  notice  of  all  the  facts 
they  may  be  required  to  answer,^-  but  it  has  been  held  that  a 
prayer  for  discharge  from  "provable  debts"  is  equivalent  to 
an  application  for  discharge  from  partnership  debts.^^ 

§  139.  Proceedings  against  firm  by  member  thereof.— If  a 
petition  is  filed  to  have  a  partnership  declared  bankrupt,  and 
all  the  partners  do  not  join  in  or  assent  thereto,  notice  must 
be  given  the  non-petitioning  partners  the  same  as  in  involun- 
tary proceedings,*^   and   if  personal    service    cannot  be  had 

•■!9ln  re  Gay,  3  A.  B.  R.  529.  98  114,  122;    Forsyth  v.  Woods,  F.  C. 

F.  R.  870;  In  re  Langslow,  1  N.  B.  17992,    11    Wall.    484,    486;     In    to 

N.   232,   1   A.   B.   R.    258,   98  F.  R.  Nuns,  16  Blatch.  439,  F.  C.  10269; 

869;    but  see  Mahoney  v.  Ward,  2  In   re   Roddin,    6   Biss.   377,    F.    C. 

N.  B.  N.  R.  538,  100  F.  R.  278,  3  A.  11989;   Buffum  v.  Seaver,  16  N.  H. 

B.  R.  770;  In  re  Barden,  2  N.  B.  N.  160;  Mack  v.  Woodruff,  87  111.  570. 

R.  741,  4  A.  B.  R.  31.  101  F.  R.  553;  ^t  in  re  Ray,  1  N.  B.  N.  276. 

In  re  Farley,  115  F.  R.  359,  8  A.  B.  *-'  In  re  Meyers,  2  N.  B.  N.  R.  11], 

R.  266.  97  F.  R.  757,  3  A.  B.  R.  260. 

40  In  re  Altman.  1  N.  B.  N.  358,  ^-i  In  re  Pierson,  10  N.  B.  R.  107. 

1  A.  B.  R.  689 ;  In  re  Moore,  5  Biss.  F.   C.  11153. 

79,   F.   C.   9750;    ex  p.  Weston.   12  ^4  G.  O.  VIII:  In  re  Laughlin,  96 

Met.  1;  Harmon  v.  Clark,  13  Gray.  F.  R.  589;  In  re  McFaun,  96  F.  R. 


Ch.  5  BANKRUPTCY  OF  PARTNERSHIP.  99 

notice  should  be  given  by  publication.^^  If  due  notice  be 
served  on  a  non-petitioning  partner  and  he  enters  no  appear- 
ance and  is  defaulted,  further  proceedings  will  be  deemed 
voluntary  on  the  part  of  all  partners.^*^  If  one  or  more  of  the 
members  of  a  firm  are  not  made  parties,  the  adjudication  will 
not  be  made,^^  and  such  jurisdictional  defect  is  not  cured  by 
a  consent  signed  for  the  non- joining  partners  filed  after  the 
adjudication.^^  It  has  been  held  that  where  partners  are  not 
named  in  the  petition,  the  court  will  not  order  their  joinder 
on  a  bill  filed  by  the  creditors,  but  the  creditors  may  have  the 
same  remedy  against  them  as  they  would  have  had  before  the 
j)etition  was  filed.^^ 

Any  member  of  a  partnership  refusing  to  join  in  a  petition 
to  have  the  firm  adjudicated  bankrupt,  is  entitled  to  resist  the 
prayer  of  the  petition  in  the  same  manner  as  if  the  petition 
had  been  filed  by  a  creditor  of  the  partnership,  and  he  has 
the  right  to  appear  at  the  time  fixed  by  the  court  for  the 
hearing,  and  to  make  proof  if  he  can,  that  the  partnership  is 
not  insolvent  or  has  not  committed  an  act  of  bankruptcy,  and 
to  inake  all  defenses  which  any  debtor  proceeded  against  is 
entitled  to  make;  and  in  case  an  adjudication  of  bankruptcy 
is  made  upon  the  petition  such  partner  must  file  a  schedule  of 
his  debts  and  an  inventory  of  his  proj^erty  in  the  same  manner 
as  is  required  in  case  of  debtors  against  whom  adjudication 
of  bankruptcy  is  made.^^  In  the  case  of  the  partner  filing  the 
petition,  the  proceedings  are  voluntary,  but  as  to  the  dissent- 

592 ;  In  re  Meyers,  1  N.  B.  N.  515,  47  in  re  Altman,  1  N.  B.  N.  358, 

96  F.  R.  408;  In  re  Lewis,  1  N.  B.  1  A.  B.  R.  689;  In  re  Pitt,  14  N.  B. 

R.  19,  2  Ben.  96,  F.  C.  8311;   In  re  R.  59,  8  Ben.  389,  F.  C.  11188;  In  re 

Penn,  5  N.  B.  R.  30,  5  Ben.  89,  F.  C.  Lewis.  1  N.  B.  R.  19,  2  Ben.  96,  F. 

10927;    In  re  Noonan,  10  N.  B.  R.  C.  8311;   In  re  Freund,  1  N.  B.  N. 

330,  3  Biss.  491,  F.  C.  10292;   In  re  105,  1  A.  B.  R.  25;   In  re  Elliott.  2 

Prinkard,    1    N.    B.    R.    51,    F.    C.  N.    B.    N.    R.    350;     Citizens'    Nat. 

11366;    In  re  Moore,  5  Biss.  79,  F.  Bk.  v.  Cass,  18  N.  B.  R.  279,  F.  C. 

C.  9750;    In  re  Hartman,  96  F.  R.  2732. 

593.  48  In  re  Altman,  1  N.  B.  N.  358, 

45  In  re  Murray,  1  N.  B.  N.  532,  3  1  A.  B.  R.  689;  s.  c.  1  N.  B.  N.  407, 
A.  B.  R.  90;  In  re  Russell,  1  N.  B.  95  F.  R.  263,  2  A.  B.  R.  407. 

N.  532.  97  F.  R.  32,  3  A.  B.  R.  91:  40  Bank  v.  Cass,  18  N.  B.  R.  279, 

In  re  Temple,  17  N.   B.  R.  345.  4     F.  C.  2732. 
Saw.  62,  F.  C.  13825.  r.o  G.  O.  VIII. 

46  In  re  Carleton,  115  F.  R.  246, 
8  A.  B.  R.  270. 


lOU  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

ing  partners  they  are  involuntary  and  subject  to  the  rules 
governing  involuntary  bankruptcy.^^  In  involuntary  bank- 
ruptcy, an  objection  that  the  petitioner  and  the  alleged 
bankrupt  are  partners  is  not  determinable  on  a  preliminary 
objection  to  the  jurisdiction,  where  the  arrangements  between 
the  parties  is  one  going  to  the  merits  of  the  controversy .^- 

§  140.  Effect  of  proceedings  on  nominal  and  secret  or 
dormant  partners. — A  secret  partner  whose  firm  commits  an 
act  of  bankruptcy  may  be  adjudged  bankrupt  although  indi- 
vidually entirely  solvent,-'"  and  it  has  been  held  that  the  law 
is  restricted  to  the  case  of  an  actual  partnership  between  the 
parties  and  not  to  a  partnership  as  to  creditors  only  where 
there  is  no  joint  estate.^'"*  It  is  not  essential  to  the  validity  of 
an  adjudication  against  a  partnership  that  a  secret  or  dormant 
partner  should  be  made  a  defendant,  since  the  firm  property  is 
bound  by  an  adjudication  made  against  the  ostensible  part- 
ners.^'"' There  is  no  reason  why  a  dormant  partner  may  not  be 
either  included  in  an  adjudication  against  the  firm,  or  be  ad- 
judged bankrupt  on  a  petition  against  him  separately ,^^  which 
rule  would  doubtless  be  true  of  nominal  partners,^^  since  on(i 
who  permits  himself  to  be  held  out  as  a  partner  may  be  ad- 
judged a  bankrupt  as  a  member  of  the  firm,  at  the  suit  of  the 
creditors.^^  In  the  event  of  the  after  discovery  of  a  dormant 
partner,  an  adjudication  against  the  nominal  firm  will  permit 
the  opening  of  the  proceedings  and  bringing  in  the  dormant 
partner  without  requiring  a  new  petition  to  be  filed.^'^  To 
charge  a  person  as  a  silent  partner,  and  thus  debar  him  from 
his  claims  as  a  creditor,  an  actual  and  definite  agreement, 
binding  on  all  i)arties,  must  be  proved.^^ 

§  141.  Effect  of  the  death  or  insanity  of  a  partner.— xVfter 
the  filing  of  a  petition  the  death  or  insanity  of  a  partner  will 
not  abate  the  proceedings,  but  they  are  continued  in  the  same 

51  Medsker  v.  Bonebrake,  108  U.  C.  Rep.  565;  In  re  Harris,  2  N.  B. 
S.  66.               X  N.  R.  868. 

52  In  re  Schenklin,  113  F.  R.  421.  •>';  Ex  p.  Hamper,  17  Ves.  403. 

53  In  re  Ess.,  7  N.  B.  R.  133,  3  ■'■!  Lindley  on  Part.,  p.  650. 
Blss.  301,  F.  C.  4530.  ss  in  re  Krueger,  5  N.  B.  R.  439, 

54  In  re  Kenney,  97  F.  R.  554,  3  2  Low.  66,  F.  C.  7941. 

A.  B.  R.  353;  see  also  In  re  Down-  59  In  re  Scott,  1  N.  B.  N.  327. 

ing,  3  N.  B.  R.  748;  Lett  v.  Young,  eo  in  re  Clark,  111  F.  R.  893,  7 

109  F.  R.  798,  6  A.  B.  R.  486.  A.  B.  R.  96;   In  re  Harris,  108  F. 

55  Metcalf  V.   Officer,   Dillons  C.  R.  517. 


^ii   5         BANKRUPTCY  OF  PARTNERSHIP.         101 

manner,  so  far  as  possible,  as  tlioiigli  he  had  not  died  or 
become  insane." ^  A  surviving  partner  who  commits  an  act 
of  bankruptcy  with  respect  to  the  joint  property  can  be 
adjudged  bankrupt  individualiy,"^  and  it  has  been  hekl  that 
where  the  firm  is  dissolved  by  the  death  of  one  partner,  the 
firm  cannot  be  adjudicated,''^  though  the  survivor  may  be 
individually  and  as  surviving  member  of  the  firm,''^  and  the 
individual  estate  of  the  deceased  would  still  be  liable  for  the 
partnership  debts.'^^  It  has  been  held  that  the  guardian  of 
a  partner  who  becomes  insane  before  adjudication,  may  con- 
sent to  the  administration  of  the  estate  in  bankruptcy,'^*'  though 
this  position  does  not  seem  tenable,  if  the  party  became  insane 
before  the  petition  was  filed. 

§  142.  Proceedings  against  solvent  partner.— If  a  firm  be 
insolvent,  but  one  partner  thereof  solvent,  the  creditors  may 
proceed  against  both  the  firm  and  the  solvent  partner,  but 
the  latter  may  clear  himself  by  paying  all  the  debts."" 

§  143.  Proceedings  in  case  of  defunct  firms  and  retired 
partners. — A  member  of  a  defunct  partnership,  desiring  ad- 
judication and  discharge  from  partnership  debts,  must  make 
the  other  members  parties,  and  the  fact  that  partnership 
creditors  have  filed  their  claims  against  his  estate  does  not 
remove  the  necessit3^  A  petition  may  be  amended  to  include 
the  firm  and  its  other  members,"''  even  after  adjudication,"^ 
since  for  the  purposes  of  the  law  a  partnership  is  in  existence 
so  long  as  there  are  outstanding  assets  or  liabilities  and  the 
joint  afi'airs  are  unsettled,  and  just  so  long  will  a  retired 
partner  remain  subject  to  proceedings  in  bankruptcy.'^'* 

§  144.  Necessary  averments  of  petition.— A  voluntary  pro- 
ceeding   by    partners    requires   no    act    of   bankruptcy   to   be 

61  Sec.  8,  act  of  1898;  Hunt  v.  er,  in  re  O'Brien,  2  N.  B.  N.  R. 
Pooke.  5  N.  B.  R.  161.  F.  C.  6896.  312. 

62  In  re  Meyer,  98  F.  R.  976;  67  in  re  Bennett,  12  N.  B.  R.  181, 
aff'g  1  N.  B.  N.  304,  1  A.  B.  R.  565,  2  Lowell,  400,  F.  C.  1314. 

92  F.  R.  896;    In  re  Stevens,  5  N.         6s  in    re   Elliott.    2   N.   B.   N.    R. 
B.  R.  112,  1  Sawy.  397,  F.  C.  13393.     S50;   In  re  Freund,  1  N.  B.  N.  105. 

63  In  re  Temple.  17  N.  B.  R.  345,     1  A.  B.  R.  25. 

4  Sawy.  92,  F.  C.  13825.  69  in  re  McFaun.  3  A.  B.  R.  66, 

64  In  re  Stevens,  5  N.  B.  R.  112.     96  F.  R.  592. 

1  Sawy.  397,  F.  C.  13393.  vo  in   re  Grady,  3  N.  B.  R.   227, 

65Vaccaro  Bank,  2  N.  B.  N.  R.     F.   C.  5654;     Parker  v.  Phillips,   2 

1037,  103  F.  R.  436.  Gush.  175;  In  re  Grockett,  2  Ben, 

514,  F.  G.  3402. 


102  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

alleged,  but  merely  au  averment  that  they  owe  debts  and  are 
willing  to  surrender  their  estate.'^  If  one  partner  files  the 
petition  and  it  is  not  proposed  to  adjudicate  the  firm  bank- 
rupt, it  must  show  that  the  petitioner  was  a  member  of  the 
iirm,  and  must  aver  that  he  asks  a  discharge  against  firm 
creditors,  as  well  as  individual  creditors^-  If  the  adjudica- 
tion be  against  the  firm  and  administration  of  its  assets  in 
bankruptcy  are  sought,  the  petition  should  so  state.'^^  Where 
insolvency  is  an  essential  part  of  the  act  of  bankruptcy,  the 
insolvency  of  the  firm  and  every  member  must  be  averred, 
since  a  partnership  is  not  insolvent  so  long  as  the  joint, 
together  with  the  separate  property  of  the  partners  liable  for 
the  joint  debts  is  sufficient  to  pay  its  debts,  and  this  is  true 
though  the  only  partner  whose  individual  estate  is  sufficient 
to  render  the  partnership  solvent  is  dead  J  ^  A  partnership 
is  a  distinct  entity  requiring  a  petition  specifically  directed 
against  it,  alleging  an  act  of  bankruptcy  in  \vhich  it  is  ex- 
pressly involved,  and  resulting  in  an  adjudication  of  the 
partnership  itself,  in  addition  to  any  that  may  be  made 
against  the  individual  membersJ^  The  converse  of  this  is 
equally  trueJ*^ 

All  the  members  of  a  firm  petitioning  for  the  benefit  of  the 
act  are  jointly  and  severally  bound  to  make  statements  of 
their  assets  and  debts,  whether  partnership  or  individual,  or 
due  by  them  jointly  with  other  persons  not  parties  to  the 
petition,"^"  but  the  fact  that  one  member  does  not  file  a 
schedule  of  debts  or  inventory  of  effects,  nor  deliver  his  prop- 
erty into  the  hands  of  the  trustee,  does  not  affect  the  right 
of  the  other  members  to  receive  a  dischargeJ^ 

-1  In  re  Penn,  5  N.  B.  R.  30,  5         74  Vaccaro  v.  Bk.,  2  N.  B.  N.  R. 

Ben.  89,  F.  C.  10927.  1037,   103   F.  R.  436;    In   re  Blair, 

T2  In  re  Russell,  1  N.  B.  N.  532.  2  N.  B.  N.  R.  364,  99  F.  R.  76,  3  A. 

3  A.  B.  R.  91,  97  F.  R.  32;   In  re  B.  R.  588;  Davis  v.  Stevens,  104  F. 

Laughlin,  96  F.  R.  589;  In  re  Hart-  R.  235;    Hanson  v.   Paige,  3  Gray, 

man,  96  F.  R.  593.  239. 

73  In   re    Miller,    104   F.   R.   764;  ts  in  re  Mercur,  115  F.  R.  655,  8 

Davis  V.  Stevens,  3  N.  R.  N.  R.  131,  A.  B.  R.  275,  and  cases  cited. 
104  F.  R.  235;  In  re  Blair,  2  N.  B.         ^g  in  re  Hale,  107  F.  R.  432,  6  A. 

N.  R.  364,  99  F.  R.  76,  3  A.  B.  R.  B.  R.  35. 

588;    In  re  Meyer,  98  F.  R.  976,  3         "  In  re  Leland,  5  N.  B.  R.  222, 

A.  B.  R.  559;  aff'g  1  N.  B.  N.  304,  5  Ben.  168,  F.  C.  8288. 
1  A.  B.  R.  565,  92  F.  R.  896;  In  re         7>  in  re  Schofield,  3  N.  B.  R.  137, 

Bennett,  12  N.  B.  R.  181,  2  Lowell,  F.  C.  12509. 
400,  F.  C.  1314. 


Cu.  5         BANKRUPTCY  OF  PARTNERSHIP.         103 

§  145.  Acts  of  bankruptcy.— Under  the  former  Acts,  there 
could  not  be  an  adjudication  of  all  the  partners,  which  was 
necessary  in  order  to  adjudge  the  firm  bankrupt,  uniess  a 
joint  act  of  bankruptcy  had  been  committed,  or  each  had 
individually  committed  an  act  of  bankruptcy ,'''9  but,  under 
the  present  law  a  partnership  is  considered  an  ** entity"  and 
may  commit  an  act  of  bankruptcy,  and  be  adjudged  bankrupt, 
though  neither  partner  can  be  so  adjudged,^*^  or  the  individual 
partners  may  each  commit  an  act  of  bankruptcy,  as  to  the 
partnership  assets,  as  by  conveying  their  individual  property 
in  fraud  of  firm  creditors^^  or  otherwise,  though  the  partner- 
ship, as  such,  has  committed  none,"^-  or  where  a  general  assign- 
ment is  made  although  executed  by  one  partner  only,^^  or 
where  a  receiver  or  trustee  is  appointed  to  take  charge  of  the 
property^^  although  on  the  application  of  some  members  of 
the  firm  only.^^ 

It  is  an  act  of  bankruptcy  to  take  the  property  of  an  insol- 
vent firm  to  pay  a  debt  which  is  not  a  partnership  debt,  but 
for  which  one  of  the  partners  is  liable  f^  and  the  same  is  true 
if  one  partner  transfers  his  interest  to  the  others'^  or  firm 
assets  to  a  third  person^^  with  the  object  of  hindering  or 
defeating  creditors.  It  has  been  held  not  to  be  an  act  of 
bankruptcy  for  a  firm  to  give  a  chattel  mortgage  to  secure  a 
debt  incurred  by  an  individual  member  of  the  firm,  for  the 
firm's  benefit,^''  or  for  a  solvent  partner,  to  whom  the  whole 

79  In  re  Redmond,  9  N.  B.  R.  408,  1  A.  B.  R.  565,  92  F.  R.  896 ;  In  re 

F.  C.  11632;  In  re  Penn,  5  N.  B.  R.  Rosenbaum,  1  N.  B.  N.  541. 

30,  5  Ben.  89;  In  re  Noonan,  10  N.  s*  Sec.  3,  act  of  1903. 

B.   R.    331,    3   Biss.    491;    Doan   v.  S5  Mather  v.  Coe,  92  F.  R.  333,  1 

Compton.  2  N.  B.  R.  607;  James  v.  A.  B.  R.  504. 

Atlantic  Delaine  Co..  11  N.  B.  R.  ss  in  re  Malot,  16  N.  B.  R.  485, 

390,  F.  C.  7179.  F.  C.  9282. 

so  In  re  Meyer,  98  F.  R.  976,  3  A.  §7  in  re  Bergman,  2  N.  B.  N.  R. 

B.  R.  559;   aff'g  1  N.  B.  N.  304,  1  806;    Burrill    v.    Lawry,    18    N.    B. 

A.  B.  R.  565,  92  F.  R.  896;   In  re  R.  387,  2  Hask.  228;  but  see  In  re 

Barden,  4  A.  B.  R.  31;    Strauss  v.  Redmond.  2  N.  B.  N.  R.  3975,  102 

Hooper,  5  A.  B.  R.   225,  105  F.  R.  F.  R.  750,  4  A.  B.  R.  531,  2  N.  B. 

590.  N.  R.  769;  In  re  Loclcerby,  3  N.  B. 

-^i  In  re  Redmond.  9  N.  B.  R.  408,  N.  R.  7,  F.  C.  2199. 

F.  C.  11632.  ss  In  re  Shapiro,  106  F.  R.  495,  5 

S2  In  re  Rosenbaum.  1  N.  B.  N.  A.  B.  R.  839. 

541.  89  Wait  V.  Bk.,  19  N.  B.  R.  500, 

83  In   re  Meyer,  98  F.  R.   976,  3  F.  C.  17043. 
A.  B.  R.  559;   aff'g  1  N.  B.  N.  304, 


104  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  ."■) 

stock  has  been  transferred  upon  dissolution  of  the  partner- 
ship, to  make  a  sale  in  gross  of  such  stock  f^  or  to  transfer  in 
good  faith,  his  interest  in  the  firm,  prior  to  bankruptcy .^^^ 

§  146.  Insolvency  of  a  partnership.— To  constitute  insol- 
vency on  the  part  of  a  partnership  the  property  of  the  firm, 
together  with  that  of  all  the  partners  applicable  to  the  part- 
nership debts,  must  be  insufficient  to  pay  such  debts.^- 

§  147.    Discharge  of  partnership  and  members  of  a  firm.— 

A  discharge  is  granted  to  a  partnership  upon  the  same  terms 
and  under  the  same  conditions  as  to  any  other  persons  and 
therefore  the  general  discussion  of  discharges  and  grounds  of 
opposition  thereto  which  is  given  elsewhere^^  will  apply 
equally  here. 

§  148.  EfiFect  of  dealing  between  partners.— One  member  of 
a  firm  cannot  estop  himself  as  between  himself  and  the  firm's 
creditors,  by  any  dealings  with  a  partner,  from  any  duty  that 
he  owes  such  creditors,  or  deprive  such  creditors  of  any  rights 
or  remedies  f^  as  by  transferring  his  interest  in  the  firm  to  the 
other  partner  to  enable  the  latter  to  claim  exemptions  out  of 
the  firm's  assets.^  If  a  partner  has  an  enforceable  claim 
against  his  partner,  not  connected  Mnth  the  partnership,  or  if 
a  balance  has  been  struck  and  acknowledged,  he  may  prove 
his  claim  against  his  partner's  estate,  but  can  receive  no 
dividend  until  all  joint  debts  are  paid.- 

§  149.  Composition. — Partnerships  may  enter  into  composi- 
tions with  their  creditors,  the  same  as  individuals.  When  one 
partner  proposes  a  composition,  the  majority  in  number  and 
amount  of  creditors,  whose  acceptance  in  writing  is  required, 
may   be    composed   of   individual   and   partnership    creditors, 

90  In  re  Weaver,  9  N.  B.  R.  132.  ■'••  See  post.  §§  373,  374. 

F.  C.  17307.  "'i  In  re  Polidori,  2  N.  B.  N.  R 

01  Shiner  v.  Huber,  19  N.  B.  R.  945;  In  re  Gorman,  18  N.  B.  R.  419, 

414,   F.   C.   12787;     Russell   v.   Mc-  9  Biss.  23,  F.  C.  5624. 

Cord,  17  N.  B.  R.  508,  2  Flip.  139,  i  In   re   Rosenbaum,   1   N.  B.  N. 

F.  C.  157.  541;   In  re  Bergman,  2  N.  B.  N.  R. 

f'2  Davis  V.  Stevens.  104  F.  R.  235,  806;-  but  see  In  re  Rudnick,  2  N. 

3  N.  B.  N.  R.  131;  Vaccaro  v.  Bk.,  B.  N.  R.  975,  102  F.  R.  750,  4  A.  B. 
2  N.  B.  N.  R-.  1037,  103  F.  R.  436,  R.  531;  rev'g  2  N.  B.  N.  R.  769;  In 

4  A.  B.  R.  474;  In  re  Blair,  2  N.  B.  re  Lockerby.  3  N.  B.  N.  R.  7. 

N.  R.  364,  99  F.  R.  76,  3  A.  B.  R.         2  Ex  p.  Richardson,  3  Dea.  &  Ch. 
588;  Hanson  v.  Paige,  3  Gray,  239.     244;   Ex  p.  Briggs.  Id.  367. 


ClI.  5  PARTNERSHIP— C0MP0SIT:0N.  105 

whose  claims  have  been  allowed,^  but  a  special  partner  would 
seem  to  have  no  right  to  take  part  in  composition  proceedings 
by  a  firm.^  An  individual  member  may  properly  propose  a 
composition  to  his  and  firm  creditors,  and  such  composition 
will  be  valid  if  accepted  by  the  requisite  number,^  A  partner 
cannot  have  a  composition  set  aside  and  his  firm  put  into 
bankruptcy  by  setting  up  his  own  fraud  in  effecting  the 
composition.'' 

§150.  'b.  Administration  of  estate.— The  creditors  of  the 
'partnership  shall  appoint  the  trustee;  in  other  respects  so 
'far  as  possible  the  estate  shall  be  administered  as  herein 
'provided  for  other  estates.' 

§  151.  Choice  of  trustee.— Upon  the  adjudication  of  a  firm 
in  bankruptcy,  whether  there  are  firm  assets  or  not,  the  cred- 
itors of  the  individual  members  have  no  voice  whatever  in 
the  election  of  a  trustee,  this  being  by  statute  left  entirely  to 
the  firm  creditors;"  and  the  choice  must  be  by  a  majority  in 
number  and  amount  of  creditors  whose  claims  have  been 
proved  and  allowed,*^  but  if  the  creditors  fail  to  elect,^  or  if  a 
majority  in  number  vote  for  one  person  and  a  majority  in 
amount  for  another,  the  judge  or  referee  may  appoint.^^  In 
the  case  of  the  separate  bankruptcy  of  one  member  of  a  firm, 
both  joint  and  separate  creditors  may  prove  their  debts  and 
vote  for  trustee,!!  though  all  the  assets  are  partnership 
assets.! - 

§152.     'c.    Jurisdiction  over  partners.— The  court  of  bank- 

3  In  re  Spades,  13  N.  B.  R.  72,  6  s  Sec.  56,  act  of  1898 ;  In  re 
Biss.  448,  F.  C.  13196.  Brown,  2  N.  B.  R.  590;  In' re  Lew- 

4  In  re  Henry,  17  N.  B.  R.  463,  insohn,  2  N.  B.  N.  R.  315,  3  A.  B. 
9  Ben.  449,  F.  C.  6730.  R.  299,  98  F.  R.  576;  In  re  Scheif- 

•"'  Pool  V.  McDonald,  15  N.  B.  R.  ler,  2  N.  B.  R.  179,  F.  C.  12445. 

560,  F.  C.  11368.  o  Sec.    44,    act    of    1898;     In    re 

6  In  re  Hamlin,  16  N.  B.  R.  522,  Brooke,  2  N.  B.  N.  R.  680,  100  F.  R. 

8  Biss.  122,  F.  C.  5994.  432,  4  A.  B.  R.  50. 

-  In  re  Eagles  &  Crisp,  99  F.  R.  m  In  re  Richards,  2  N.  B.  N.  R. 

696,  3  A.  B.  R.  733,  2  N.  B.  N.  R.  1024. 

462;  In  re  Phelps,  1  N.  B.  R.  139.  F.  n  In  re  Webb,  16  N.  B.  R.  253,  4 

C.  11071;  In  re  Scheiffer.  2  N.  B.  R.  Sawy.  326.  F.  C.  17317;  In  re  Falk- 

179,  F.  C.  12445;   Amsink  v.  Bean,  ner,   16  N.  B.   R.  503,  F.  C.  4624; 

11  N.  B.  R.  495,  22  Wall.  395;  s.  c.  Wilkins  v.  Davis,  2  Lowell,  511,  F. 

8  N.  B.  R.  228,  10  Blatch.  361,  F.  C.  C.  17664. 

3167;    Atkinson  v.  Kellogg,  10  N.  12  in  re   Beck,   110  F.  R.  140,  6 

B.  R.  535,  F.  C.  613.  A.  B.  R.  554. 


106  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

'ruptcy  which  has  jurisdiction  of  one  of  the  partners  may 
'have  jurisdiction  of  all  the  partners  and  of  the  administra- 
tion of  the  partnership  and  individual  property. '^^ 

§  153.  Jurisdiction  in  general.— This  clause  assumes  that 
the  proceeding  is  for  the  adjudication  of  the  firm.  In  case 
two  or  more  petitions  are  filed  against  the  same  partnership 
in  difi^erent  courts,  each  having  jurisdiction  over  the  case,  the 
petition  first  filed  must  be  first  heard,  and  may  be  amended  by 
the  insertion  of  an  allegation  of  an  earlier  act  of  bankruptcy 
than  that  first  alleged,  if  such  earlier  act  is  charged  in  either 
of  the  other  petitions;  and,  in  either  case,  the  proceedings 
upon  the  other  petitions  must  be  stayed  until  an  adjudication 
is  made  upon  the  petition  first  heard;  and  the  court  which 
makes  the  first  adjudication  of  bankruptcy  shall  retain  juris- 
diction over  all  proceedings  therein  until  the  same  shall  be 
closed.  In  case  two  or  more  petitions  are  filed  in  different 
districts  by  different  members  of  the  same  partnership  for  an 
adjudication  of  bankruptcy  of  said  partnership,  the  court  in 
which  the  petition  is  first  filed  having  jurisdiction  should  take 
and  retain  jurisdiction  over  all  proceedings  in  such  bank- 
ruptcy until  the  same  are  closed;  and  if  such  petitions  are 
filed  in  the  same  district  action  must  be  first  had  upon  the  one 
first  filed.  But  the  court  so  retaining  jurisdiction  must,  if 
satisfied  that  it  is  for  the  greatest  convenience  of  parties  in 
interest  that  another  of  said  courts  proceed  with  the  cases, 
order  them  to  be  transferred  to  that  court.^^  Although  if  the 
second  petition  is  not  filed  until  after  the  selection  of  the 
trustee  and  he  has  started  to  administer  the  estate,  unless  very 
good  reasons  should  be  shown  therefor,  the  case  would  not  be 
transferred.  A  transfer  will  not  be  ordered  upon  the  petition 
of  creditors  who  have  received  preferences  which  they  do  not 
offer  to  surrender.^  ^ 

So  long  as  there  is  either  partnership  property  to  be  admin- 
istered, or  partnership  debts  to  be  paid,  everybody,  whether 
creditors  or  partners,  having  an  interest  in  the  fund  or  lia- 
bility  existing,   should    be    before   the   court   and   within   its 

13  Analogous  provision  of  Act  of  elusive  jurisdiction  over  the  case. 

1867.    Sec.  36.     .     .     .     If  such  co-  i*  Gen.  Orders,  VI;   In  re  Sears, 

partners    reside    in    different    dis-  112  F.  R.  58,  7  A.  B.  R.  279. 

tricts,  that  court  in  which  the  pe-  i".  In  re  Sears,  supra, 
tition  is  first  filed  shall  retain  ex- 


Ch.  5        PARTNERSHIP— JURISDICTION    IN    GENERAL.  107 

jurisdiction,  that  its  decision  may  be  final.^*^  If  a  firm  does 
business  and  one  of  its  members  lives  in  tlie  United  States, 
the  court  has  jurisdiction  as  to  him  and  the  firm  in  involun- 
tary proceedings,  although  another  member  lives  abroad.^ '^  If 
a  firm  has  its  only  place  of  business  within  a  given  district  for 
more  than  three  months  before  the  petition  is  filed  against  it 
in  such  district,  the  court  therein  will  have  jurisdiction,  al- 
though during  part  of  the  time  the  only  business  carried  on 
was  to  wind  up  the  affairs  of  the  firm  by  several  of  the 
partners,  the  others  having  retired.^ '^  The  question  as  to  the 
jurisdiction  of  the  bankruptcy  court  over  the  assets  of  an 
alleged  bankrupt,  held  by  a  receiver  under  a  state  court,  does 
not  affect  the  jurisdiction  of  the  court  to  proceed  to  an  adju- 
dication, and  cannot  be  raised  at  the  filing  of  the  petition.^s 

§  154.  *d.  Accounts.— The  trustees  shall  keep  separate 
'accounts  of  the  partnership  property  and  of  the  property 
'belonging  to  the  individual  partners.'-*' 

§155.  'e.  Payment  of  expenses.— The  expenses  shall  be 
'paid  from  the  partnership  property  and  the  individual  prop- 
'ert}'  in  such  proportions  as  the  court  shall  determine.' 

§  156.  Expenses  of  administration.— Where  there  are  assets 
of  the  firm  and  of  one  or  more  individual  members,  the  joint 
estate  and  the  individual  estates  must  each  pay  its  proportion 
of  the  expenses  of  administration.-^  Except  in  the  matter  of 
expense,  it  is  of  no  consequence  whether  there  are  two  pro- 
ceedings or  only  one  by  or  against  partners,  for  the  rights  of 
creditors  and  others  are  the  same.--  The  expenses  of  ad- 
ministration must  be  reported  in  detail  under  oath,  and  be 
examined  and  approved  or  disapproved  by  the  court  of  bank- 
ruptcy or  referee.-^ 

§157.     'f.     Distribution  of  proceeds.— The  net  proceeds  of 

16  In  re  Freund,  1  N.  B.  N.  105,  1  signee    .     .    .     shall  also  keep  sep- 

A.  B.  R.  25.  arate  accounts  of  the  joint  stock  or 

IT  In  re  Burton.  17  N.  B.  R.  212,  property  in  such  proportions  as  the 

9  Ben.  324,  P.  C.  2214.  court  shall  determine. 

18  In  re  Blair,  2  N.  B.  N.  R.  364,  21  in  re  Smith,  13  N.  B.  R.  500, 

99  F.  R.  76,  3  A.  B.  R.  588.  F.  C.  12987;    Atkinson  v.  Kellogg, 

10  In  re  Kersten,  110  F.  R.  929,  10  N.  B.  R.  535,  F.  C.  613. 

6  A.  B.  R.  516.  22  In  re  Morse,  13  N.  B.  R.  376, 

20  Analogous  provision  of  Act  of  F.  C.  9854. 

1867.      Sec.    36.     .     .     .     The    as-  23  Sec.  62,  Act  of  1898. 


108 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch.5 


*the  partnership  property  shall  be  appropriated  to  the  payment 
'of  the  partnership  debts,  and  the  net  proceeds  of  the  indi- 
'  vidual  estate  of  each  partner  to  the  payment  of  his  individual 
'debts.  Should  any  surplus  remain  of  the  property  of  any 
'partner  after  paying  his  individual  debts,  such  surplus  shall 
'be  added  to  the  partnership  assets  and  be  applied  to  the 
'payment  of  the  partnership  del>ts.  Should  any  surplus  of 
'the  partnership  property  remain  after  paying  the  partner- 
'ship  debts,  such  surplus  shall  be  added  to  the  assets  of  the 
'individual  partners  in  the  proportion  of  their  respective 
'interests  in  the  partnership.' 

§  158.  Rule  of  distribution.— This  subdivision  prescribes 
the  rule  for  the  distribution  of  assets  between  individual  and 
firm  creditors  of  bankrupt  partners,  and  applies  not  only  to 
the  case  of  the  adjudication  of  the  partnership  as  such,  but 
also  where  a  member  of  the  firm  is  adjudged  bankrupt  in  his 
individual  capacity.-^  It  is  but  a  reaffirmance  of  the  equity 
"jnle  which  remits  joint  creditors  primarily  to  the  joint  fund 
and  the  individual  creditors  to  the  individual  fund.^^ 


24  In  re  Wilcox,  94  F.  R.  84.  1  N. 

B.  N.  494,  2  A.  B.  R.  117;  In  re 
Denning,  114  F.  R.  219. 

25  A  similar  rule  existed  under 
the  former  acts.  In  re  Jewett,  1 
N.  B.  R.  131;  In  re  Byrne,  1  N.  B. 
R.  122;  Collins  v.  Hood,  4  McLean, 
186,  F.  C.  3015;  In  re  Williams,  F. 

C.  17702;  In  re  Warren,  F.  C. 
17191;  In  re  Lowe,  11  N.  B.  R.  221, 
F  O.  8564;  In  re  Ingalls,  F.  C. 
7032;  In  re  Smith,  13  N.  B.  R. 
500,  F.  C.  12987;  In  re  Marwick,  F. 
C  9181;  In  re  Dunham,  1  Hask. 
495,  F.  C.  4144;  In  re  Morse,  13  N. 
B.  R.  376,  F.  C.  9854;  In  re  Mc- 
Lean, 15  N.  B.  R.  333,  F.  C.  8879; 
See  Amsink  v.  Bean,  11  N.  B.  R. 
495,  22  Wall.  395;  but  this  rule 
only  applied  where  both  estates 
were  before  the  court  for  distribu- 
tion; In  re  Downing,  3  N.  B.  R. 
182,  1  Dill.  33,  F.  C.  4044;  U.  S.  v. 
Lewis.  13  N.  B.  R.  33,  F.  C.  15595; 
In  re  Pease,  13  N.  B.  R.  168.  F.  C. 


10881,  and  it  held  that  where  there 
was  no  joint  estate  the  joint  cred- 
itors could  receive  no  dividends 
until  the  individual  creditors  were 
fully  paid;  In  re  Byrne,  1  N.  B.  R. 
122,  F.  C.  2270,  though  the  later 
cases  deny  this  doctrine;  In  re 
Knight,  8  N.  B.  R.  436,  F.  C.  7880, 
2  Biss.  518;  In  re  McEwen,  12  N. 
B.  R.  11,  6  Biss.  294,  F.  C.  8783; 
In  re  Slocum,  F.  C.  12951;  aff'g 
12950;  In  re  Jewett,  1  N.  B.  R. 
130,  F.  C.  7304.  It  was  also  held 
that  the  rule  preferring  partner- 
ship property  to  the  payment  of 
partnership  debts  was  for  the  ben- 
efit of  the  partners  and  that  they 
might  waive  it.  In  re  Kahley,  4 
N.  B  R.  124,  2  Biss.  383,  F.  C. 
7593;  and  that  subject  to  this  rule, 
the  assets  of  the  separate  estates 
of  partners  as  well  as  that  of  the 
partnership  might  be  resorted  to 
for  payment  of  a  partnership  debt; 
Mead    v.    Bk.,    2    N.    B.    R.    65,    6 


Ch.  5  PARTNERSHIP— DISTRIBUTION    OP    ASSETS.  109 

The  same  rule  applies  whether  the  proceeding  is  on  behalf 
of  a  partnership  or  an  individual,  and  partnership  creditors 
cannot  resort  to  the  individual  assets  until  the  individual 
creditors  have  been  paid  in  full,  and  vice  versa,^^  and  this 
rule  prevails  notwithstanding  the  fact  that  there  are  no  part- 
nership assets  and  is  still  true  where  a  member  of  a  copartner- 
ship is  adjudged  bankrupt  in  his  individual  capacity.-^  The 
adjudication  of  the  firm  will  subject  the  separate  estates  of 
the  partners,  as  well  as  the  firm  property,  to  administration  in 
bankruptcy,  if  an  act  of  bankruptcy  has  been  committed  by 
the  firm,  as  such,  although  the  partners  or  some  of  them  indi- 
vidually have  not  committed  nor  participated  in  committing 
any  act  upon  which  as  individuals  they  could  be  adjudged 
bankrupts.-^  The  only  way  in  which  the  assets  of  a  firm  can 
be  administered  in  bankruptcy  (except  by  consent  of  the 
solvent  partners)  is  by  putting  the  firm  into  bankruptcy; 
and  if  a  sole  surviving  or  liquidating  partner  commits  an  act 
of  bankruptcy  he  in  his  individual  capacity  and  as  surviving 
partner  may  be  adjudged  bankrupt  and  the  partnership  assets 
and  his  separate  estate  may  be  administered  under  the  act.-'-' 
Real  estate  held  by  a  firm  is  generally  held  by  the  members 
as  tenants  in  common,  but  when  it  is  firm  property  firm 
creditors  are  entitled  to  payment  from  the  proceeds  thereof 
before  a  judgment  of  an  individual  partner.^o 

§159.    Absence  of  firm  assets  and  solvent    partner.— The 

Blatch.  180,  F.  C.  9366;   and  even  B.  R.  559;  aff'g  1  N.  B.  N.  304,  1  A. 

that   joint   creditors    of    partners  B.   R.   565,    92   F.   R.    896;     In   re 

might  share  equally  with  the  part-  Rosenbaum,  1  N.  B.  N.  541;   In  re 

nership   creditors   in   the   partner-  Blair,  2  N.  B.  N.  R.  364,  99  F.  R. 

ship  assets.     In  re  Nims,  18  N.  B.  76;   In  re  Williams,  3  N.  B.  R.  74, 

R.  91,  10  Ben.  53,  F.  C.  10268.  1  Lowell,  406,  F.  C.  17703. 

26  In  re  Smith,  13  N.  B.  R.  500,  29  in  re  Meyer,  supra;  In  re 
F.  C.  12987;  In  re  Morse,  13  N.  B.  Murray,  1  N.  B.  N.  570,  96  F.  R. 
R.  376,  F.  C.  9854;  In  re  Byrne,  600,  3  A.  B.  R.  601,  1  N.  B.  N.  532. 
1  N.  B.  R.  122,  F.  C.  2270;  In  re  3  A.  B.  R.  90;  In  re  Stevens,  5  N. 
Williams,  F.  C.  17702;  In  re  In  B.  R.  112,  1  Sawy.  397,  F.  C.  13393; 
galls,  F.  C.  7032;  In  re  Lane,  10  N.  In  re  Meyers,  1  N.  B.  N.  515,  2  A. 
B.  R.  135,  F.  C.  8044.  B.  R.  707,  96  F.  R.  408;   In  re  Alt- 

27  In  re  Wilcox  ,  supra;  In  re  man,  1  N.  B.  N.  358,  4  A.  B.  R.  689, 
Mills,  95  F.  R.  269,  2  A.  B.  R.  667;  95  F.  R.   263. 

In  re  Jones,  2  N.  B.  N.  R.  193,  100        30  Marrett  v.  Murphy,  11  N.  B.  R. 
F.  R.  781,  4  A.  B.  R.  141,  2  id.  191.     131,  F.  C.  9103. 

28  In  re  Meyer,  98  F.  R.  976,  3  A. 


110 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch.  5 


exception  to  the  general  rule  that  the  individual  creditors 
must  resort  to  the  individual  assets  and  the  joint  creditors  to 
the  partnership  assets,  and  that  when  there  are  no  firm  assets 
and  no  solvent  living  partner,  the  creditors  of  the  firm  might 
share  pari  passu  with  the  individual  creditors,  is  no  longer 
applicable,^^  and  partnership  creditors  must  look  to  the  part- 
nership assets  and  can  only  resort  to  the  individual  assets 
after  the  individual  debts  are  paid,  without  regard  to  whether 
there  are  partnership  assets  or  a  solvent  partner  amenable  to 
the  court's  jurisdiction.^- 

§  160.  Assumption  of  firm  assets  and  debts  by  one  member 
thereof. — After  a  firm  is  actually  insolvent,  a  partner  cannot 
by  the  transfer  of  his  interest  to  his  copartner  constitute  the 
assets  of  the  firm  the  individual  property  of  the  latter  as 
against  firm  creditors,^^  but  a  firm  while  solvent  may  in  good 


■SI  In  re  Wilcox,  supra;  In  re 
Bates,  100  F.  R.  263;  In  re  Mills, 
95  F.  R.  269,  2  A.  B.  R.  667;  contra 
In  re  Conrader,  118  F.  R.  676. 

32  It  was  held  under  the  act  of 
1867  that  if  a  partnership  was  dis- 
solved and  one  of  the  partners  pur- 
chased all  the  assets  of  the  firm, 
agreeing  to  pay  all  the  debts;  and 
both  partners  are  individually  ad- 
judged bankrupt,  so  that  there  is 
no  solvent  partner  and  no  firm 
property,  the  firm  and  individual 
creditors  of  the  partner  who  as- 
sumed to  pay  the  firm  debts  are 
entitled  to  share  pari  passu  in  the 
estate  of  such  partner.  (In  re 
Downing,  3  N.  B.  R.  182,  1  Dill. 
39,  F.  C.  4044;  In  re  Collier,  12  N. 
B.  R.  266,  F.  C.  3002;  In  re  Rice, 
9  N.  B.  R.  373,  F.  C.  11750.)  The 
individual  and  partnership  cred- 
itors share  equally  in  the  distribu- 
tion of  assets  where  both  classes 
of  debts  are  incurred  upon  the 
credit  of  the  property  owned  by  a 
member  of  the  firm  (In  re  Goedde, 
6  N.  B.  R.,  F.  C.  5500)  ;  where  the 
individual  assets  consisting  of 
goods  purchased  by  the  bankrupt 


from  the  partnership  on  its  dis- 
solution prior  to  bankruptcy  being 
the  same  goods  in  the  purchase  of 
which  the  partnership  debts  orig- 
inated. (In  re  Jewett,  1  N.  B.  R. 
130,  F.  C.  7309.)  If  all  the  assets 
of  a  bankrupt  firm  were  expended 
in  the  payment  of  costs,  and  there 
was  no  fund  to  be  divided  among 
the  firm  creditors,  the  firm  and  in- 
dividual creditors  must  be  paid  pari 
passu  out  of  the  separate  estate  of 
each  partner.  (In  re  McEwen,  12 
N.  B.  R.  11,  6  Biss.  294,  F.  C.  8783; 
but  under  the  present  Act  there  is 
no  provision  allowing  joint  and 
separate  creditors  to  share  pari 
passu  in  the  separate  estates.  In 
the  cases  cited,  if  the  property 
could  not  be  held  to  be  partnership 
assets  because  the  transfer  was 
preferential  or  fraudulent,  or  on 
some  other  ground,  the  partner- 
ship creditors  could  not  resort 
to  it. 

•■^3  Earle  v.  Library  Pub.  Co.,  95 
F.  R.  544;  In  re  Rudnick,  2  N.  B. 
N.  R.  769;  In  re  Cook,  3  Biss.  116, 
F.  C.  3151 ;  In  re  Byrns,  1  N.  B.  R. 
464. 


Ch.  5    PARTNERSHIP— ASSUMPTION   OF   FIRM  ASSETS.  Ill 

faith  dissolve,  the  retiring  i^artner  transferring  the  joint 
property  to  the  remaining  partner,  who  may  assume  the  joint 
debts,  and  the  joint  creditors  will  share  equally  with  indi- 
vidual creditors  in  the  individual  assets,  upon  the  remaining 
partner  becoming  bankrupt.^"*  A  promise  by  one  partner  to 
pay  all  the  firm  debts  is  enforceable  by  the  firm  creditors, 
though  they  were  not  cognizant  of  the  promise  when  made, 
and  though  the  consideration  did  not  move  from  them.^^  A 
mortgage  given  by  a  partnership  on  its  property  is  not 
affected  by  bankruptcy  proceedings  against  one  partner, 
though  after  the  mortgage  is  given,  the  firm  was  dissolved 
and  such  partner  took  the  assets  and  assumed  its  liabilities.^® 
If  a  firm  expires  by  limitation  and  the  interests  of  all  the 
partners  are  transferred  to  one  of  them,  who  agrees  to  apply 
firm  assets  to  the  payment  of  firm  debts,  and  he  afterwards 
files  a  voluntary  petition  in  bankruptcy,  and  includes  the  firm 
assets  and  debts  in  his  schedule,  the  other  members  should 
intervene  and  have  the  firm  adjudicated  bankrupt,  that  the 
firm  assets  may  be  applied  to  the  firm  debts.-^'''  If  one  part- 
ner sells  his  interest  to  another  member,  pending  the  insol- 
vency of  the  firm,  receiving  notes  in  payment,  he  cannot  prove 
such  notes  in  bankruptcy  against  the  purchasing  partner.^* 

§  161.    Individual  debts  not  allowable  out  of  firm  assets.— 

Since  the  law  contemplates  that  partnership  assets  shall  be  in 
good  faith  applied  first  to  the  payment  of  partnership  debts, 
any  scheme  resorted  to  by  a  person  in  contemplation  of  bank- 
ruptcy for  the  purpose  of  charging  partnership  assets  with 
the  individual  liabilities  of  the  partners,  is  violative  of  the 
law  and  should  not  be  permitted,^**  as  where  the  firm's  en- 

34  In  re  Green,  116  F.  R.  118,  8  :'■-  In  re  Collier,  12  N.  B.  R.  266, 

A.  B.  R.  553;   In  re  Keller,  109  F.  F.  C.  3002. 

R.   118,   6   A.   B.  R.  337;    See  also  -o  in  re  Sanderlin,  109  F.  R.  857, 

Fitzpatrick   v.    Flannagan,    106   U.  6  A.  B.  R.  384;  McDaniel  v.  Stroud, 

S.  648,   27  L.  Ed.  211;    In   re  Col-  106  F.  R.  486,  5  A.  B.  R.  685;  Mc- 

lier,  12  B.  R.  266,  F.  C.  3002;  In  re  Nair  v.  Mclntyre,  113  F.  R.  113.  7 

Long,  9  B.  R.  227,  7  Ben.  141,  F.  C.  A.  B.  R.  638. 

8476;   In  re  Downing.  3  B.  R.  182,  37  in  re  Gorham,  18  N.  B.  R.  419, 

1  Dill.  33,  F.  C.  4044;   In  re  Wiley,  9  Biss.  23,  F.  C.   5624. 

4    Biss.    214,    F.    C.    17656;    In    re  ss  in  re  Denning.  114  F.  R.  219,  8 

Mills,  11  B.  R.  74,  F.  C.  9611;   Ex  A.  B.  R.  133. 

n.  Ruffin.  6  Ves.  119;  In  re  Keller,'  39  in  re  Bates,  100  F.  R.  263,  4 

109  F.  R.  118,  6  A.  B.  R.  334.  A.  B.  R.  56;   In  re  Leigh  Lumber 


113  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

dorsement  is  placed  upon  the  individual  notes  of  its  members 
to  certain  relatives,^^  or  a  note  is  given  in  an  individual  trans- 
action, though  signed  in  the  firm  name,^^  or  is  merely  signed 
in  the  name  of  the  individual  giving  it,^-  or  an  accommoda- 
tion note  is  endorsed  by  one  member  without  the  knowledge 
or  consent  of  the  others/^  or  a  firm  note  is  issued  to  a  partner 
for  his  share  of  the  capital  stock  and  by  him  transferred  to 
his  wife  by  whom  the  capital  was  advanced,"^^  or  notes  are 
signed  by  both  members,  which  do  not  purport  to  be  obliga- 
tions of  the  firm.^^  Although  real  estate  stands  in  the  name 
of  a  member,  if  it  be  in  fact  firm  property,  the  unsecured 
individual  creditors  of  such  member  have  no  claim  upon  the 
proceeds.*^ 

§  162.  Firm  debts.— Notes  drawn  by  one  partner  in  the 
firm  name  in  the  course  of  partnership  business  without  mala 
fides,  or  actual  knowledge  by  the  holder  of  want  of  authority 
or  intended  misapplication,  entitles  the  holder  to  their  allow- 
ance out  of  the  firm  estate;^"  the  same  is  true  where  one 
holds  a  note  on  which  the  firm  is  an  accommodation  endorser, 
though  collateral  security  is  held  therefor;^**  or  a  note  given 
by  each  of  the  members  of  a  firm  individually,  the  considera- 
tion of  which  went  into  the  firm's  business ;■*'•*  or  where  with 
knowledge  of  the  existence  of  a  dormant  partner,  the  paper 
of  the  active  members  is  discounted,  or  money  loaned  them, 
although  the  money  was  borrowed  for  the  partnership.^*^ 
"Where  all  the  members  of  a  firm  have  signed,  instead  of  the 
firm  name,  their  respective    names  to  a  written    obligation, 

Co.,  101  F.  R.  216,  4  A.  B.  R.  221;  Jones,   116  F.  R.   431,  8  A.  B.  R. 

In  re  Denning,  supra.  626. 

40  In  re  Jones,  2  N.  B.  N.  R.  193,  46  in  re  Groetzinger,  110  F.  R. 
100  F.  R.  781,  4  A.  B.  R.  141;  but  366,  6  A.  B.  R.  399. 

see  Ex  p.  Russell,  16  N.  B.  R.  476,  47  Bush  v.  Crawford,  7  N.  B.  R. 

F.  C.  12148.  299,  F.  C.   2224;  overruling  In  re 

41  In  re  Forsyth,  7  N.  B.  R.  174,  Dunkle,  7  N.  B.  R.  107,  F.  C.  4161. 
F.  C.  4948.  48  In  re  Dunkerson,  12  N.  B.  R. 

42  In  re  Dobson,  2  N.  B.  N.  R.  413.  4  Biss.  253,  F.  C.  4157;  Ex  p. 
514.  "Whiting,  14  N.  B.  R.  307,  2  Lowell, 

43  In  re  Irving,  17  N.  B.  R.  22,  F.  472,  F.  C.  17573. 

C.  7074.  49  In  re  Thomas,  17  N.  B.  R.  54, 

44  In  re  Frost,  3  N.  B.  R.  180,  F.  8  Biss.  139,  F.  C.  13886;  see  in  Her- 
C.  5135.  rick,  13  N.  B.  R.  312,  F.  C.  6420. 

45  Strause  et  al.  v.  Hooper  et  al.,  "-o  Amly  v.  Lyle,  15  Bast;  Ex  p. 
105  F.  R.  590,  5  A.  B.  R.  225 ;  In  re  Emly,  1  Rose,  61. 


Ch.  5  PARTNERSHIP— FIRM   DEBTS.  113 

whether  the  indebtedness  is  individual  or  that  of  the  firm 
depends  upon  whether  it  was  given  for  a  firm  obligation, 
whether  the  consideration  went  to  the  firm,  whether  it  is 
joint  or  several,  or  joint  and  several,  and  whether  others 
besides  the  members  of  the  firm  are  on  it.^^  That  the  obli- 
gation is  that  of  the  firm  may  be  proved  notwithstanding  the 
failure  to  enter  the  transaction  at  large  on  the  firm's  books.^^ 
Whether  a  claim  is  against  a  firm  and  hence  provable  in 
bankruptcy  against  it,  or  a  claim  against  the  individuals,  or 
some  one  of  them,  composing  such  firm,  is  to  be  determined 
on  general  principles  and  the  bankrupt  law  makes  no  special 
provision  on  the  subject.  If  a  firm  obligation  be  taken  for 
the  debt  of  a  partner,  the  creditor  must  show  that  the  partner 
is  entitled  to  give  it  and  he  may  then  prove  against  the  joint 
assets,  and  the  firm  assets  must  be  applied  without  reference 
to  any  disproportion  of  the  individual  partners'  interests,  as 
between  themselves,^^  so  with  the  amount  paid  for  firm  debts 
purchased  by  friends  for  two  partners,  the  third  partner  not 
contributing,  even  though  the  third  partner  objects.^^  One 
does  not  become  a  firm  creditor  by  reason  of  holding  a  right 
of  action  for  the  misrepresentation  of  a  firm's  condition  by 
one  of  its  members  ;^^  or  by  purchasing  the  partner's  interest 
in  a  firm  pending  their  adjudication  as  a  bankrupt  individ- 
ually and  as  a  firm;'"^^  or  where  by  the  partnership  contract  it 
is  agreed  that  the  firm  should  assume  the  individual  debts  if 
it  becomes  bankrupt,  the  creditor  failing  to  consent  to  the 
conversion  of  liabilities  before  bankruptcy;^"  nor  can  a  firm, 
all  of  whose  members  are  partners  in  another  firm,  prove  its 
debts  against  the  latter  firm.^^ 

51  In  re  Webb.  2  B.  R.  183,  F.  C.  54  in  re  Lathrop,  5  N.  B.  R.  43. 
17313;  In  re  Bucyrus  Mach.  Co.,  5  Ben.  199,  F.  C.  8104;  see  In  re 
5  N.  B.  R.  303,  F.  C.  2100;  In  re  Carmichael,  96  F.  R.  594,  2  A.  B. 
Miller,  F.  C.  9550;   In  re  Herrick,  R.  815. 

13  N.  B.  R.  312,  F.  C.  6420;   In  re  ^5  in  re  Schuchart,  15  N.  B.  R. 

Roddin,   6  Biss.  377,  F.  C.  11989;  161,  8  Ben.  585,  F.  C.  12483. 

In  re  Holbrook,  2  Lowell,  259,  F.  56  Osborne  v.  McBride,  16  N.  B. 

C.  6588;  In  re  Thomas,  17  N.  B.  R.  R.  22,  3  Sawy.  590,  F.  C.  10593. 

54,  8  Biss.  139,  F.  C.  13886.  57  in  re  Isaacs,  6  N.  B.  R.  92,  3 

52  In  re  Stevens,  104  F.  R.  323;  Sawy.  35,  F.  C.  7093. 

In  re  Warren,  2  Ware,  322,  F.  C.         ss  in  re  Savage,  16  N.  B.  R.  368, 
17191.  F.  C.  12381. 

53  In  re  Lowe,  11  N.  B.  R.  221,  F. 
C.  8564. 


114  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

§163.  Joint  and  individual  debts.— The  holder  of  a  note 
given  by  a  firm  and  also  by  an  individual  member  of  the  firm 
is  entitled  to  dividend  from  both  estates.^^  And  it  has  been 
held  that  a  creditor  holding  a  firm  note  endorsed  by  one  of 
its  members  may  resort  to  either  estate,*^^  jf  qy^q  partner 
endorses  firm  paper  and  pledges  securities  belonging  to  him- 
self, after  the  firm's  bankruptcy,  the  holder  of  the  notes  may 
sell  the  security  and  yet  receive  from  the  joint  fund  a  divi- 
dend on  the  notes."^  If  the  holders  of  a  note  endorsed  by  a 
firm  and  one  partner  accept  a  percentage  from  the  makers, 
their  dividends  from  the  partnership  and  individual  partner's 
estates  are  confined  to  the  difference  between  the  face  of  the 
note  and  the  percentage  received.*'-  A  former  partner  may 
be  held  liable  on  a  firm  note,  where,  after  retirement,  he  per- 
mits his  name  to  be  used,  although  notice  of  his  withdrawal 
is  published,  and  the  firm  exchanges  notes  with  a  third  party, 
who  sells  for  value  before  maturity,  the  firm  becoming  bank- 
rupt.''^ If  a  partner  nses  funds  of  an  estate  in  his  hands  for 
his  firm,  keeping  an  account  on  the  firm's  books,  a  claim  arises 
against  his  individual  estate,  as  well  as  against  the  firm 
estate.^* 

Where  an  execution  lien  has  been  obtained  in  good  faith 
more  than  four  months  before  bankruptcy  on  the  property 
of  one  of  the  individual  members  of  the  firm  under  a  judg- 
ment against  the  firm,  it  has  been  held  that  the  statutory  lien 
will  not  yield  to  the  equity  of  the  separate  creditors  of  that 
partner,^^  but  such  partner  has  a  lien  on  the  firm  real  estate 
until  the  debts  are  paid  to  indemnify  him  in  the  event  of  his 
having  to  pay  them.*'^ 

§164.    Firm  debts  provable  against  individual  estate.— If, 

09  Emery  V.  Bank,  7  N.  B.  R.  217,  2   Lowell,    66,    F.    C.    7941;     In    re 

3  Cliff.  507,  F.  C.  4446;  In  re  Long,  Morse,  13  N.  B.  R.  376,  F.  C.  9854. 

9  N.  B.  R.   237,  7  Ben.  141,  F.  C.  ^^  In  re  Jordan,  19  N.  B.  R.  465; 

8476 ;  In  re  Bigelow,  2  N.  B.  R.  121,  In  re  Tesson,  9  N.  B.  R.  378,  F.  C. 

3  Ben.  146,  F.  C.  1397.  13844;  In  re  Baxter,  18  N.  B.  R.  62. 

60  Stephenson  v.  Jackson,  9  N.  B  F.  C.  1119. 

R.  255,  2  Hughes,  204,  F.  C.  13374.         cj5  in  re  Sandusky,   17  N.   B.  R. 

61  In  re  Foot,  12  N.  B.  R.  337,  8  542,  F.  C.  12308;  In  re  Lewis,  8  N. 
Ben.  228,  F.  C.  4906.  B.   R.    546,    2    Hughes,    320,   F.    C. 

62  In  re  Howard,  4  N.  B.  R.  185,  8313. 

F.  C.  6750.  <'"<'  Thrall  v.  Crampton,   16  N.  B. 

63  In  re  Kreuger,  5  N.  B.  R.  439,    R.  261,  9  Ben.  218,  F.  C.  14008. 


Ch.  5  PARTNERSHIP— FIRM    DEBTS    PROVABLE.  115 

on  dissolution  by  consent,  one  partner  takes  the  assets  and 
assumes  the  debts  from  which  he  agrees  to  hold  the  other 
harmless,  the  relation  of  the  former  partners  becomes  that 
of  principal  and  surety  and  if  the  retiring  partner  on  the 
other's  bankruptcy  is  called  on  to  pay  a  firm  debt,  he  may 
prove  such  claim  in  the  creditor's  name  against  bankrupt's 
estate ;^'^  but  if  an  agreement  to  pay  the  firm's  debts  is  with  the 
consent  of  creditors,  firm  creditors  are  entitled  to  share  pari 
passu  with  the  individual  creditors.*'^ 

If  one  partner  files  a  voluntary  petition,  seeking  a  discharge 
from  both  individual  and  firm  debts,  and  is  adjudged  bank- 
rupt, but  no  adjudication  is  made  against  the  firm,  the  firm 
creditors  may  prove  their  debts  and  subject  bankrupt's  interest 
in  the  firm  property  to  the  payment  thereof.*''-^  If  the  firm  is 
not  brought  into  bankruptcy  and  there  are  no  firm  assets,  it 
has  been  held  that  a  partnership  creditor  may  share  with  the 
individual  creditors  in  the  estate  of  a  bankrupt  individual 
partner J^  A  firm  creditor  may  prove  against  a  partner's 
separate  estate  such  partner's  individual  notes,  received  and 
credited  by  him  on  a  firm  note  held  by  him;'''i  or,  if  he  holds 
individual  property  as  security  for  partnership  debts  he  may 
prove  his  whole  debt  against  the  joint  estate  and  the  deficiency 
after  disposing  of  the  security  against  an  individual  partner's 
separate  estateJ^  A  bond  binding  several  members  of  a  firm 
jointly  and  severally  may  be  proved  against  the  individual 
estate  of  such  member  of  the  firmJ^  If  a  partner  purchases 
judgments  against  his  firm,  in  favor  of  certain  of  its  creditors, 
he  becomes  a  creditor  of  his  partners  for  their  respective  shares 
of  the  money  so  advanced,  and  may  prove  a  claim  for  such 
share  against  a  partner's  individual  estate  J* 

If  there  is  a  dormant  partner,  the  firm  creditors,  having  no 
notice  of  him,  may  prove  against  the  separate  estate  of  the 

67  In  re  Dillon,  100  F.  R.  627;  Iii  to  in  re  Green,  116  F.  R.  118,  8 

re   Pease,   13   N.  B.  R.   168,   F.   C.  A.  B.  R.  553. 

10881.  Ti  In  re  Stevens,  104  F.  R.  323. 

08  In  re  Long,  9  N.  B.  R.  227,  7  72  in  re  May,  17  N.  B.  R.  102,  F. 

Ben.    141,    F.    C.    8476;    see   In    re  C.  9327. 

Keller,  109   F.  R.  118,  6  A.  B.  R.  73  in  re  Bigelow,  2  N.  B.  R.  121, 

334.  3  Ben.  146,  F.  C.  1397. 

>■>'■>  In  re  Laughlin,  96  F.  R,  589.  74  in  re  Carmichael,  96  F.  R.  594, 

2  A.  B.  R.  815. 


IIG  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

ostensible  partner/^  and  in  the  ease  of  a  merely  nominal  part- 
ner, the  same  course  may  be  taken  ;'^^  and,  by  proving  as 
separate  debts,  the  separate  creditors  of  the  ostensible  partner 
are  entitled  to  payment  from  the  surplus  of  the  joint  estate 
before  the  separate  creditors  of  the  dormant  partner. 

A  claim  of  the  United  States  against  a  firm  some  of  whose 
members  are  non-residents,  was  held  to  be  entitled  to  priority 
of  payment  out  of  the  individual  estates  of  the  resident  part- 
ners ;"^  or  debts  arising  out  of  internal  revenue  bonds,  signed 
by  the  members  of  a  firm,  as  sureties,  were  entitled  to  priority 
out  of  the  individual,  assets.'^^  The  Act  of  1898  does  not  ex- 
pressly give  priority  to  debts  due  the  United  States,  but  inas- 
much as  there  is  no  express  repeal  of  Section  3466  R.  S.,  giving 
this  right,  it  doubtless  still  exists  by  implication.'^^ 

§  165.  Firm  debts  not  provable  against  individual  estates.— 
The  following  firm  debts  have  been  held  not  to  be  provable 
against  a  partner's  separate  estate;  where  a  judgment  against 
a  bankrupt  firm  is  jjaid  out  of  real  property  belonging  to  a 
partner  who  was  not  served  with  process  ;^^  or  a  partner  seek- 
ing payment  before  all  the  partnership  debts  have  been  paid, 
where  he  sells  his  interest  to  his  partner,  taking  his  notes 
therefor,  and  the  partner  became  bankrupt,  leaving  some'  of 
the  notes  unpaid  :^^  or  creditors  of  an  old  insolvent  firm,  to  the 
prejudice  of  the  creditors  whose  claims  arose  in  connection 
with  a  new  business,  in  which  he  is  adjudged  bankrupt  upon 
the  petition  of  the  new  creditors  \^^  or  firm  creditors  who  re- 
ceived a  dividend  in  dissolution  proceedings  in  a  state  court, 
but  decline  to  surrender  the  same,  before  proving  for  the  bal- 
ance on  the  subsequent  adjudication  of  a  member  of  the  firm;^-'' 
or  the  firm  trustee  against  the  separate  estate  of  a  partner 
who  withdraws  firm  money  for  his  private  purposes,  the  with- 
drawal not  being  fraudulent  as  against  his  partners,  even  if 

75  Ex  p.  Hodgkinson,  19  Ves.  291;  '»  See  Sec.  64,  Act  of  1898,  post. 

Ex  p.  Norfolk,  Id.  455;  Ex  p.  Law.  §  1011. 

3  Dea.  541.  so  in  re  Hinds,  3  N.  B.  R.  91,  F. 

-<-'  Ex  p.  Reid,  2  Rose,  84.  C.  6516. 

77  U.  S.  V.  Lewis,  13  N.  B.  R.  33.  '^i  In  re  Jewett,  1  N.  B.  R.  131,  F. 

F.  C.  15595;  s.  c.  on  appeal,  Lewis  C.  7309. 

V.  U.  S.,  14  N.  B.  R.  64,  92  U.  S.  s2  In  re  Bates,  2  N.  B.  N.  R.  208. 

618.  ""^  In  re  Mills,  95  F.  R.  269.  2  A. 

7s  In  re  Webb,  2  N.  B.  R.  214,  F.  B.  R.  667. 
C.  17313. 


Ch.  5      PARTNERSHIP— FIRM    DEBTS    NOT    PROVABLE.  117 

the  firm  estate  was  known  to  be  insolvent  at  the  time  ;^^  or  a 
claim  of  one  firm  of  which  the  bankrupt  is  a  partner,  against 
another  firm  of  which  he  is  a  partner  cannot  be  proved  against 
him  f^  or  where  a  creditor  gets  judgment  against  the  solvent 
partner,  he  cannot  waive  his  rights  under  such  judgment  and 
resort  to  the  bankrupt  partner's  separate  estate.^^  Costs  in- 
curred in  an  action  under  a  state  insolvency  law  against  a  firm, 
although  a  preferred  claim  thereunder,  are  not  entitled  to 
priority  of  payment  out  of  the  individual  estate  of  one  of  the 
partners,^'  nor  joint  and  several  notes  given  by  partners  for 
partnership  liabilities,^^  nor  a  note  made  payable  to  a  firm  and 
subsequently  endorsed  by  a  member  in  the  firm  name.^^ 

§  166.  Effect  of  proving  firm  debt  against  individual  estate. 
— A  firm  creditor  does  not  lose  his  right  against  the  firm  or 
the  assets  of  the  firm  by  proving  his  debt  against  a  single  part- 
j2gj..9o  ]^^i  if  a^  ^rm  creditor  has  received  payment  out  of  an 
individual  partner's  property,  such  partner's  creditors  will  be 
subrogated  to  his  rights.-*^ 

§167.  Effect  of  pajnnent  of  solvent  partner's  liability.— 
Although  a  partner,  afterward  becoming  bankrupt,  had 
assumed  the  partnership  debts,  a  solvent  partner  can  not  share 
in  the  joint  assets,  if  any  of  the  partnership  debts  are  out- 
standing, since  if  he  did  so  he  would  compete  with  his  own 
creditors;  nor  can  he  prove  against  the  separate  assets,  since 
the  surplus  therefrom  increases  the  joint  assets;  but,  if  he 
has  paid  the  joint  debts,  he  is  entitled  to  prove  against  the 
separate  estate.  A  bankrupt  partner,  though  liable  to  the 
joint  creditors  for  the  whole  debt,  is  entitled  to  the  benefit 
of  the  payment  by  the  solvent  partner  of  his  liability .^- 

§  168.  Individual  property.— By  individual  property  or 
estate,  or  separate  estate,  is  meant  that  property  in  which 
each  partner  is  separately  interested  to  the  exclusion  of  the 

84  In  re  May,  19  N.  B.  R.  101.  F.  «»  Lamoille  County  Nat.  Bank  v. 
C.  9328.  Stevens   Estate,    107   F.   R.    245,   6 

85  In  re  Lloyd,  15  N.  B.  R.  257,     A.  B.  R.  164. 

F.  C.  8429.  90  Hudgins  v.  Lane,  11  N.  B.  R. 

86  In  re  Polidori,  2  N.  B.  N.  R.     462,  2  Hughes  361,  F.  C.  6827. 
922.  91  In  re  May,  17  N.  B.  R.  192,  F. 

87  In  re  Daniels,  110  F.  K.  745,  G  C.  9327;  In  re  Foote,  12  N.  B.  R. 
A.  B.  R.  699.  337,  8  Ben.  228.  F.  C.  4906. 

88  In  re  Mosier,  112  F.  R.  138,  7  n^  in  re  Jay  Cooke,  12  N.  B.  R. 
A.  B.  R.  268.  30,  F.  C.  3170. 


118  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

other  partners  at  the  time  of  the  bankruptcy .'^^  The  first 
source  to  be  resorted  to  for  determining  what  is  partnership 
and  what  is  individual  property  is  from  the  agreement  between 
the  partners  themselves.  In  the  absence  of  express  agreement, 
attention  must  be  paid  to  the  "source  whence  the  property 
was  obtained,  the  purpose  for  which  it  was  acquired,  and  the 
mode  in  which  it  has  been  dealt  with."^^ 

Where,  upon  the  dissolution  of  a  partnership,  one  partner 
takes  the  accounts  and  notes  of  the  firm  and  the  other  the 
stock  in  trade,  to  which  he  adds,  and  with  which  he  continues 
the  business,  the  stock  in  the  hands  of  the  latter,  upon  the 
subsequent  bankruptcy  of  the  former,  will  be  held  primarily 
liable  for  his  individual  debts.^^  The  classification  in  the 
schedule  as  partnership  assets  of  real  estate  held  by  partners 
as  tenants  in  common,  will  not  convert  the  individual  partner's 
separate  property  into  firm  property,  in  derogation  of  the 
rights  of  separate  creditors,  but  the  real  estate  is  an  asset  of 
the  individual  partners.^*'  Buildings  built  with  partnership 
funds  by  one  partner  on  his  own  property  becomes  part  of  the 
realty  and  such  partner's  separate  property .^^ 

§  169.  Partnership  property.— The  determination  of  what  is 
partnership  and  what  is  individual  property  is  one  of  some 
difficulty.  The  rule  stated  by%Lindley  in  his  work  on  part- 
nership, is  that  it  is  for  the  partners  to  determine  by  agree- 
ment amongst  themselves  what  shall  be  the  property  of  them 
all,  and  what  shall  be  the  separate  property  of  some  one  or 
more  of  them,  and  by  agreement  they  may  convert  what  is 
the  joint  property  of  all  into  the  separate  property  of  some 
one  or  more  of  them  and  vice  versa,  though  this  would  not 
be  true  if  made  within  four  months  of  the  bankruptcy  of  the 
firm  or  one  of  its  members,  and  it  was  shown  that  the  purpose 
was  to  hinder,  delay,  defraud  or  prefer  one  class  of  creditors 
over  another.  Whatever,  at  the  commencement  of  a  partner- 
ship is  thrown  into  the  common  stock,  and  whatever  has,  from 
time  to  time  during  the  continuance  of  a  partnership  been 
added  thereto,  or  obtained  by  means  thereof,  whether  directly 
by  purchase,  or  circuitously  by  employment  in  trade,  belongs 

93  In  re  Lowe,  11  N.  B.  R.  221,  96  in  re  Zugg,  16  N.  B.  R.  280, 
F.  C.  8564.  F.  C.  18222. 

94  Lindley  on  Part.,  329.  'J7  in  re  Parks,  9  N.  B.  R.  270,  F, 
05  In  re  Montgomery,  3  N.  B.  R.     C.  10765. 

109,  3  Ben.  567,  F.  C.  9727. 


Ch.  5  PARTNERSHIP  PROPERTY.  119 

to  the  firm  and  in  case  oi'  bankruptcy  its  status  could  not  be 
changed.^^  Property  originally  owned  by  one  partner  and 
used  in  the  business  of  the  partnership,  may  be  joint  or  sepa- 
rate as  the  partners  agree,  in  writing  or  by  parole,  and  the 
general  intent  of  the  partnership  will  be  carried  out.^^ 

In  law,  real  estate  owned  by  members  of  a  firm  is  held  as 
tenants  in  common,  but  it  is  presumptively  firm  property  if 
purchased  with  partnership  funds,i  although  the  title  stands 
in  the  name  of  a  member,^  and  the  intent  to  consider  it  a 
partnership  asset  may  be  shown  by  evidence^  or  implied  from 
the  fact  that  the  losses  are  to  be  sustained  by  the  firm  assets, 
and  the  profits  are  to  augment  the  capital,^  and  out  of  wdiich 
firm  creditors  are  entitled  to  priority  of  payment  even  against 
individual  creditors  having  judgments  operating  as  liens  upon 
the  individual  partners'  interests.^ 

An  insolvent  firm's  property  is  a  trust  fund  for  the  pay- 
ment of  the  firm's  creditors,  and  the  rule,  supported  by  the 
weight  of  authority  is  that  individual  partners  cannot  claim 
individual  exemptions  out  of  it.*^  A  partnership  is  not  entitled 
to  retain  toward  the  payment  of  its  debts,  the  surplus  arising 
from  securities  held  by  one  partner  for  his  debtJ 

§  170.  Conversion  of  joint  estate  into  separate  estate  and 
vice  versa. — It  may  be  generally  stated  that  partners  may  con- 
vert that  which  was  partnership  into  the  separate  property  of 
an  individual  partner,  or  vice  versa,  by  agreement  amongst 
themselves.^  ' '  The  nature  of  the  property  may  be  thus  altered 
by  any  agreement  to  that  effect,  for  neither  a  deed  nor  even 

9s  In  re  Swift,  118  F.  R.  348.  1  A.  B.  R.  165,  91  F.  R.  745;  In  re 

99  Lindley  on  Part.,  323.  Grimes.  1  N.  B.  N.  339,  2  A.  B.  R. 

1  Osborn  v.  McBride,  16  N.  B.  160,  94  F.  R.  800,  1  N.  B.  N.  426,  2 
R.  22,  3  Saw.  590,  F.  C.  10593.  A.  B.  R.  611,  1  N.  B.  N.  516,  2  A. 

2  In  re  Groetzinger,  110  F.  R.  B.  R.  730,  96  F.  R.  529;  In  re  Du- 
366,  6  A.  B.  R.  399.  guid,  2  N.  B.  N.  R.  607,  100  F.  R. 

3  In  re  Farmer,  18  N.  B.  R.  207,  274,  3  A.  B.  R.  794;  In  re  Friedrich, 
F.  C.  4650.  100  F.  R.  284,  3  A.  B.  R.  801;  In  re 

4  Hiscock  V.  Jaycox,  12  N.  B.  R.  Wilson,  101  F.  R.  571,  4  A.  B.  R. 
507,  F.  C.  6531.  260. 

5  Marrett  v.  Murphy,  11  B.  R.  '  Sparhawk  v.  Drexel,  12  N.  B. 
131,  F.  C.  9103.  R.  450,  F.  C.  13204. 

6  In  re  Lentz,  2  N.  B.  N.  R.  190,  s  Lindley  on  Part.,  p.  334 ;  ex 
97  F.  R.  486;  In  re  Stevenson,  1  parte  Ruffln,  6  Ves.  119;  ex  parte 
N.  B.  N.  531,  2  A.  B.  R.  230,  93  F.  Williams.  11  id.  3 ;  ex  parte  Fell, 
R.  789;  In  re  Camp,  1  N.  B.  R.  142.  10  id.  348. 


120  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

a  writing  is  absolutely  necessary. ' '  '-*  But  so  long  as  the  agree- 
ment is  dependent  upon  an  unperformed  condition,  so  long 
will  the  ownership  of  the  property  remain  unchanged.^''  Since 
the  creditors  of  an  individual  have  no  lien  on  his  property 
and  can  not  prevent  him  from  disposing  of  it  as  he  pleases, 
so  the  ordinary  creditors  of  a  firm  have  no  lien  on  the  firm 
property  to  enable  them  to  prevent  it  from  disposing  of  it 
to  whomsoever  it  chooses.^i  Accordingly  it  has  frequently 
been  held  that  agreements  made  between  partners  converting 
firm  property  into  the  separate  estate  of  one  or  more  of  its 
members,  and  vice  versa  are,  unless  fraudulent,  binding,  not 
only  as  between  the  partners  themselves,  but  also  on  their 
joint  and  on  their  respective  several  creditors,  and  that  in  the 
event  of  bankruptcy  the  trustee  must  give  effect  to  such  agree- 
ment.* 2  In  case  of  the  bankruptcy  of  the  firm  or  an  individual 
member  thereof,  since  the  act  confines  each  class  of  creditors 
to  the  corresponding  estate,  separate  creditors  to  the  separate 
estate  and  joint  creditors  to  the  joint  estate,  any  agreement 
changing  the  situation  of  property,  if  within  four  months  of 
the  bankruptcy,  would  be  regarded  as  a  transfer  to  hinder, 
delay  and  defraud,  or  prefer  one  class  of  creditors  over  the 
other.  For  this  reason  the  foregoing  rule  stated  would  prob- 
ably fall  in  a  proceeding  under  the  present  law. 

§  171.  Disposition  of  assets  on  death  of  partner.— Upon  the 
death  of  a  partner,  the  surviving  member  takes  the  property 
of  the  firm  for  the  purpose  of  closing  the  estate,^^  and  the 
assets  are  to  be  marshalled  as  if  all  the  partners  were  living -,1* 
the  joint  assets  going  to  partnership  creditors  and  the  separate 
assets  to  separate  creditors,^ ^  though  in  some  states  the  debts 
are  severed  upon  the  death  of  the  partner.^  ^ 

spilling  V.   Pilling,   3   De  G.   J.  Dea.  1  Ch.  D.  514;  ex  p.  Manches- 

and   Sm.  162;    ex  parte  Williams,  ter  Bk.,  12  Ch.  D.  917;  In  re  Clap. 

11  Ves.  3.  2   Lowell   168,  F.   C.   2783;    Farley 

10  Ex  parte  Wheeler,  Buck.  25.  v.  Moog,  79  Ala.  148;   Tellinghast 

11  Wilcox  V.  Kell,   11  Ohio  394;  v.  Champlin,  4  R.  I.  173. 

White  V.  Parish,  20  Tex.  688.  i"^  Craft  v.  Pyke,  3  P.  Williams, 

i2Lindley  on  Part.  335;  ex  parte  180;  Addis  v.  Knight,  2  Mer.  117; 

Ruffin,  6  Ves.   119;   ex  parte  Wil-  Lodge  v.  Prichard,  1  D.  G.  J.  &  S. 

liams,  11  Ves.  3.  610;  Gray  v.  Chiswell,  9  Ves.  118; 

13  In  re  Stevens,  5  N.  B.  R.  112,  Hills  v.  McRae,  9  Hare  297;  In  re 
1  Sawyer  397,  F.  C.  13393.  Gray,  111  N.  Y.  404. 

14  Ex  parte  Leaf,  4  Dea.  287;  ex  icPearce  v.  Cooke,  B.  R.  I.  184; 
p.  Morley,  L.  R.  8  Ch.  1026;  ex  p.  Sparhawk  v.  Russell,  10  Met.  305; 


Ch.  5  PARTNERSHIP— TRUSTEE'S    RIGHTS.  I'^l 

§172.  Trustee's  right  to  partnership  property.— The 
trustee  has  the  same  right  to  the  property  of  a  bankrupt  part- 
ner as  in  the  case  of  any  individual,  and  may  recover  from  a 
solvent  partner,  what  is  due  under  the  articles  of  copartner- 
ship.i'  But  a  trustee  for  individual  members  of  a  firm  cannot 
interfere  with  the  firm  assets.^  ^ 

The  trustee  of  a  bankrupt  firm  takes  all  the  firm's  property 
with  like  right,  title,  power  and  authority  as  the  firm  had, 
but  subject  to  any  lien  existing  thereon  and  to  every  equity 
which  would  affect  the  firm.^^  The  actual  interest  of  the 
trustee  of  a  bankrupt  partner  is  the  bankrupt's  proportion  of 
the  surplus,  which  may  be  either  sold  to  the  other  partner,  or 
an  accounting  be  had,-*'  or  if  the  remaining  partner  continues 
the  business  without  a  settlement  the  trustee  may  take  an 
interest.-^  The  trustee  of  one  partner  will  be  subrogated  to 
the  rights  of  the  creditors  of  another  partner  to  the  extent 
that  their  claims  against  the  latter  have  been  satisfied  by  the 
sale  of  the  property  of  the  former.22  If  prior  to  the  adjudica- 
tion of  a  partnership  as  a  bankrupt,  one  of  the  individual  part- 
ners makes  an  assignment  for  the  benefit  of  his  creditors,  the 
assignee  may  be  required  by  summary  order  to  transfer  to  the 
trustee  all  the  property  so  coming  to  him.^^ 

§  173.  'g.  Marshalling  of  assets.— The  court  may  permit 
'the  proof  of  the  claim  of  the  partnership  estate  against  the 
'individual  estates,  and  vice  versa,  and  may  marshal  the  assets 
'of  the  partnership  estate  and  individual  estates  so  as  to  pre- 
*vent  preferences  and  secure  the  equitable  distribution  of  the 
'property  of  the  several  estates,' 

§  174.  Claims  between  the  estates.— Where  all  the  partners 
become  bankrupt,  the  general  rule  is  that  a  separate  estate 
shall  not  claim  against  the  joint  estate  in  competition  with 
the  joint  creditors,  nor  shall  the  joint  estate  claim  against  a 

changed  by  Statute  in  Mass.;  Jew-  pie,  17  N.  B.  R.  345.  4  Sawy.  62,  F. 

ett  V.  Phillips,  5  Allen  150.  C.  13826. 

i^Wilkins  v.  Davis,  15  N.  B.  R.  20  Ex  Motion,  L.  R.  9  Ch.  192. 

60,  2  Lowell  511,  F.  C.  17664.  21  Ex  Finch,  1   Dea.  &  Ch.   274; 

18  Ludowici   Roofing  Tile  Co.  v.  Ex  Freeman,  Id.  464. 

Pa.  Inst,  for  Inst,  for  Blind,  116  F.  22  in   re  Mason,  1  N.  B.  N.  331, 

R.  661;  8  A.  B.  R.  739;  In  re  Mer-  2  A.  B.  R.  60. 

cur,  116  F.  R.  655,  8  A.  B.  R.  275.  23  in  re  Stokes,  106  F.  R.  312,  6 

19  In  re  Leland,  5  N.  B.  R.  222,  A.  B.  R.  262. 
5  Ben.  168.  F.  C.  8228;  In  re  Tern- 


122  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

...  V  . 

separate  estate  in  competition  with  the  separate  creditors,-^ 

unless  there  be  a  surplus  of  the  joint  estate  to  be  divided 
among  the  individual  creditors  and  vice  versa.-^  It  is  equally 
clear  that  a  solvent  partner  cannot  prove  his  own  separate 
debt  against  the  separate  estate  of  the  bankrupt  partner,  so 
as  to  come  in  competition  with  the  joint  creditors  of  the  part- 
nership, for  the  reason  that  he  is  himself  liable  to  all  the  joint 
creditors,  which  is  suflficient  to  show  that  in  equity  he  cannot 
be  permitted  to  claim  any  part  of  the  funds  of  the  bankrupt 
before  all  the  creditors  to  whom  he  is  liable  are  fully  paid.-^ 
Neither  can  a  solvent  partner  prove  against  the  separate 
estate  of  the  bankrupt  partner  in  competition  w4th  the  sepa- 
rate creditors  of  the  bankrupt  until  all  the  joint  creditors  of 
the  partnership  are  paid  or  fully  indemnified,  for  if  a  divi- 
dend were  reserved  to  such  a  party  on  such  proof  the  joint 
creditors  might  be  injured  by  such  solvent  partner  stopping  the 
surplus  of  the  separate  estate,  which  would  otherwise  be  car- 
ried over  to  the  joint  estate,  or  the  separate  creditors  might 
be  injured  by  the  funds  being  stopped  and  the  transmission  of 
the  same  be  delay ed.^'^  The  exceptions  to  this  rule  are  (1) 
where  the  property  of  a  partner  has  been  fraudulently  applied 
for  the  purpose  of  a  partnership;  (2)  where  a  distinct  trade  is 
prosecuted  by  one  or  more  of  the  members  of  the  firm.^s 

§  175.  Where  one  is  a  member  of  two  firms.— Where  a  bank- 
rupt is  a  member  of  two  firms,  the  assets  should  be  so  mar- 
shalled that  the  creditors  of  each  firm  may  have  priority  in 
the  distribution  of  the  assets  of  the  firms  of  which  they  are 
creditors.  If  a  surplus  remains  after  paying  the  creditors  of 
one  firm,  it  is  subject  to  the  claims  of  the  individual  creditors 
and  not  to  the  creditors  of  the  other  firm.  If,  however,  there 
is  a  surplus  of  individual  assets,  it  should  be  apportioned 
pro  rata  among  creditors  of  both  firms  according  to  the  part- 
ner's respective  interests,-"  and  where  the  partnership  estate 

24  Amsink  v.  Bean,  11  N.  B.  R.  2s  Amsink  v.  Bean,  11  N.  B.  R. 

495,  22  Wall.  395 ;  In  re  McEwen,  495,  22  Wall.  395. 

12  N.  B.  R.  11,  6  Biss.  294,  F.  C.  29  in  re  Leland,   5   B.   R.   222,  & 

8783.  Ben.  168,  F.  C.  8228;   In  re  Hinds, 

2r.  In  re  Lane,  10  N.  B.  R.  135,  2  3  B.  R.  91,  F.  C.  6516;  In  re  Dun- 
Lowell  333,  F.  C.  8044.  kerson,  12  B.   R.  391,  4  Ben.  423, 

26  Emery  v.  Bank,  7  N.  B.  R.  217.  F.    C.    4159;    Ex    parte    Franklyn, 

27  Exp.  Lodge,  1  Ves.  Jr.  166.  Buck,  332. 


C'H.  5  CLAIM    OP    PARTNER    AGAINST     PARTNER.  123 

is  indebted  to  another  firm,  one  of  the  members  of  which  is 
also  a  member  of  the  bankrupt  firm,  the  court  will  deduct 
from  the  payment  due  the  creditor  firm  the  amount  to  which 
the  bankrupt  member  is  entitled.^^ 

§  176.  Claim  of  partner  against  bankrupt  partner.— A  bank- 
I'upt  creditor  of  his  bankrupt  copartner  has  the  residuum  of 
the  estates,  separate  and  joint,  belonging  to  the  latter  after 
all  the  bankrupt  debtor's  separate  creditors  and  the  firm 
debts  are  paid,  but  not  until  then,3i  and  a  solvent  partner 
can  not  prove  against  the  separate  estate  of  the  bankrupt 
partner  in  competition  with  the  bankrupt  partner's  separate 
creditors  until  all  the  partnership  creditors  are  paid  or  fully 
indemnified,^-  nor  for  interest  on  the  balances  in  his  favor 
shown  by  the  firm's  books,  unless  by  express  agreement.^^  A 
partner  who  has  had  to  pay  all  the  firm  debts  can  prove 
against  his  bankrupt  partner  his  proportion  of  such  debts,^'* 
so  a  former  partner,  or  a  joint  covenantor  with  bankrupts, 
who  is  liable  for  joint  debts  and  pays  them,  may  prove  the 
amount  ao:ainst  the  assets  of  his  former  partners  or  of  his  co- 
contractors.^^ 

§  177.  'h.  Settling  business  where  all  not  adjudged  bank- 
*rupt. — In  the  event  of  one  or  more  but  not  all  of  the  mem- 
*bers  of  a  partnership  being  adjudged  bankrupt,  the  partner- 
*ship  property  shall  not  be  administered  in  bankruptcy,  unless 
*by  consent  of  the  partner  or  partners  not  adjudged  bank- 
*rupt;  but  such  partner  or  partners  not  adjudged  bankrupt 
'shall  settle  the  partnership  business  as  expeditiously  as  its 
'nature  will  permit,  and  account  for  the  interest  of  the  partner 
*or  partners  adjudged  bankrupt.' 

§  178.    Proceedings  where  all  members  are  not  adjudicated. 

— This  provision  applies  to  a  proceeding  by  or  against  one 
partner,  or  any  number  less  than  all,  and  means  that  the  bank- 
ruptcy of  one  partner  shall  not  preclude  the  other  from  set- 
so  in  re  Ellis,  5  Ben.  421,  F.  C.  ss  in  re  Stevens,  104  F.  R.  323; 
4399.  5  A.  B.  R.  9. 

31  In  re  McLean,  15  N.  B.  R.  333.  34  in  re  Stevens.  104  F.  R.  323; 
F.  C.  8879.  In  re  Stephens,  6  N.  B.  R.  533,  3 

32Amsink  v.  Bean,  11  N.  B.  R.     Biss.  187,  F.  C.  13365. 
495,  22  Wall.  395;   In  re  Dunning,         35  Ex  p.  Lake,  16  N.  B.  R.  497,  2 
8  A.  B.  R.  133.  Lowell  544,  F.  C.  7991. 


124  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  5 

tling  the  partnership  busmess,*'''  but  does  not  j^ive  authority 
for  the  administration  of  the  firm  assets  in  individual  proceed- 
ings against  all  the  parties.^'^  One  or  more  of  the  partners 
may  be  adjudged  bankrupt  without  the  others,  or  the  part- 
nership being  so  adjudged;  but,  in  such  case,  if  a  discharge 
from  firm  as  well  as  individual  debts  is  sought,  the  petition 
should  aver  individual  and  firm  indebtedness,  giving  the  firm 
name  and  the  names  of  the  partners,  and  should  ask  for  a  dis- 
charge from  both  firm  and  mdividual  debts,  and  be  accom- 
panied by  schedules,  setting  out  firm  debts  and  property,  and 
other  matters  required  in  case  all  the  partners  join,  and  the 
notices  and  application  for  discharge  should  specifically  state 
that  a  discharge  is  asked  from  both  firm  and  individual  debts, 
and  be  given  to  firm  creditors  and  non-joining  partners,^'^ 
though,  when  all  are  insolvent  and  there  are  no  firm  assets 
whatever,  the  proceeding  may  be  without  reference  to  the 
other  partners.^^  The  creditors  of  a  firm  being  by  law  also 
creditors  of  each  member  of  the  firm  may  join  in  a  petition 
to  have  the  members  of  the  firm  individually  adjudged  bank- 
rupt.'^o 

When  all  are  not  adjudicated  the  trustee  is  elected  by  joint 
and  separate  creditors  and  takes  the  bankrupt  partners'  indi- 
vidual assets  and  their  proportionate  share  of  the  surplus  of 
the  firm's  assets,  but  has  nothing  to  do  with  the  partnership 
estate  unless  by  consent  of  the  partners  not  adjudged  bank- 
rupt,^^  although  the  bankruptcy  court  will  require  the  part- 
ners  not   adjudged   bankrupt   to   settle   the   business   expedi- 

36  In  re  Meyer,  98  F.  R.  976,  3  A.  ers,  1  N.  B.  N.  515,  96  F.  R.  408,  2 
B.  R.  550.  A.  B.  R.  707;   In  re  Winkens,  2  N. 

37  In  re  Mercur,  116  F.  R.  655,  B.  R.  113,  F.  C.  17875;  In  re  Down- 
8  A.  B.  R.  275.  ing,  3  N.  B.  R.  182,  1  Dill.  33,  F. 

38  In  re  Laughlin,  96  F.  R.  589,  C.  4044. 

3  A.  B.  R.  1;  In  re  McFaun,  96  F.  +«•  In  re  Melick,  4  N.  B.  R.  26.  F. 

R.  592,  3  A.  B.  R.  66;    In  re  Rus-  C.  9399;   In  re  Mercur,  1  N.  B.  N. 

sell,  1  N.  B.  N.  532,  3  A.  B.  R.  91,  527.  2  A.  B.  R.  626,  95  F.  R.  634. 

97  F.  R.  32;  Amsink  v.  Bean,  11  N.  4i  in  re  Polidori,  2  N.  B.  N.  R. 

B.  R.  495,  22  Wall.  395;  G.  O.  VIII.  945;  In  re  Wilcox,  1  N.  B.  N.  286, 

39  In  re  Hirsch,  2  N.  B.  N.  R.  137,  494,  2  A.  B.  R.  117,  94  F.  R.  84 ;  In 
3  A.  B.  R.  344,  97  F.  R.  571;  In  re  re  Blair.  2  N.  B.  N.  R.  364,  99  F.  R. 
Abbe,  2  N.  B.  R.  26,  F.  C.  4 ;  In  re  76,  3  A.  B.  R.  588;  In  re  Meyer.  98 
Marks,  F.  C.  9094;  Crompton  v.  F.  R.  976,  3  A.  B.  R.  559;  aff'g  1 
Conkling,  15  N.  B.  R.  417,  420,  9  N.  B.  N.  304,  1  A.  B.  R.  565,  92  F. 
Ben.  225,  F.  C.  3407-8;  In  re  Mey-  R.  896. 


Cu.  5  PARTNERSHIP— PROCEEDINGS.  135 

tiously,  or  consent  to  the  administration  of  the  partnership 
assets  in  bankruptcy.*- 

If  a  secret  partner  keeps  silent  and  allows  the  partnership 
assets  to  be  administered  in  bankruptcy,  he  will  be  held  to  have 
consented.*^  A  creditor  of  a  partner  may  proceed  against 
him  individually,  though  the  partnership  estate  is  being  ad- 
ministered by  a  probate  court,  and  it  has  been  held  in  such 
case  that  the  court  of  bankruptcy  has  complete  jurisdiction 
over  the  case,  and  jurisdiction  over  the  partnership  estate, 
provided  such  court  will  surrender  possession  of  the  assets 
to  the  trustee.** 

42  In  re  O'Brien,  2  N.  B.  N.  R.  44  See  In  re  Pierce,  2  N.  B.  N.  R. 
312.  979,  102  F.  R.  977,  4  A.  B.  K.  489; 

43  In  re  Harris,  2  N.  B.  N.  R.  868,  In  re  Daggett,  8  N.  B.  R.  433,  F.  C. 
4  A.  B.  R.  132.  3536. 


CHAPTER    VI. 


EXEMPTIONS. 


§179   (6a)   Bankrupts,     exemptions 
fixed  by  law  of  domicile. 

180.  Constitutionality. 

181.  Jurisdiction  over  exemptions. 

182.  Rule  governing. 

183.  Bankrupt   should   claim. 

184.  Trustees'      duty  —  appraise- 

ment. 

185.  Title  to. 

186.  Property  fraudulently  trans- 

ferred. 

187.  Property  assigned. 

188.  Purchase  price  not  paid. 

189.  Waiver. 

190.  Homestead,  right  to. 

191.  Abandonment. 

192.  In    property    mortgaged 

or  transferred. 

193.  When  subject  to  liens. 


194.  Growing  crops. 

195. Head  of  family. 

196.  Wife's  right. 

197.  Re-allotment. 

198.  Personal  property. 

199.  Successive  exemptions. 

200.  Partnership     property,     firm 

exemptions. 

201.  Individual  exemptions. 

202.  Taxes  on  exempt  property. 

203.  Sale  and  proceeds  of  exempt 

property. 

204.  Indian  allotments  exempt. 

205.  Pension  money  exempt. 

206.  Costs    payable    from    exemp- 

tions. 

207.  Insurance  policies. 

208.  Rule  governing  construction 

of  State  laws. 


>;  179.  '  (Sec.  6a)  Bankrupt's  exemptions  fixed  by  law  of 
'domicile. — This  Act  shall  not  affect  the  allowance  to  bank- 
'  rupts  of  the  exemptions  which  are  prescribed  by  the  state  laws 
'in  force  at  the  time  of  the  filing  of  the  petition  in  the  State 
'  wherein  they  have  had  their  domicile  for  the  six  months  or  the 
'greater  portion  thereof  immediately  preceding  the  filing  of  the 
*  petition.  '^ 


1  Analogous  provisions  of  Act  of 
1867.  Sec.  14.  .  .  .  That  there 
shall  be  excepted  from  the  opera- 
tion of  the  provisions  of  this  sec- 
tion the  necessary  household  and 
kitchen  furniture,  and  such  other 
articles  and  necessaries  of  such 
bankrupt  as  the  said  assignee  shall 
designate  and  set  apart,  having 
reference  in  the  amount  to  the 
family,  condition  and  circum- 
stances of  the  bankrupt,  but  alto- 
gether not  to  exceed  in  value,   in 


any  case,  the  sum  of  five  hundred 
dollars;  and  also  the  wearing  ap- 
parel of  such  bankrupt,  and  that  of 
his  wife  and  children,  and  the  uni- 
form, arms  and  equipments  of  any 
person  who  is  or  has  been  a  sol- 
dier in  the  militia,  or  in  the  serv- 
ice of  the  United  States;  and  such 
other  property  as  now  is,  or  here- 
after shall  be,  exempted  from  at- 
tachment, or  seizure,  or  levy  on  ex- 
ecution by  the  laws  of  the  United 
States,    and    such  other    property 


126 


Cii.  G 


EXEMPTIONS— CONSTITUTIONALITY. 


127 


§180.  Constitutionality.— Upon  the  enactment  of  the  fed- 
eral bankruptcy  law,  all  state  statutes  on  the  subject  so  far 
as  they  were  in  conflict,  except  exemption  laws,  were  super- 
seded, or  suspended.^  With  the  power  to  pass  a  uniform  bank- 
ruptcy law  is  linked  authority  to  define  what  and  how  much  of 
a  debtor's  property  shall  be  exempt,-^  and  in  the  exercise  of  this 
power  Congress  may  even  pass  exemption  laws  impairing  the 
obligation  of  contracts.^  But  laws  exempting  reasonable  por- 
tions of  the  debtor's  property  relate  to  the  remedy,  and  are, 
therefore,  not  liable  to  a  constitutional  objection.^  So  long, 
therefore,  as  the  trustee  takes  in  each  state  whatever  would 
have  been  available  to  the  creditors  if  the  bankrupt  law  had 
not  been  passed,  the  system  is  uniform  in  the  Constitutional 
sense.^ 

In  enacting  a  uniform  bankruptcy  law.  Congress  may  prop- 
erly provide  that  the  exemptions  given  by  the  several  state 
statutes  shall  be  allowed  to  the  bankrupt,  and  this  is  true 
Avithout  respect  to  the  validity  or  invalidity  of  the  state  law,''' 
that  question  being  left  for  the  highest  court  of  the  state  to 


not  included  in  the  foregoing  ex- 
ceptions as  is  exempted  from  levy 
and  sale  upon  execution  or  other 
process  or  order  of  any  court  by 
the  laws  of  the  state  in  which  the 
bankrupt  has  his  domicile  at  the 
time  of  the  commencement  of  the 
proceedings  in  bankruptcy,  to  an 
amount  not  exceeding  that  allowed 
by  such  state  exemption  laws  in 
force  in  the  year  eighteen  hun- 
dred and  sixty-four:  Provided. 
That  the  foregoing  exception  shall 
operate  as  a  limitation  upon  the 
conveyance  of  the  property  of  the 
bankrupt  to  his  assignees;  and  in 
no  case  shall  the  property  hereby 
excepted  pass  to  the  assignees,  or 
the  title  of  the  bankrupt  thereto 
be  impaired  or  affected  by  any  of 
the  provisions  of  this  act;  and  the 
determination  of  the  assignee  in 
the  matter  shall,  on  exception 
taken,  be  subject  to  the  final  de- 
cision of  the  said  court.    As  this 


act  does  not  affect  the  allowance 
to  bankrupts  of  the  exemptions 
which  are  prescribed  by  the  state 
laws,  the  exemption  laws  of  all 
the  states  and  territories  are  set 
forth  at  length  under  Title  IV. 

2  Richard,  1  N.  B.  N.  487,  94  F. 
R.  633,  2  A.  B.  R.  506. 

3  In  re  Reiman  et  al.,  13  N.  B.  R. 
128,  12  Blatchf.  562,  F.  C.  11675. 

^  In  re  Owens,  12  N.  B.  R.  518,  6 
Diss.  432. 

''  Hanover  Nat.  Bank  v.  Moyses, 
186  U.  S.  181,  8  A.  B.  R.  1;  In  re 
Beckerford,  1  Dill.  45;  In  re 
Owens,  12  N.  B.  R.  518,  6  Biss. 
432,  F.  C.  10632. 

6  Hanover  Nat.  Bank  v.  Moyses, 
supra;  In  re  Deckert,  2  Hughes 
183. 

'  In  re  Smith,  14  N.  B.  R.  295,  2 
Woods  458.  F.  C.  12996;  In  re 
Smith,  8  N.  B.  R.  401,  F.  C.  12986; 
In  re  Kean  et  al.  8  N.  B.  R.  367, 
F.  C.  7630. 


128  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  G 

determine,^  though  the  bankruptcy  court  may  look  to  the 
state  constitution,  and  if  the  exemption  statute  is  unconstitu- 
tional, it  will  refuse  to  allow  the  exemption.^  When  the  state 
exemption  laws  are  adopted  as  a  part  of  a  federal  bankruptcy 
system,  they  must  be  taken  as  they  are  found  upon  the  statute 
books  of  the  states,  as  interpreted  by  the  highest  courts  of 
such  states  ;^o  but  the  incorporation  of  these  statutes  into  the 
bankruptcy  law  will  not  make  valid  provisions  in  them  which, 
under  the  state  constitutions  are  invalid.^  ^  The  adoption  of 
the  different  statutes  of  exemptions  is  not  in  contravention 
of  the  constitutional  requirement  that  the  law  must  be 
"uniform,"  since  that  provision  contemplates  only  uniformity 
of  administration,^^  and  upon  this  ground  of  supposed  lack 
of  uniformity  the  act  of  1867  was  frecjuently  unsuccessfully 
attacked.^ ^  This  word  "uniform"  is  only  a  limitation  upon 
the  power  of  Congress  in  enacting  bankruptcy  legislation,^^ 
and  means  uniformity  among  the  states,  and,  so  far  as  the 
distribution  of  the  assets  are  concerned,  the  law  is  uniform.^'* 
§  181.  Jurisdiction  over  exemptions.— Subdivision  11  of 
Section  2  of  the  Act  expressly  confers  upon  courts  of  bank- 
ruptcy jurisdiction  to  "determine  all  claims  of  bankrupts  to 
their  exemptions,"  and  this  jurisdiction  is  exclusive,  as  to 
questions  concerning  the  right  of  the  bankrupt^*'  or  his  wife 
and  children  to  their  exemptions.^'     This  jurisdiction  would 

8  Bush  V.  Lester  et  aL,  15  N.  B.         i4  In  re  Smith,  8  N.  B.  R.  401; 

R.  36;  see  also  post,  §  208;  but  see  citing  Evans  v.  Eaton,   Peters,  C. 

In  re  Petrim,  1  N.  B.  R.  264.  C.   R.    323;    Bloomer   v.    Statly,    5 

0  In  re  Buelow,  2  N.  B.  N.  R.  26,  McLean,  158;  Satterlee  v.  Matthew- 

on  appeal,  id.  230,  98  F.  R.  286.  son,  2  Pet.  330;   Hepburn  v.  Gris- 

10  In  re  Manning,  112  F.  R.  948,  wold,  8  Wall.  603;  In  re  Everett,  9 
7  A.  B.  R.  571;  In  re  Staunton,  N.  B.  R.  90;  In  re  Smith,  14  N.  B. 
117  F.  R.  507;  In  re  Duerson,  13  R.  295;  In  re  Vogler.  8  N.  B.  R. 
N.  B.  R.  183,  F.  C.  4117.  132;   In  re  Jordan,  8  N.  B.  R.  180; 

11  In  re  Deckert,  10  N.  B.  R.  1;  Legal  Tender  Cases,  12  Wall.  457. 
In  re  Dillard,  9  N.  B.  R.  8.  i^  In  re  Beckerford,  4  N.  B.  R. 

12  Hanover  Nat.  Bank  v.  Moyses,  59,  1  Dill.  45;  Hanover  Nat.  Bank 
186  U.   S.   181,  8  A.  B.  R.  1;   see  v.  Moyses,  supra. 

also  In  re  Rohrer,  140  U.  S.  545,  ic  in  re  Overstreet.    1   N.   B.  N. 

560;   In  re  Jordan,  8  N.  B.  R.  180,  408,  2  A.  B.  R.  486;    In  re  Bragg, 

F.  C.  7514.  2  N.  B.  N.  R.   82. 

13  In  re  Beckerford,  1  Dill.  45,  4  it  Lumpkin  et  al.  v.  Eason,  10 
N.  B.  R.  203 ;  In  re  Smith,  8  N.  B.  N.  B.  R.  549. 

R.  401 ;  Kean  v.  White,  8  N.  B.  R. 
367;    In  re  Deckert,  supra. 


Ch.  6  ALLOWANCE    OF    EXEMPTIONS.  129 

also  extend  to  a  case  where  it  is  sought  to  correct  an  error 
in  the  description  of  bankrupt's  homestead,  as  a  result  of 
which  it  was  sold  in  bankruptcy  proceedings  ;is  but  not  to  a 
proceeding  to  enforce  a  lien  upon  property  that  is  exempt.^^ 

The  extent  of  the  jurisdiction  of  the  bankruptcy  courts,  in 
determining  claims  of  creditors  against  the  exempt  property, 
where  there  is  a  waiver,  is  discussed  elsewhere. ^*^ 

§  182.  Rule  g-Qverning  allowance  of  exemptions.— Section  6 
of  the  law  establishes  the  rule  governing  exemptions  which 
pervades  the  entire  act  and  must  be  read  into  every  other 
section  thereof  when  not  clearly  in  conflict.-^  The  right  is 
fixed  by  the  law  of  the  state  in  which  bankrupt  has  had  his 
domicile  for  six  months  or  the  greater  portion  thereof  imme- 
diately preceding  the  filing  of  his  petition,  but  the  method  of 
ascertaining  the  value  of  the  property  claimed  as  exempt  or 
of  setting  part  of  the  property,  is  governed  by  the  bankruptcy 
law.22 

The  word  "exemptions"  as  used  in  the  bankruptcy  act  is 
not  limited  to  real  estate  and  chattels.  It  includes  all  classes 
of  property  and  would  cover  a  trust-income,-^  and  property 
of.  any  kind  which  is  covered  by  the  local  statutes,-^  though 
it  would  not  cover  allowances  which  are  clearly  a  part  of  a 
state  insolvency  law,  the  operation  of  which  is  suspended  by 
the  bankruptcy  act.-^  But  the  right  to  the  exemption  must 
exist  at  the  date  of  the  institution  of  proceedings  in  the  baniv- 
ruptcy  court.-^  Where  debtor  receives  his  exemptions  and 
shortly  thereafter  bankruptcy  proceedings  are  instituted,  he 
cannot  claim  further  exemptions.-'^ 

For  a  discussion  of  the  length  of  domicile  see  §  32,  ante. 

§  183.     Bankrupt   should  claim.— The  bankrupt  should  file 

18  Steele  v.  Moody,  16  N.  B.  R.  23  in  re  Baudouine,  1  N.  B.  N. 
558.  506,  3  A.  B.  R.  55,  96  F.  R.  536. 

19  In  re  Everett,  9  N.  B.  R.  90,  F.  24  in  re  Erben,  2  N.  B.  R.  66,  F. 
C.  4579;   In  re  Preston,  6  N.  B.  R.  C.  1315. 

545 ;    Darling  v.   Berry,    13    F.   R.  25  in  re  Anderson,  110  F.  R.  141. 

659;    In  re  Betts,  15  N.  B.  R.  536,  6  A.  B.  R.  555. 

4  Dill.  93,  F.  C.  1371.  26  in   re   Duerson,  13  N.   B.  183, 

20  See  post,  §189.  F.  C.  4117. 

21  Steele  v.  Buel,  104  P.  R.  968,  27  in  re  Miller,  1  N.  B.  N.  263,  1 

5  A.  B.  R.  165.  A.  B.  R.  647;  In  re  Buckingham,  2 

22  In  re  Lynch,  101  F.  R.  579;  In     N.  B.  N.  R.  617. 
re  Friederich,  100  F.  R.  284,  3  A. 

B.  R.  801. 
9 


130  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  6 

in  triplicate,  with  the  schedule  of  his  property,  a  claim  for 
such  exemptions  as  he  may  be  entitled  to,  one  copy  to  be  for 
the  clerk,  one  for  the  referee,  and  one  for  the  trustee  ;^^  and  if 
he  does  not,  there  appears  no  reason  why  the  title  thereto  would 
not  vest  in  the  trustee.^^  The  claim  for  the  exemptions  must 
be  specific  and  not  in  general.^^  The  trustee  is  required  to  set 
apart  the  exemptions  and  report  the  items  and  estimated  value 
thereof  to  the  court  as  soon  as  practicable  after  his  appoint- 
ment,^^ which  is  authorized  to  determine  all  such  claims.^^ 
He  may  select  such  property  in  conformance  to  the  state 
statute,-'^^  and  it  is  then  the  duty  of  the  court  to  see  that  it  is 
secured  to  him,^^  but  a  severance  of  exempted  articles  or  prop- 
erty from  the  rest  of  his  estate  is  not  to  be  made  by  the 
debtor.35  Where  it  appears  that  the  claim  for  exemptions  was 
fraudulently  omitted  from  the  schedules  they  cannot  be 
amended  for  the  purpose  of  claiming  them,^^  though  the  fact 
that  bankrupt  fails  to  make  claim  in  his  schedules  will  not  nec- 
essarily bar  him  from  making  a  subsequent  claim  therefor, 
provided  rights  have  not  intervened  or  injury  will  not  be 
worked  by  the  allowance,^"^  but  the  application  must  be  made 
before  the  discharge.^^ 

§184.  Trustee's  duty— appraisement.— After  the  bankrupt 
in  his  schedule  has  selected  his  exemptions,  the  trustee  must 
set  them  aside  and  in  this  he  has  no  discretion,  the  law  being 

28  Sec.  7  (8),  act  of  1898;  In  re  R.  287;  In  re  Garner,  115  F.  R. 
Jackson,  2  N.  B.  R.  158,  F.  C.  7127;      200. 

In  re  Friederich.  100  F.  R.  284,  3  a*  In  re  Stevens,  5  N.  B.  R.  298, 

A.  B.  R.  801;   In  re  Rodenhagen,  2  2   Biss.   373,   F.   C.   13392. 

N.  B.  N.  R.  674;   In  re  Duffy,  118  35  in  re  Friederich,  supra. 

F.  R.  926.  36  In  re  Nunn,  1  N.  B.  N,  427,  2 

29  In  re  Moran,  105  F.  R.  901,  5  A.  B.  R.  664;  In  re  Garden,  93  F. 
A.  B.  R.  472,  aff'd  in  Moraw  v.  R.  423,  1  N.  B.  N.  189,  1  A.  B.  R. 
King,  111  F.  R.  730,  7  A.  B.  R.  176.  582;   Steele  v.  Moody,  16  N.  B.  R. 

30  In  re  Groves,  6  A.  B.  R.  728.  558. 

31  Sec.  47  (11),  act  of  1898.  37  in  re  Williams,  2  N.  B.  N.  R. 

32  Sec.  2  (11),  act  of  1898.  419;   In  re  Harrington,  1  N.  B.  N. 

33  In  re  Grimes,  1  N.  B.  N.  516,  513;  In  re  Osborn,  104  F.  R.  780; 
96  F.  R.  529,  2  A.  B.  R.  730;  In  re  Bartholomew  v.  West,  8  N.  B.  R. 
Solomon,  10  N.  B.  R.  9,  F.  C.  12,  F.  C.  1071;  In  re  Moran,  105 
13166;  In  re  Smith,  8  N.  B.  R.  401,  F.  R.  901,  5  A.  B.  R.  472. 

F.  C.  12986;  In  re  Tobias.  103  F.  R.         ss  in  re  Kean  et  al.  8  N.  B.  R. 
68,  3  N.  B.  N.  R.  23,  4  A.  B.  R.  555;      367,  F.  C.  7630. 
In  re  Wilson,  108  F.  R.  197,  6  A.  B. 


Ch.  6  TRUSTEE'S    DUTY— APPRAISEMENT.  131 

luaudatory.  It  is  solely  his  duty,  and  any  agreement  on  his 
part  or  the  creditor's  that  they  shall  be  alloted  in  any  other 
manner  than  that  prescribed  by  the  bankruptcy  law,  or 
through  other  agencies  than  that  of  the  trustee  of  the  bank- 
rupt, is  a  nullity.  Where  appraisers  set  apart  or  value  the 
exemptions  pursuant  to  an  agreement  to  that  effect,  excep- 
tions to  such  allotments  may  be  filed  by  bankrupt  or  any 
creditor  within  20  days  after  the  same  has  been  made  and 
filed  with  the  clerk  or  referee,  when  such  allotment  will  be 
set  aside.  Where,  however,  the  assets  are  in  excess  of  the 
exemptions,  the  property  must  be  appraised  by  three 
appraisers  when  their  inventory  may  aid  the  trustee  in  mak- 
ing his  allotment,  but  he  is  in  no  wise  concluded  by  it  nor  has 
he  any  right  to  adopt  it  as  his  own;-^^  even  where  another 
method  is  prescribed  by  the  state  law.^^  The  bankrupt  law 
allows  to  debtors  the  exemptions  provided  by  the  state  stat- 
utes, but  the  manner  in  which  they  are  to  be  claimed, 
set  apart  and  awarded  is  regulated  by  the  law.^i  The  trustee 
cannot  impose  conditions  upon  his  allowance  nor  demand 
indemnity  from  the  bankrupt  before  surrendering  his  exemp- 
tions ;*2  iior  divest  himself  of  any  part  of  the  estate  except 
for  full  consideration  when  the  exemptions  are  not  properly 
claimed,  nor  will  the  action  of  a  state  court  adjudging  prop- 
erty to  be  exempt,  confer  any  authority  on  the  trustee  to 
transfer  the  title  to  such  property.'*^  It  has  been  held  that 
where  exemptions  had  been  set  apart  by  a  state  court  and 
bankruptcy  proceedings  were  shortly  thereafter  instituted  that 
such  setting  apart  cannot  be  reviewed  or  set  aside  by  the  bank- 
ruptcy court,^^  but  this  seems  questionable. 

39  In  re  Grimes,  1  N.  B.  N.  516,  N.  B.  R.  298,  2  Biss.  373,  F.  C. 
96  F.  R.  529,  2  A.  B.  R.  730;  In  re  13392;  In  re  Preston,  6  N.  B.  K. 
Smith,  1  N.  B.  N.  532,  93  F.  R.  791,  545,  F.  C.  11394;  In  re  Ricliard,  1 
2  A.  B.  R.  190;  contra  In  re  Mc-  N.  B.  N.  487,  2  A.  B.  R.  506,  94  F. 
Cutchen,  2  N.  B.  N.  R.  636,  100  F.  R.    635. 

R.   779,   4   A.  B.  R.   81;    see  In   re  -ti  In  re  Friederich,  100  F.  R.  284, 

Wilson,  101  F.    R.    571,  4  A.  B.  R.  2  A.  B.  R.  801. 

260;    In  re  Peabody,    16  N.  B.   R.  42  in  re  Brown,  1  N.  B.  N.  511, 

248,  F.  C.  10866.  100  F.  R.  441,  4  A.  B.  R.  46. 

40  In  re  Camp,  1  N.  B.  N.  142,  91  *^  In  re  Nunn.  1  N.  B.  N.  427,  2 
F.   R.    745,   1   A.   B.   R.   165;    In   re  A.  B.  R.   664. 

Bass,  15  N.  B.  R.  453,  3  Woods.  «  In  re  Rhodes,  109  F.  R.  117,  6 
382,  F.  C.   1091 ;   In  re  Stevens,  5     A.  B.  R.  173. 


132  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  6 

As  to  what  constitutes  the  setting  aside  of  the  exemption, 
it  seems  clear  that  some  affirmative  act  to  that  end  is  required 
of  the  trustee.  A  mere  report  by  him  that  the  bankrupt  has 
claimed  his  exemptions  will  not  amount  to  a  setting  aside,"*^ 
but  there  must  be  a  specification  of  the  items  with  an  appraisal 
of  the  property  set  apart.^^  With  this  single  exception  of  set- 
ting aside  the  exemptions,  the  trustee  bears  no  relation  to  the 
bankrupt.^'^ 

Within  20  days  after  receiving  notice  of  his  appointment, 
the  trustee  must  make  report  to  the  court  of  the  articles  set 
off  to  the  bankrupt  with  the  estimated  value  of  each  article, 
unless  they  do  not  come  into  his  possession  and  his  right  to 
them  is  contested,  in  which  case  the  time  should  be  computed 
from  the  final  decision  thereon  ;^^  and  exceptions  to  the  de- 
terminations of  the  trustee  may  be  taken  within  20  days 
after  the  filing  of  the  report  by  any  creditor,  but  this  provi- 
sion does  not  apply  to  the  bankrupt.^^  Where  a  party  is 
guilty  of  laches  in  failing  to  contest  the  bankrupt's  claim  the 
court  will  not  reopen  the  matter.^^  -phe  referee  may  require 
the  exceptions  to  be  argued  before  him  and  at  the  request  of 
either  party  must  certify  them  to  the  court  for  final  determina- 
tion,^^ and  an  objection  made  at  the  first  meeting  will  pre- 
serve the  right  to  object  at  a  subsequent  stage  of  the  proceed- 
ings.-^2 

§  185.  Title  to  exemptions.— The  title  to  exempt  property 
does  not  pass  to  the  trustee,^-^  but  remains  in  the  bankrupt, 
who  has  the  same  rights  as  others  before  a  state  tribunal,  where 
his  exempt  property  has  been  wrongfully  seized  on  execu- 
tion.^^ Beyond  setting  it  aside,  the  trustee  has  no  connection 
with  it.^^    The  bankrupt  may  convey,  mortgage,  or  make  such 

45  In  re  Harber,  2  N.  B.  N.  R.  '^^i  G.  O.  XVII;  In  re  Smith,  1  N. 
449;  Darsey  v.  Mumford,  17  N.  B.  B.  N.  532,  93  P.  R.  791,  2  A.  B.  R. 
R.  181.  190. 

46  In  re  Manning,  112  F.  R.  948,  52  in  re  Harber,  2  N.  B.  N.  R. 
7  A.  B.  R.  571.  449. 

47  Ailten  v.  Edrington  et  al.  15  ^3  See.  70a,  act  of  1898;  In  re 
N.  B.  R.  271,  F.  C.  111.  Seabolt,  113  F.  R.  766;  In  re  Wells, 

4s  In  re  Shields,  I  N.  B.  R.  170,     105  F.  R.  762,  5  A.  B.  R.  308. 
F.  C.  12785.  •'54  In  re  Everett,  9  N.  B.  R.  90. 

49  In  re  White,  3  N.  B.  N.  R.  27,     F.  C.  4579. 

103  F.  R.  774,  4  A.  B.  R.  613.  ^-'  In  re  Hill.  2  A.  B.  R.  798.  97 

50  In  re  Reese,  8  A.  B.  R.  411.  F.  R.  185;  In  re  Bass,  15  N.  B.  R. 


C'll.  G  TITLE    TO    EXEMPTIONS.  133 

disposition  of  it  as  he  sees  tit;  lie  may  maintain  and  defend 
suits  with  reference  theretOj^*^  dispose  or  rent  it,^'''  and  upon 
liis  death,  it  descends  to  his  heirs.^^  After  it  has  been  desig- 
nated and  set  apart  by  the  trustee,  it  has  passed  out  of  the 
possession  and  control  of  the  bankruptcy  court,  and  neither 
it  nor  the  trustee  has  any  further  interest  in  it,^^  and  the 
court  of  bankruptcy  will  not,  on  the  petition  of  a  chattel  mort- 
gagee of  such  property,  order  the  bankrupt  to  restore  such 
property  to  the  trustee  to  be  sold  by  him  for  such  mortgagee's 
benefit.*''^  As  the  trustee  has  title  to  the  assets  of  the  bank- 
rupt estate  only  in  a  representative  capacity,  he  cannot  trans- 
fer title  to  the  bankrupt  by  setting  aside  to  him  property 
which  the  statute  does  not  make  exempt,  as  such  an  act  would 
be  void  and  he  would  be  held  accountable  ;'^i  nor  make  an 
allowance  from  the  general  fund  for  articles  sold  under  distress 
for  rent,  which  would  have  been  exempt.*'- 

There  is,  however,  a  class  of  property  which  is  closely  akin 
to  exempt  property  to  which  the  trustee  takes  title  for  the 
benefit  of  creditors.  Such  is  the  reversionary  interest  in  land 
alloted  to  bankrupt  as  a  homestead  after  the  termination  of 
the  exempt  estate  or  interest.®^  So  the  trustee  has  a  claim 
for  the  excess  upon  a  piece  of  bankrupt's  real  estate  which 
exceeds  in  value  the  exemption  allowed  by  law,  and  to  that 
extent  the  bankrupt's  title  to  such  real  estate  is  qualified.^* 

453,  3  Woods,  382,  F.  C.  1091 ;  Du-  59  In  re  Grimes,  supra. 

rant  v.  Ins.  Co.  16  N.  B.  R.  324,  F..  eo  In  re  Hatch,  102  F.  R.  280,  4 

C.  4188;    In  re  Baker,  1  N.  B.  N.  A.  B.  R.  349. 

212,  1  A.  B.  R.  526;   In  re  Grimes,  ei  in  re  Gainey,  2  N.  B.  R.  163, 

96  F.  R.  528,  1  N.  B.  N.  516,  2  A.  F.  C.  5181;    In  re  Farish,  2  N.  B. 

B.  R.  730;  In  re  Hester,  5  N.  B.  R.  R.  168,  F.  C.  4647;  In  re  Jackson  & 
285;  In  re  Lambert,  2  N.  B.  R.  Pearce,  2  N.  B.  R.  158,  F.  C.  7127; 
426;  In  re  Everett,  9  N.  B.  R.  90;  In  re  Perdue,  2  N.  B.  R.  67,  F.  C. 
In  re  Hunt,  5  N.  B.  R.  493;  Henly  10975. 

V.  Lanier,  15  N.  B.  R.  280.  62  in  re  Lawson,  2  N.  B.  R.  19,  F. 

56  Henly  v.  Lanier,  15  N.  B.  R.     C.    8149. 

280;  In  re  Hunt,  5  N.  B.  R.  493,  F.         es  in  re  Woodard,  1  N.  B.  N.  385, 

C.  6883.  2  A.  B.  R.  339,  95  F.  R.  260;   In  re 

57  In  re  Oleson,  110  F.  R.  796,  7     Watson,    2    N.    B.    R.    174,    F.    C. 

A.  B.  R.  22.  17271;  Rix  v.  Bank,  2  Dill.  367. 

58  In  re  Hester,  5  N.  B.  R.  285,  F.  64  in  re  Parks,  9  N.  B.  R.  270, 
C.  6437;    Farmer  v.  Taylor,  15  N.     F.  C.  10765;  Johnson  v.  May,  16  N. 

B.  R.  515;  In  re  Seabolt,  113  F.  R.     B.  R.  425,  F.  C.  7397. 
766. 


rS4:  THE    NATIONAL    BANKRUPTCY    LAW.  Cil.  (i 

§  186.  Property  concealed  or  fraudulently  transferred.— 
The  authorities  are  not  in  harmony  upon  the  right  of  a  bank- 
rupt to  exemptions  where  he  has  failed  to  account  for  all  his 
assets,  or  has  fraudulently  transferred  or  concealed  his  prop- 
erty, many  courts  holding  that  exemptions  should  be  allowed 
since  a  remedy  is  afforded  by  which  they  may  be  recovered  ;^^ 
but  the  better  rule  would  seem  to  be  opposed  to  such  doc- 
trine,^^  and  certainly  in  those  states  where  the  exemption  law 
requires  the  bankrupt  to  come  mto  court  with  clean  hands, 
ihere  can  be  no  question  that  such  acts  will  operate  as  a  bar 
to  the  right  to  have  property  set  aside  as  exempt*^'''  even 
though  the  evidence  may  not  make  out  a  case  of  fraudulent 
concealment  in  every  detail  as  indicated  and  defined  by  the 
statute.*^^  It  has  been  held  that  property  or  the  proceeds 
thereof  constituting  a  preference  which  is  surrendered  to  the 
trustee  by  the  preferred  creditor,  can  be  applied  in  the  setting 
off  of  exemptions.*^'^  Where  bankrupt  disposes  of  property 
not  exempt  a  few  days  before  filing  his  petition,  and  applies  the 
proceeds  in  partial  payment  of  an  incumbrance  upon  property 
which  was  exempt,  the  transaction  was  held  to  be  in  fraud  of 
the  law  and  the  creditors  were  entitled  to  be  subrogated  to 

CO  In  re  Noell,  2  N.  B.  N.  R.  789;  Yost,  117  F.  R.  792;  In  re  Evans. 
In  re  Park,  2  N.  B.  N.  R.  981,  102  8  A.  B.  R.  730. 
r.  R.  602,  4  A.  B.  R.  432;  In  re  gt  in  re  Magata,  2  N.  B.  R.  456; 
Detert,  11  N.  B.  R.  293,  F.  C.  3829;  McNally  v.  Mulherin  et  al.,  79  Ga. 
Cox  V.  Wilder,  7  N.  B.  R.  241;  2  614;  In  re  Waxelbaum,  101  F.  R. 
Dill.  45,  F.  C.  3308;  Penny  v.  Tay-  228,  4  A.  B.  R.  120;  In  re  Tollett,  2 
lor,  10.  N.  B.  R.  200,  F.  C.  10957;  N.  B.  N.  R.  1096,  105  F.  R.  425,  5 
McFarland  v.  Goodman,  11  N.  B.  A.  B.  R.  305;  reversed  on  ground 
R.  134,  6  Biss.  Ill,  F.  C.  8789;  that  conveyance  was  only  con- 
Bartholomew  V.  West,  8  N.  B.  R.  structively  fraudulent,  in  106  F.  R. 
12,  F.  C.  1071;  Smith  v.  Kehr,  7  866,  5  A.  B.  R.  404;  In  re  William- 
N.  B.  R.  97,  2  Dill.  50,  F.  C.  13071;  son,  114  F.  R.  190.  8  A.  B.  R.  42; 
In  re  Peterson,  1  N.  B.  N.  215,  1  A.  114  F.  R.  192,  8  A.  B.  R.  53;  In  re 
B.  R.  254;  Comstock  v.  Bechtel,  63  Taylor,  114  F.  R.  607,  7  A.  B.  R. 
Wis.  656;  Wilcox  v.  Hawley,  31  N.  410;  In  re  Boorstin,  114  F.  R.  696. 
Y.  648;  In  re  Talbott,  116  F.  R.  8  A.  B.  R.  89;  In  re  West,  116  F. 
417,  8  A.  B.  R.  427;  In  re  Falconer,  R.  767,  8  A.  B.  R.  564. 
110  F.  R.  Ill,  6  A.  B.  R.  557.  c8  in  re  Morris,  2  N.  B.  N.  R.  260. 

coin  re  Long,  116  F.  R.  113;   In  so  in  re  Talbott.  116  F.   R.   417. 

re  White,  109  F.  R.  635,  6  A.  B.  R.  8  A.  B.  R.  427;  In  re  Falconer,  110 

451;  In  re  Evans,  116  F.  R.  909;  In  F.  R.  Ill,  6  A.  B.  R.  557;   contra, 

re    Duffy,    118    F.    R.    926;    In    re  In  re  Long,  8  A.  B.  R.  591. 


Ch.  6  WAIVER    OF    EXEMPTIONS.  135 

the  mortgage  creditors  upon  the  homestead  to  the  extent  of 
such  payment.'^*' 

§  187.  Property  assigned.— Upon  the  filing  of  a  petition  in 
bankruptcy  within  four  months  of  a  general  assignment  for 
the  benefit  of  creditors,  the  latter  is  void  and  the  trustee  in 
bankruptcy  takes  the  property  as  though  such  assignment 
•had  never  been  made;  and  may,  by  proper  proceedings,  re- 
cover the  same  if  not  voluntarily  surrendered  to  him.  While 
the  making  of  such  an  assignment  is  not  actually  fraudulent 
but  only  fraudulent  in  law,  and,  since  the  exemption  laws  are 
given  for  the  protection  of  the  family  and  not  the  benefit  of 
the  individual  and  are  to  be  liberally  construed,'''^  the  assignor 
in  such  assignment  is  entitled  to  •  his  exemptions  out  of  the 
assigned  property  in  case  of  subsequent  bankruptcy  proceed- 
ings,'^- or  out  of  the  proceeds  if  the  same  has  been  sold.'''^ 

§  188.  Purchase  price  not  paid.— By  statute  in  many  states 
it  is  specifically  provided  that  property  or  the  proceeds  thereof 
when  sold,  cannot  be  set  apart  as  exempt  where  the  purchase 
l)rice  has  not  been  paidJ^  Even  in  the  absence  of  a  statute  to 
hold  to  the  contrary  would  be  unconscionable  and  operate  as 
a  great  hardship. 

§  189.  Waiver. — There  is  much  diversity  of  opinion  with 
reference  to  the  power  of  the  Court  of  Bankruptcy  in  cases 
where  there  is  a  waiver  of  the  exemptions  either  generally  as 
to  all  creditors  or  specially  as  to  a  particular  creditor.  Some 
courts  have  taken  the  position  that  since  the  title  to  exempt 
property  does  not  pass  to  or  vest  in  the  trustee,  the  Federal 

70  In  re  Boston,  2  N.  B.  N.  R.  19,  73  in  re  Noell,  supra;  In  re 
98  F.  R.  587,  3  A.  B.  R.  388.  Jones,  2  Dill.  343,  F.  C.  7445;  In  re 

71  In  re  Tilden,  1  N.  B.  N.  134,  "Welch,  5  N.  B.  R.  348,  5  Ben.  230, 
91  F.  R.  500,  1  A.  B.  R.  300;  In  re  F.  C.  17366;  In  re  Ellis,  1  N.  B.  R. 
Buckingham,  2  N.  B.  N.  R.  617;  154,  P.  C.  4400;  Vaughan  v.  Thomp- 
Sears  v.  Hanks,  14  O.  S.  298,  301.  son,  17  III.  78;  Berry  v.  Hanks,  28 

72  In  re  Noell,  2  N.  B.  N.  R.  789;  111.  App.  57. 

In  re  Talbott,  116  F.  R.  417,  8  A.  B.  74  in  re  Anderson,  103  F.  R.  854, 

R.  427;  Rex  v.  Capitol  Bk.,  2  Dill.  4  A.  B.  R.  640;  McGahan  v.  Ander- 

r,67.  F.  C.  11869;   In  re  Poleman,  9  son,  113  F.  R.  115,  7  A.  B.  R.  641; 

N.    B.    R.    376,    5    Biss.   526,  F.    C.  In  re  Durham,  104  F.  R.  231,  4  A. 

11247;  In  re  Griffin,  2  N.  B.  R.  85,  -B.  R.  760;   In  re  Seydel,  118  F.  R. 

F.  C.  5813;    In  re  Stevens,  2  Biss.  207;  In  re  Wells,  105  F.  R.  762,  5 

373,    F.    C.    13392;     Bashinski    v.  A.  B.  R.  308. 
Talbott,  119  F.  R.  337. 


136  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  (] 

Court  has  absolutely  no  control  or  jurisdiction  over  the  same 
other  than  to  set  it  apart  leaving  the  person  holding  such 
Avaiver  to  resort  to  the  state  court  to  enforce  this  right,  if 
any  he  hasJ^  Serious  objection  exists  as  to  this  position  for 
the  reason  that  if  the  property  has  once  been  set  apart  as 
exempt,  before  the  party  holding  such  waiver  can  enforce  his 
claim,  the  bankrupt  will  have  received  his  discharge  and  the. 
same  may  be  pleaded  in  bar  to  an  action  thereon.  To  say  that 
a  debtor  may  indiscriminately  waive  his  exemptions  and  then 
claim  them  on  subsequently  taking  advantage  of  the  bank- 
ruptcy law  would  certainly  be  inequitable. 

The  right  to  have  property  set  apart  as  exempt  is  a  personal 
privilege,  which  a  bankrupt  may  claim  or  waive.  While  a 
creditor  holding  a  note  or  an  obligation  containing  a  waiver 
of  exemption  does  not  have  a  specific  lien  on  the  exempt  prop- 
erty it  does  create  an  incumbrance  upon  it.  Thus,  in  pass- 
ing upon  a  note  under  the  act  of  1867,  containing  a  waiver 
of  exemption,  Chief  Justice  Waite  said'^^  that  the  owner  of  a 
homestead  has  the  absolute  control  over  it  and  may  deal  with 
it  in  such  manner  as  he  sees  fit,  and  has  the  right  to  sell  or 
incumber  it  as  suits  his  convenience,  and  adds:  "If  he  sells 
or  incumbers  before  he  selects,  his  power  of  selection  as 
against  such  sale  or  incumbrance  is  gone.  No  particular  form 
of  incumbrance  is  specified ;  that  is  left  to  the  discretion  of 
the  legislature.  Now,  a  waiver  of  the  right  to  sell  is,  in  effect, 
an  incumbrance  on  the  property  which  may  be  selected." 
Hence,  while  there  is  no  lien  on  the  property  designated,  it 
comes  into  the  bankruptcy  court  incumbered  by  a  waiver  of 
the  right  of  the  bankrupt  to  claim  the  property  as  exempt. 

Accordingly,  where  a  bankrupt  claims  his  exemption  in  prop- 
erty surrendered  and  debts  are  proved  as  to  which  the  benefit 
of  the  exemption  has  been  waived,  it  is  the  duty  of  the  trustee 
to  sell  the  property  claimed  as  a  homestead,  or  so  much  thereof 
as  may  be  necessary,  to  pay  the  debts  proved  as  to  which  the 

75  In  re  Camp,  1  N.  B.  N.   142,  R.  621,  6  A.  B.  R.  681;  In  re  Wells, 

91  F.  R.  745,  1  A.  B.  R.  365;  In  re  105    F.    R.    762,    5    A.    B.    R.    296; 

Jackson,  116  F.  R.  46,  8  A.  B.  R.  Woodruff  v.  Cheeves,  105  F.  R.  601, 

594;    In   re  "Hill,    96   F.   R.   185,    2  5  A.  B.  R.  296,  reversing  96  F.  R. 

A.  B.  R.  798;  In  re  Bass,  3  Woods  317,  2  A.  B.  R.  679. 

382,  F.  C.   1064;    In  re  Stevens,  5  76  in  re  Solomon,  2  Hughes,  164. 

N.    B.    R.    298;    In    re    Preston,    6  F.  C.  13166. 
N.  B.  R.  545;  In  re  Little,  110  F. 


Ch.  6  WAIVER    OF    EXEMPTIONS.  137 

benefit  of  the  exemption  has  been  waived,  since  the  claim  of 
such  creditor  must  be  paid  out  of  the  fund  as  to  which  he  can 
alone  resort.  The  residue  of  the  exempt  property,  if  any,  or 
the  proceeds  of  the  sale  thereof,  should  then  be  allowed  the 
bankrupt  under  his  claim.'^'^ 

Furthermore,  while  objection  has  been  made  to  the  juris- 
diction of  the  bankruptcy  court  on  the  ground  that  the  title 
to  the  property  claimed  as  exempt  does  not  pass  to  the  trustee, 
such  decisions  fail  to  recognize  the  fact  that  where  by  the  laws 
of  the  state  such  waiver  is  recognized,  the  property  is  not 
absolutely  exempt  from  the  payment  of  the  debts. 

§  190.  Homestead,  right  to.— The  right  to  a  homestead 
exemption  is  not  given  by  the  Bankrupt  Act,  but  exists  by 
virtue  of  some  state  law,  if  at  all,  and  therefore  if  the  latter 
makes  provision  for  an  exempt  homestead,  it  will  be  allowed 
by  the  bankruptcy  courts,  otherwise  not,'^^  but  in  order  to 
obtain  the  same  the  debtor  must  comply  with  the  provisions 
of  the  state  law  under  which  he  makes  claim. "^ 

The  chief  essential  to  the  debtor's  right  to  a  homestead  is, 
as  a  rule,  actual  selection  of  the  property  and  its  occupancy 
as  such,'^'^  at  the  time  he  makes  claim,^^  a  mere  present  inten- 
tion to  make  it  his  homestead  being  usually  held  insufficient,'^^ 
as  will  any  selection  or  occupancy  that  is  not  bona  fide.^^  In 
some  states  he  may  change  his  homestead,  removing  to  one 
more  valuable,  although  but  shortly  before  the  proceedings, 
where  it  is  done  in  good  faith.^*    So  it  has  been  held  that,  in 

77  In  re  Sisler,  1  N.  B.  N.  472,  96  -s  In  re  Kerr,  9  N.  B.  R.  566,  F. 

F.  R.  402,   2  A.  B.  R.   760;    In   re  C.  7729. 

Graves,  2  N.  B.  N.  R.  469 ;  Reed  v.  ^9  in  re  Farish,  2  N.  B.  R.  62,  F. 

Union  Bk.,  29  Gratt.  719;   Linken-  C.  4647. 

broker  v.  Detrick,  81  Va.  44;  In  re  so  in  re  Dawley,  1  N.  B.  N.  482, 

Solomon,    3    Hughes,    164;    In    re  and  cases  cited;    In  re  Gibbs,  103 

Harber,   2  N.  B.  N.  R.  449;    In  re  F.  R.  782,  4  A.  B.  R.  619. 

Nunn,   1  N.  B.   N.  427,   2  A.   B.  R.  *^i  In  re  Buelow.  2  N.  B.  N.  R.  26, 

664.     See  In  re  Bragg,  2  N.  B.  N.  on  appeal  230,  98  F.  R.  86.  3  A.  B. 

R.  82;   In  re  Harber,  2  N.  B.  N.  R.  R.  389. 

449;    In  re  Becker,  2  N.  B.  N.  R.  82  in  re  Hatch,  1  N.  B.  N.  293,  2 

202;  In  re  Ross,  2  N.  B.  N.  R.  218;  A.  B.  R.  36. 

In  re  Garden,  1  N.  B.  N.  189.  93  F.  ss  in  re  Wright,  8  N.  B.  R.  430, 

R.    423.    1    A.    B.    R.    582;    In    r?  F.  C.  1806. 

Hoover.  113  F.  R.  136;   In  re  Gar-  »*  Hunergardt  v.  Dry  Goods  Co.. 

ner,  8  A.  B.  R.  263;  In  re  Hopkins,  116  F.  R.  31,  8  A.  B.  R.  341;  In  re 

1  A.  B.  R.  209.  Stone,  116  F.  R.  35,  8  A.  B.  R.  416; 


138  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  6 

a  state  where  a  husband  entitled  to  curtesy  becomes  vested 
with  a  life  estate  in  his  wife's  property,  he  is  entitled  to  a 
homestead  exemption  out  of  the  estate  he  holds  in  the  prop- 
erty occupied  by  him  and  his  family  as  a  homestead,  without 
regard  to  the  value  of  the  fee  where  his  interest  is  less.^^ 

Where  the  property  claimed  by  the  bankrupt  as  a  home- 
stead appears  to  be  worth  more  than  the  homestead  exemp- 
tion, the  same  may  be  appraised  and  assigned  as  a  homestead 
on  payment  of  the  excess  over  the  exemption  •,^^  or,  if  the 
bankrupt  makes  no  application  to  retain  it  and  pay  such 
excess  and  it  is  indivisible,  the  trustee  may  apply  to  the 
referee  for  an  order  of  sale,  and  the  validity  of  such  sale  does 
not  depend  on  the  filing  of  the  proceedings  with  the  clerk  of 
the  bankruptcy  court;  and  the  bankrupt,  not  having  objected 
to  such  order  of  sale,  can  not  thereafter  attack  its  validity 
nor  object  to  the  deduction  of  the  value  of  other  assets  from 
his  share  of  the  proceeds,  which,  though  not  exempt,  he  re- 
ceived without  objection  from  the  trustee.^'^ 

Where  bankrupt  has  remainder  after  a  life  estate,  there  is 
not  such  a  possession  that  he  could,  either  by  intent  or  actual 
occupancy,  claim  a  homestead.^^  It  has  been  held  further  that 
after  the  death  of  the  father  and  mother,  the  homestead  char- 
acter of  property  continues  with  the  children.^^ 

In  the  absence  of  a  statutory  provision  to  that  effect,  there 
can  be  no  homestead  exemption  in  unimproved  property  ;^^ 
nor  where  one  reserves  a  room  in  a  building  in  which  he  stored 
some  articles,  while  he  boarded  at  a  restaurant  and  lodged 
elsewhere  ;"i  nor  where  the  premises  are  permanently  rented 
and  not  occupied  by  the  owner.^^ 

§  191.  Abandonment.— Homestead  rights  may  be  lost  by 
abandonment,  but  mere  physical  absence  without  the  intent 

contra,   In   re  Wright,  8  N.   B.  R.  »»  In  re  Fitzsimmons,  2  N.  B.  N. 

430,   F.   C.   18067;    In   re  Lammer,  R.   453. 

14  N.  B.  R.  460,  7  Biss.  289,  F.  C.  sa  in  re  Rafferty,  112  F.  R.  512. 

8031.  7  A.  B.  R.  415. 

85  In  re  Marquette,  103  F.  R.  777,  oo  In    re    Duerson,    13   N.    B.    R. 

4  A.  B.  R.  623.  183,  F.  C.  4117. 

86  In  re  Anderson,  103  F.  R.  854;  oi  in  re  Dawley,  1  N.  B.  N.  528, 
In   re   Carmichael,   108   F.   R.   789.     94  F.  R.  795,  2  A.  B.  R.  496. 

5  A.  B.  R.  551.  92  In  re  Vincent,  115  F.  R.  236. 

87  In  re  Oderkirk,  103  F.  R.  779, 
4  A.  B.  R.  617. 


Ch.  G  right  to  homestead.  139 

to  abandon  will  not  generally  destroy  the  rigiit,'^^  nor  the  use 
of  part  of  the  premises  for  another  purpose,  or  the  renting 
of  part.^^  A  temporary  removal,  even  for  a  long  time,  or  the 
renting  of  the  property  will  not  suffice  to  work  an  abandon- 
ment, if  the  animus  revertendi  remains,^^  and  this  is  true,  al- 
though bankrupt,  by  his  attorney's  direction,  closed  and 
locked  his  business  homestead  on  filing  his  petition,  intend- 
ing, however,  to  resume  business,  the  building  and  contents 
passing  into  the  trustee's  possession.^^  There  can  be  no  in- 
tention to  return  to  a  state  without  a  former  or  actual  bona 
fide  residence  within  it.^''^ 

§  192.    In  property  mortgaged    or    transferred.— Questions 

frequently  arise  as  to  the  right  of  the  bankrupt  to  have  a  home- 
stead exemption  where  he  has  transferred  or  mortgaged  the 
property  out  of  which  he  would  be  entitled.  Under  the  act  of 
1867  the  rule  was  that  where  a  conveyance  fraudulent  as  to 
creditors  was  set  aside  by  a  bankrupt  court,  at  the  instance  of 
the  assignee,  the  parties  were  restored  to  the  status  occupied 
prior  to  such  conveyance,  and  a  homestead  exemption  was 
allowed,!  and  a  similar  doctrine  under  the  present  law  was 
announced  under  the  laws  of  Tennessee,  where  a  bankrupt 
husband  fraudulently  conveyed  property  to  his  wife,^  though, 
if  the  wife  joined  in  the  fraudulent  conveyance,  it  would  not 
be  S0.3  It  was  also  held  that  a  bankrupt  who  mortgaged  the 
only  real  estate  he  possessed,  might  nevertheless  claim  a 
homestead  exemption  out  of  it,^  but  that  he  would  not  be 

93  In  re  Pope,  2  N.  B.  N.  R.  427,  241,  2  Dill.  45,  F.  C.  3308;  Penny 
98  F.  R.  722.  3  A.  B.  K.  525.  v.  Taylor,   10   N.  B.  R.  200,  F.  C. 

94  In  re  Parker,  1  N.  B.  N.  262,  10957;  McFarland  v.  Goodman,  11 
1  A.  B.  R.  708;  In  re  Mayer,  108  N.  B.  R.  134,  6  Biss.  Ill,  F.  C. 
F.  R.  599,  6  A.  B.  R.  117.  8789;    Bartholomew  v.  West,  8  N. 

95  In  re  Lynch,  1  N.  B.  N.  182,  1  B.  R.  12,  F.  C.  1071;  Smith  v.  Kehr. 
A.  B.  R.  245;  In  re  Ross,  2  N.  B.  7  N.  B.  R.  97,  2  Dill.  50,  F.  C. 
N.  R.  218 ;  Duddy  v.  Willis,  99  Mo.  13071 ;  contra,  Keating  v.  Keefer 
132;  Leach  v.  King,  85  Mo.  413;  5  N.  B.  R.  133;  In  re  Dillard,  9  N 
Bailey  Ass.  v.  Comings,  16  N.  B  B.  R.  8;  In  re  Graham,  2  Biss.  449; 
R.  382,  F.  C.  733.  In  re  Everett,  9  N.  B.  R.  90. 

96  In  re  Harrington,  1  N.  B.  N.         2  in  re  Griffith,  1  N.  B.  N.  546. 
513,  99  F.  R.  390,  3  A.  B.  R.  639.  3  in  re  Tollett.  2  N.  B.  N.  R.  1096. 

97  In  re  Dinglehoef,  109  F.  R.  868,  105  F.  R.  425,  5  A.  B.  R.  305. 

6  A.   B.  R.   242.  *  In  re  Brown,  3  N.  B.  R.  60,  F. 

1  In  re  Detert,  11  N.  B.  R.  293,  F.     C.  1980. 
C.  3829  •  Cox  V.  Wilder,  7  N.  B.  R. 


140  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  6 

entitled  thereto  out  of  lands  subject  to  purchase  money  mort- 
gage,^ although  without  such  mortgage,  a  discharge  may  be 
pleaded  in  bar  in  an  action  for  the  purchase  money.*^  So,  the 
cestui  que  trust  under  a  trust  to  secure  present  loans  and 
future  advances  will  be  protected  against  the  borrower,  who 
declared  the  land  a  homestead,  and  subsequently  obtained  such 
advances,  fraudulently  concealing  his  declaration  of  liome- 
steadJ 

§  193. When  subject  to  liens.— The  trustee,  in  alloting 

exemptions,  is  not  obliged  to  designate  articles  free  from  liens,'^ 
while  such  action,  when  taken,  in  no  wise  impairs  the  right  of 
lien  holders  whose  liens  were  valid  against  the  property  be- 
fore it  was  set  apart,^  but  when  it  is  subject  to  debts,  so  as 
to  render  a  sale  necessary,  the  cost  of  converting  it  into  money 
should  be  borne  by  the  trustee  and  the  entire  proceeds  in 
excess  of  the  debt  paid  to  the  bankrupt.^o  They  need  not 
come  into  the  bankruptcy  court  for  relief,  but  may  proceed 
without  regard  to  the  bankruptcy  proceedings.  A  mortgagee 
may  enforce  his  lien  in  a  state  court  against  property  that  has 
been  set  aside  as  exempt  in  the  bankruptcy  court,^^  and  a 
vendor's  lien  against  land  may  be  enforced  by  sale,^-  but 
property  exempt  from  levy  and  sale  cannot  be  sold  even  to 
satisfy  a  prior  levy,  after  bankrupt  has  filed  a  petition  in 
bankruptcy, 13  although,  while  the  lien  may  not  prevail  against 

5  In  re  Whitehead,  2  N.  B.  R.  ert,  10  N.  B.  R.  1;  In  re  Bass,  15 
180,  F.  C.  17562.  N.  B.  R.  453;    In  re  Broome,  3  N. 

6  Hoskins  v.   Wall,   17  N.   B.   R.     B.  R.  343,  3  Ben.  488. 

314.  10  In  re  Hopkins,  103  F.  R.  781,  4 

7  In  re  Haake,  7  N.  B.  R.  61,  2     A.  B.  R.  619. 

Sawy.  231,  F.  C.  5883.  n  Gumming  v.   Clegg,   14   N.  B. 

8  In  re  Preston,  6  N.  B.  R.  545,  F.  R.  49;  Bush  v.  Lester,  15  N.  B.  R. 
C.  1394;  In  re  Thomas,  1  N.  B.  N.  36;  In  re  Bass,  15  N.  B.  R.  453;  In 
551,  96  F.  R.  828.  3  A.  B.  R.  78.  re  Everett,   9   N.   B.  R.  90;   In  re 

sHaworth  v.  Travis,  13  N.  B.  R.  Hunt,  5  N.  B.  R.  493;    Hatcher  v. 

145;  Robinson  v.  Wilson,  14  N.  B.  Jones,  14  N.  B.  R.  387,  53  Geo.  208. 

R.  565;  In  re  Haake.  7  N.  B.  R.  61,  12  in  re  Perdue.  2  N.  B.  R.  67.  ^. 

2  Sawy.  231,  F.  G.  5883;  In  re  Pres-  C.  10975;  see  also  In  re  Martin,  13 

ton,  6  N.  B.  R.  545,  F.  C.  1394;  In  N.  B.  R.  397,  2  Hughes,  418.  F.  C. 

re  Lambert,  2  N.  B.  R.  426;  In  re  9152;    In   re    Owens,    12   N.   B.    R. 

Garrett,    11   N.    B.    R.    493;    In   re  518,  6  Biss.  432,  F.  C.  10632;  In  re 

Dillard!  9  N.  B.  R.  8;    In  re  Hut-  Ellis,  1  N.  B.  R.  154,  F.  G.  4400. 

ton.  3  N.  B.  R.  787;   In  re  White-  i^  In  re  Griffin,  2  N.  B.  R.  85.  F. 

head.  2  N.  B.  R.  599 ;  In  re  Deck-  G.  5813. 


Ch.  6  EXEMPTIONS    SUBJECT    TO    LIENS.  141 

property  actually  exempt,  if  it  has  value  in  excess  of  the 
amount  of  the  statutory  exemption,  the  lien  will  hold  upon 
the  excess.i^  The  court  of  bankruptcy  has  no  power  to  parti- 
tion property,  on  a  portion  of  which  there  is  a  valid  mort- 
gage executed  by  the  bankrupt  and  his  wife,  so  as  to  set  off 
a  homestead  free  from  liens,  or  otherwise  impair  the  security, 
or  discharge  any  part  of  the  property  until  the  debt  is  paid, 
or  to  substitute  other  security  for  the  mortgage.^^ 

§  194.  Growing  crops. — In  the  absence  of  an  express  pro- 
vision of  law  the  general  rule  is  that  growing  crops  do  not 
constitute  a  part  of  the  homestead,  but  are  a  part  of  the  assets 
of  the  estate;^''  this,  however,  is  a  matter  governed  entirely  by 
the  state  law.^''' 

§  195.  Head  of.  family.— As  bearing  upon  the  right  of  a 
bankrupt  to  a  homestead,  or  other  exemption,  it  is  of  impor- 
tance to  determine  whether  under  the  law  he  is  the  head  of 
a  family.  This,  however,  is  a  question  that  is  generally  well 
settled  by  the  state  courts,  construing  the  various  exemption 
statutes,  and  reference  should  be  had  to  them.^^  The  question 
most  frequently  arises  where  the  bankrupt  is  not  married  or 
is  divorced  and  has  others  dependent  upon  him.^^ 

14  Haworth  v.  Travis,  13  N.  B.  services  and  pays  no  board,  but 
R.  145.  considers   her  brotlier's  home  her 

15  In  re  Thomas,  1  N,  B.  N.  551,  home,  has  been  held  to  be  the  head 
96  F.  R.  828,  3  A.  B.  R.  99.  of  a  family,  and  entitled  as  such  to 

16  In  re  Coffman,  1  N.  B.  N.  402,  a  homestead  exemption.  (Bailey 
93  F.  R.  422,  1  A.  B.  R.  530;  In  re  v.  Comings,  16  N.  B.  R.  382,  F.  C. 
Daubner,  1  N.  B.  N.  520,  96  F.  R.  733.)  So  has  an  unmarried  man 
855.  3  A.  B.  R.  368;  In  re  Hoag,  97  who  supports  his  widowed  mother 
F.  R.  543,  3  A.  B.  R.  290;  contra  and  minor  brothers;  In  re  Morri- 
In  re  Eastman,  2  N.  B.  N.  R.  86.  son,  110  F.  R.  734,  6  A.  B.  R.  488. 

17  In  re  Hoag,  3  A.  B.  R.  290,  97  Owing  to  peculiar  provisions  of  a 
F.  R.  543.  state  law,  an  unmarried  man  who 

18  Whitmer  v.  Field,  53  Vt.  556 ;  had  a  household  under  his  su- 
Rice  V.  Rudd,  57  Id.  6;  Woodbury  pervision,  with  minor  children 
V.  Warren,  67  Id.  261;  Thorp  v.  awarded  him  as  apprentices  by 
Thorp,  70  Id.  49 ;  In  re  Dawley,  1  orphans'  court,  was  held  not  to  be 
N.  B.  N.  482,  Id.  528,  94  F.  R.  795,  the  head  of  a  family  (In  re  Sum- 
2  A.  B.  R.  496;  In  re  McCutchen,  mers.  3  N.  B.  R.  21,  F.  C.  13604), 
100  F.  R.  779,  4  A.  B.  R.  81,  2  N.  B.  and  the  same  was  true  of  a  hus- 
N.  R.  636.  band,    his    minor    children    living 

19  An  unmarried  bankrupt  whose  with  his  divorced  wife,  and  he  con- 
domestic  affairs  are  in  charge  of  a  tributed  nothing  to  their  support 
sister,  who  receives  no  pay  for  her     (In  re  Tillman,  2  N.  B.  N.  R.  611), 


142  THE    NATIONAL    BANKRUPTCY    LAW.  ClI.  0 

§  196.  Wife's  right.— Where  a  husband  abandoned  his  wife, 
and  she  obtained  a  divorce,  she  has  a  right  to  have  the  prem- 
ises set  apart  to  her  as  a  homestead,  especially  when  she 
holds  and  has  held  the  title  in  her  own  right,  and  continuous 
actual  occupancy  is  not  necessary  ;2o  and  it  has  been  held  that 
she  is  entitled  to  a  homestead  out  of  lands  fraudulently 
conveyed  to  her  by  her  husband,  a  bankrupt,  although  the  con- 
veyance was  made  to  hinder  creditors.-^  In  Virginia  a  mar- 
ried woman  who  holds  the  title  to  the  property,  although 
living  with  her  husband,  is  entitled  to  claim  the  exemption, 
as  against  her  own  creditors,  where  she  had  been  trading  as 
a  feme  sole.  She  is  the  head  of  a  family,  either  alone  or 
jointly  with  her  husband,  for  homestead  purposes.-^  The 
bankrupt's  wife  having  a  separate  estate  cannot  affect  his 
right  to  a  homestead,  unless  he  occupies  her  property  instead 
of  his  o'vvn.^-* 

§  197.  Re-allotment  of.— Where  the  homestead  set  apart  in 
a  state  court  some  years  prior  to  the  bankruptcy  has  enhanced 
in  value  beyond  the  amounts  prescribed  by  the  statute,  bank- 
rupt should  only  be  allowed  the  statutory  value,-^  although 
it  was  held  under  the  act  of  1867  that  where  there  was  no 
irregularity  a  re-assessment  would  not  be  ordered  for  mere 
excess  of  value.^^  The  latter  view,  however,  would  probably 
only  hold  good  in  case  of  recent  allotments.^'^ 

§  198.     Personal  property. — Since   the   exemption   laws  are 

while  in  another  case  an   unmar-  jointly  with  her  husband  for  home- 

ried  man   residing  in  a  house  of  stead    purposes.       (Richardson    v. 

which     he     was     proprietor,    and  Woodward,  104  F.  R.  873.) 

which  had  no  other  inmates  than  20  in  re  Pope,  2  N.  B.  N.  R.  427, 

hired    servants    or   persons    living  98  F.  R.  722,  3  A.  B.  R.  525. 

on  his  bounty,  was  held  to  be  the  21  Roughs  v.  Hooke,  3  Lea.  302; 

head  of  a  family,  and,  as  such,  en-  In  re  Griffith,  1  N.  B.  N.  546. 

titled   to  a   homestead   exemption,  2.3  Richardson  v.  Woodward,  104 

but  not   to   additional   allowances  F.  R.  873. 

for  inmates  for  whose  maintenance  24  in  re  Tonne,  13  N.  B.  R.  170, 

he  was  legally  bound  (In  re  Tay-  F.  C.  14095.' 

lor,  3  N.  B.  R.  38,  F.  C.  13775).    In  25  Jn  re  McBride.  2  N.  B.  N.  R. 

Virginia  a  married  woman  holding  345,  99  F.  R.  686,  3  A.  B.  R.  729. 

title  to   property,    although   living  26  in  re  Hall,  9  N.  B.  R.  366,  7. 

with   her   husband,    is   entitled   to  Hughes,  411,  F.  C.  5921. 

the  exemption  where  she  traded  as  27  in  re  Rhodes,  109  F.  R.  117,  6 

a  feme  sole,  and  is  held  to  be  the  A.  B.  R.  173. 

head  of  a  family,  either  alone  or 


Ch.  6 


PERSONAL  PROPERTY. 


143 


peculiar  to  the  various  states  and  in  their  interpretation  the 
federal  courts  consider  themselves  controlled  by  the  decisions 
of  the  highest  state  courts,  recourse  must  necessarily  be  had 
to  such  decisions  interpreting  the  state  statutes  as  to  what 
personal  property  is  exempt.-*^ 


2s  "Wearing  Apparel"  as  gen- 
erally used  in  exemption  laws  in- 
cludes all  the  articles  of  dress 
usually  worn  by  persons  in  the 
calling  and  condition  of  life  and 
in  the  locality  of  the  residence  of 
the  persons  claiming  the  exemp- 
tion (Sellers  v.  Bell,  94  F.  R.  801, 
2A.  B.  R.  529).  Accordingly  there 
has  been  set  aside  as  exempt  a  gold 
watch  (Sellers  v.  Bell,  supra;  in 
re  Freeman,  2  N.  B.  N.  R.  569;  in 
re  Jones,  2  N.  B.  N.  R.  296;  97  F. 
R.  773,  3  A.  B.  R.  259  ;  in  re  Head- 
ley,  2  N.  B.  N.  R.  684;  in  re  Steele, 
2  Flip,  324,  F.  C.  13346;  Stewart  v. 
McClung,  12  Ore.  431;  Contra,  In 
re  Turnbull,  106  F.  R.  667,  5  A.  B. 
R.  549;  In  re  Graham,  2  Biss. 
449);  a  diamond  stud  worth  $250 
habitually  worn  to  fasten  bank- 
rupt's shirt,  in  the  absence  of  cir- 
cumstances connected  with  its  ac- 
quisition or  use  tending  to  show 
fraud  or  bad  faith  toward  his 
creditors  (In  re  Smith,  96  F.  R. 
832,  3  A.  B.  R.  140) ;  and  a  Ma- 
sonic uniform  for  occasional  wear 
(Frazier  v.  Barnum,  19  N.  J.  Eq. 
316). 

"Tools  and  implements  of  trade" 
have  been  set  apart  for  a  baker 
(In  re  Petersen,  1  N.  B.  N.  430,  95 
F.  R.  417,  2  A.  B.  R.  630;  In  re 
Osborn,  104  F.  R.  780,  5  A.  B.  R. 
Ill);  a  carpenter  and  embalmer 
(In  re  Harrington,  1  N.  B.  N. 
513)  ;  but  they  have  been  refused 
in  case  of  a  merchant  (In  re  Pea- 
body,  16  N.  B.  R.  243,  F.  C.  10866; 
In  re  Schwartz,  4  N.  B.  R.  189, 
F.  C.  12503).  A  watch  may  be 
set  aside  when  necessary  for  a 
man's  business ;  In  re  Coller,  111 


F.  R.  503,  7  A.  B.  R.  131;  contra, 
In  re  Turnbull,  supra. 

"Domestic  animals"  when  neces- 
sary, as  two  horses  used  for  team 
work,  have  been  set  apart  as  ex- 
empt (Rowell  V.  Powell,  53  Vt. 
302;  Steel  v.  Lyford.  59  Vt.  230), 
but  they  must  be  capable  of  such 
use  (Sullivan  v.  Davis,  50  Vt.  648), 
an  unbroken  colt  intended  for  such 
work  (In  re  Alfred,  1  N.  B.  N. 
136,  1  A.  B.  R.  243),  but  not  a  race 
horse,  though  he  has  been  occa- 
sionally used  for  work  (In  re 
Libby,  103  F.  R.  776,  4  A.  B.  R. 
615),  and  working  animals  gen- 
erally (In  re  Peabody,  3  6  N.  B.  R. 
243,  F.  C.  10866);  bui  unless  a 
bankrupt  personally  follows  some 
trade,  occupation  or  profession 
which  necessitates  the  ownership 
of  a  wagon  and  team,  and  earns 
his  living  by  such  trade,  etc.,  he 
is  not  entitled  to  such  property  as 
exempt  under  the  law.  (In  re 
Parker,  18  N.  B.  R.  43,  F.  C 
10724);  as  a  whitewasher,  kalso- 
niiner,  paperhanger  and  repairer  of 
plastering  (In  re  Hindman,  104 
F.  R.  331).  The  fact  that  the  bank- 
rupt has  part  of  the  meat  of  a 
swine  does  not  prevent  his  having 
his  best  remaining  swine  as  ex- 
empt under  a  statute  exempting 
his  best  swine  or  meat  of  a  swine 
(In  re  Libby,  103  P.  R.  776,  4  A.  B. 
R.  615).  Money  claimed  in  lieu  of 
domestic  animals,  but  which  were 
never  owned,  cannot  be  allowed 
(In  re  Williams,  2  N.  B.  N.  R. 
419). 

"Necessaries"  have  been  set 
apart  in  the  way  of  provisions  and 
fuel   (In  re  Bulow,  2  N.  B.  N.  R. 


144 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch.  G 


§  199.  Successive  exemptions.— While  successive  allowances 
will  not  be  made  within  short  periods  of  time  or  out  of  the 
same  property,  the  debtor  may  use  the  exemption  allowed  him 
by  statute  to  acquire  other  property  out  of  which  he  would 
be  entitled  to  the  same  amount  of  allowance  exempt  from  levy 
and  sale,  for  it  is  not  contemplated  that  a  debtor  having  once 
received  his  exemptions  can  never  receive  them  again.-^ 


230,  98  F.  R.  86,  3  A.  B.  R.  389), 
but  real  estate  will  not  be  set  aside 
to  cover  a  deficiency  in  the  value 
of  articles  and  necessaries  (In  re 
Thornton,  2  N.  B.  R.  68,  F.  C. 
13994),  nor  money  as  an  exemp- 
tion, except  when  it  is  the  pro- 
ceeds of  articles  which  ought  to  be 
set  aside  under  the  head  of  "other 
articles  and  necessaries"  (In  re 
Welch,  5  N.  B.  R.  248,  5  Ben.  230, 
F.  C.  17366). 

Where  a  bankrupt  executed  a 
mortgage  two  days  before  adjudi- 
cation, he  was  permitted  to  retain 
sufficient  for  the  support  of  him- 
self and  family  (In  re  Thompson. 
13  N.  B.  R.  300,  4  F.  C.  13938). 
Whether  the  circumstances  of  the 
bankrupt  require  the  setting  apart 
of  necessaries  is  a  question  for  the 
trustees  to  determine,  subject  to 
the  approval  of  the  court  (In  re 
Hay  et  al.,  7  N.  B.  R.  344,  2  Lowell. 
180,  F.  C.  6253), 

In  Arkansas  there  is  no  exemp- 
tion against  a  judgment  or  other 
process  for  the  purchase  price 
while  the  property  remains  in  the 
vendee's  possession,  the  possession 
of  which  the  trustee  holds  (Fell- 
heimer  v.  Durham,  3  N.  B.  N.  R. 
30).  In  Pennsylvania  a  bankrupt 
may  select  a  portion  of  his  exemp- 
tions from  personal  property  and 
the  balance  from  the  proceeds  of 
the  sale  of  real  estate  (In  re  Har- 
ber,  2  N.  B.  N.  R.  449),  and  must 
be  claimed  in  specie  and  not  as 
cash  out  of  proceeds  (In  re  Stern- 


berg, 3  N.  B.  N.  R.  79;  see  In  re 
Sunseri,  3  id.  65),  but  a  liquor 
license  not  being  subject  to  execu- 
tion, he  has  no  claim  to  exemption 
out  of  the  proceeds  of  its  sale  (In 
re  Myers.  2  N.  B.  N.  R,  860,  1049, 
102  F.  R.  869,  4  A.  B.  R.  536). 

In  Washington  a  bankrupt's 
claim  for  exemptions  out  of  a 
stock  of  merchandise,  some  of 
which  had  been  paid  for  in  full, 
and  all  of  which  had  been  paid  for 
in  part,  was  allowed,  notwithstand- 
ing the  provision  of  the  statute 
that  no  property  should  be  exempt 
against  a  claim  for  the  purchase 
price.  (In  re  Petrini,  1  N.  B.  N. 
264). 

In  Virginia  it  was  held  that 
where  the  goods  surrendered  by  a 
bankrupt  were  honestly  acquired 
in  the  regular  course  of  business, 
he  is  entitled  to  a  homestead  ex- 
emption in  same,  although  they 
were  paid  for  out  of  the  proceeds 
of  goods  not  paid  for.  (In  re 
Tobias,  103  F.  R.  68,  3  N.  B.  N.  R. 
23,   4   A.  B.  R.   555.) 

Change  of  occxipation.  It  has 
been  held  that  where  one  merely 
temporarily  changes  his  pursuit, 
he  is  entitled  to  the  exemptions 
allowed  in  his  former  occupation, 
provided  there  was  no  intention  of 
making  a  permanent  change.  (In 
re  Fly,  110  F.  R.  141,  6  A.  B.  R. 
550.) 

29  In  re  Buckingham,  2  N.  B.  N. 
R.  617. 


Ch.  g  taxes  on  exempt  property.  145 

§200.  Partnership  property— firm  exemptions.— There  can 
be  no  exemption  to  a  co-partnership  as  sucli,  since  it  is  a  per- 
sonal privilege,  in  addition  to  which  the  adjudication  works  an 
absolute  dissolution  of  the  firm,  and  its  existence  is  terminated, 
so  that  there  is  no  firm  to  claim  or  receive  exemptions.^^ 

§201.  Individual  exemptions  out  of  a  firm's  assets.— Upon 
this  question  the  authorities  are  irreconcilable.  The  most 
logical  conclusion,  however,  and  that  which  is  supported  by  the 
weight  of  authority,  is  that  the  individual  members  of  a  firm 
are  not  entitled  to  have  any  portion  of  the  firm  property  set 
apart  as  exempt  unless  there  should  remain  a  surplus  of  such 
property  after  the  payment  of  all  firm  debts  ;^^  this  conclu- 
sion being  based  upon  the  theory  that  the  partnership  assets 
are  a  trust  fund  for  the  payment  of  firm  creditors,  the  interest 
of  the  partners  being  an  interest  in  the  surplus  only.  The 
authorities  taking  the  opposite  view  generally  agree,  how- 
ever, that  to  entitle  the  individual  partners  to  an  allowance 
out  of  the  firm  assets,  the  other  partners  must  consent  thereto 
and  the  claim  must  be  seasonably  and  properly  asserted,  the 
signing  of  the  petition  by  all  the  partners  being  prima  facie 
evidence  of  such  consent.^^     Where  partners  purchase   lots, 

30  In  re  Lentz,  2  N.  B.  N.  R.  190,  Contra,  In  re  Wilson,  101  F.  R. 
97  F.  R.  486;  In  re  Friederich,  100  572;  In  re  Friederich,  95  F.  R.  282. 
F.  R.  284,  3  A.  B.  R.  801;  In  re  affirmed  100  F.  R.  284,  3  A.  B.  R. 
Blodgett,  10  N.  B.  R.  145,  F.  C.  801;  In  re  Young,  3  N.  B.  R.  Ill, 
1555.  F.  C.  18148;    In  re  Rupp,  4  N.  B. 

31  In  re  Beauchamp,  101  F.  R.  R.  25,  F.  C.  12141;  In  re  Richard- 
106;  In  re  Lentz,  2  N.  B.  N.  R.  190,  son,  11  N.  B.  R.  114,  F.  C.  11776; 
97  F.  R.  486;  In  re  Hafer,  1  N.  B.  Radcliff  v.  Woods,  25  Barb.  52;  lu 
R.  147,  F.  C.  5896;  In  re  Handlin,  re  Camp,  1  N.  B.  N.  142,  91  F.  R. 
12  N.  B.  R.  49,  3  Dill.  290,  F.  C.  745,  1  A.  B.  R.  165;  In  re  Steed, 
6018;  In  re  Tonne,  13  N.  B.  R.  170,  107  F.  R.  682,  6  A.  B.  R.  73,  but 
F.  C.  14095;  In  re  Boothroyd,  14  in  this  case  it  was  held  that  ex- 
N.  B.  R.  223,  F.  C.  1652;  In  re  emptions  should  not  be  allowed  out 
Hughes,  16  N.  B.  R.  464,  8  Biss.  of  the  firm  assets  unless  there  are 
107,  F.  C.  6842;  In  re  Croft  Broth-  no  individual  assets.  It  has  been 
ers,  17  N.  B.  R.  324,  8  Biss.  188.  F  held  that  where  a  business  is  con- 
C.  3404;  In  re  Stewart,  13  N.  B.  R.  ducted  as  a  partnership  but  in  fact 
295,  F.  C.  13420;  In  re  Blodgett,  10  is  not,  the  sale  owner  is  entitled 
N.  B.  R.  145,  F.  C.  1555;  In  re  De-  to  exemptions.  (In  re  Carpenter, 
marest.  110  F.  R.  638,  6  A.  B.  R.  109  F.  R.  558,  6  A.  B.  R.  465.) 
232;  In  re  Meriweather,  107  F.  R.  32  in  re  Wilson,  101  F.  R.  571. 
102.  5  A.  B.  R.  435;  In  re  Mosier,  4  A.  B.  R.  260;  In  re  Friedrich,  100 
112  F.  R.   138,    7    A.    B.    R.    268;  F.   R.   284,  3   A.  B.  R.   801;    In  re 


146  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  6 

taking  the  title  in  the  firm  name,  and  erect  buildings  thereon 
with  the  understanding  that  each  should  own  in  severalty 
the  lot  on  which  he  built,  it  was  held  that  the  interest  of  each 
was  sufficient  to  entitle  him  to  a  homestead.^^  And  where 
one  partner  buys  out  the  other  members  of  his  firm,  he  has 
been  held  to  be  entitled  to  have  his  exemption  set  apart,  since 
the  firm  has  been  dissolved  and  he  is  in  the  same  position 
as  if  no  firm  had  ever  existed,^^  but  where  the  partners  while 
insolvent  agree  to  dissolve  exemptions  should  not  be  allowed.-^'^ 
Where  one  partner  abandons  his  interest  to  his  partner  just 
before  the  latter  files  a  petition,  no  consideration  being  given, 
no  exemption  should  be  allowed.^*'  Such  transmutation  of 
partnership  assets  into  individual  property  shortly  before 
bankruptcy  may  be  permitted  when  no  fraud  is  shown  or  pre- 
sumable from  the  facts,  and  the  remaining  partner  retains  his 
right  to  claim  exemptions  out  of  such  property.^'^  Where, 
however,  there  is  a  surplus  after  paying  all  partnership  claims, 
exemptions  may  properly  be  allowed  to  the  individual  part- 
ners,^^  since  such  surplus  would  then  become  a  part  of  their 
personal  estate. 

§  202.  Taxes  on  exempt  property.— By  section  64  of  the  law 
the  trustee  is  required  to  pay  from  the  general  assets  "all 
taxes  legally  due  and  owing  by  the  bankrupt,"  even  though 
they  are  assessed  against  property  which  is  set  ofi^  to  the 
bankrupt  as  exempt,  or  are  a  lien  upon  and  enforceable 
against  such  property.  This  is  true,  although  the  effect  of 
such  payment  is  to  exhaust  the  fund  which  would  otherwise 
be  distributed  among  the  general  creditors.^^  While  such  an 
interpretation  of  the  law  may  work  an  injustice  to  the  cred- 

Stevenson,  1  N.  B.  N.  531,  93  F.  K.  so  in  re  Bergman,  2  N.  B.  N.  R. 

789,  2  A.  B.  R.  230;  In  re  Nelson,  2  806;    Contra,   In  re  Rudnick,  2  N. 

A.  B.  R.  556;  In  re  Grimes,  1  N.  B.  B.  N.  R.  975,  102  F.  R.  750,  4  A.  B. 

N.   339,   94   F.   R.   800,    2   A.  B.   R.  R.  531. 

160;   In  re  Seabolt.  113  F.  R.  766,  37  in    re    Lockerby,   3    N.   B.   N. 

8  A.  B.  R.  57.  R.  7. 

33  Bartholomew  v.  West,  8  N.  B.  38  in   re   Beauchamp.    101    F.   R. 

R.  12,  F.  C.  1071.  106,  4  A.  B.  R.  151;   In  re  Tonne, 

3*  In  re  Bjournstad,  18  N.  B.  R.  13  N.  B.  R.  170;  In  re  Stewart,  13 

282.  N.  B.  R.  295;  In  re  Price,  6  N.  B 

35  In  re  Head,  114  F.  R.  489,  7  R.  400,  F.  C.  11410. 

A.  B.  R.  556.  39  In  re  Tilden,  1  N.  B.  N.  134,  91 


Ch.  6  MISCELLANEOUS    EXEMPTIONS.  147 

itors  the  doctrine  is  doubtless  founded  upon  that  liberality 
of  construction  of  exemption  laws  which  is  necessary  for  the 
protection  of  the  family  in  the  vicissitudes  of  financial  dis- 
tress. 

§  203.  Sale  and  proceeds  of  exempt  property.— Where  prop- 
erty claimed  by  a  bankrupt  as  exempt  has  been  sold  by  the 
trustee,  the  exemption  should  be  set  apart  out  of  the  proceeds 
of  the  sale,^*^  but  in  this  case,  the  distribution  of  the  money 
will  be  regulated  by  the  state  laws.^^  In  some  states  it  is  held 
that  exemptions  claimed  out  of  personal  property,  must  be 
claimed  in  specie  and  not  out  of  the  proceeds  of  the  sale.^- 

It  frequently  happens  that  the  bankrupt  is  entitled  to  a 
homestead  exemption  of  a  specified  amount  and  the  property 
occupied  by  him  is  of  greater  value  and  incapable  of  parti- 
tion. In  such  case  the  property  will  be  sold  and  the  amount 
of  the  exemption  paid  from  the  proceeds  ;^^  also  where  the 
property  is  incapable  of  division  without  injury  and  where  the 
interest  of  the  estate  and  all  the  parties  will  be  best  subserved 
by  its  sale  as  a  whole  ;^^  or  where  the  estate  in  question  is  only 
an  estate  for  years  ;^^  or  out  of  the  equity  of  redemption, 
where  property  is  sold  under  a  mortgage  by  the  bankruptcy 
court  ;^^  or  where  the  bankrupt  consents  to  the  sale  upon  con- 
dition of  receiving  a  share  of  the  proceeds,^'^  and  where  the 
trustee  has,  without  just  cause,  refused  to  set  his  exemptions 
aside  upon  due  claim,  he  may  receive  his  exemptions  from  the 

F.  R.  500,  1  A.  B.  R.  300;    In  re  In  re  Staunton,  117  F.  R.  507. 

Baker,  1  N.  B.  N.  212,  1  A.  B.  R.  *2  in  re  Sunseri,  3  N.   B.  N.  R. 

526.  65;  see  In  re  Sternberg,  3  id.  79. 

41  In  re  Clark,  102  F.  R.  602;  lu  ^3  in  re  Lynch,   2  N.  B.  R.  374, 

re  Rodenhagen,  2  N.  B.  N.  R.  674;  101  F.  R.  579. 

In  re  Buckingham,  2  N.  B.  N.  R.  4*  In  re  Edwards,  2  N.  B.  R.  109; 

617;   In  re  Beckerford.  4  N.  B.  R.  In  re  Brown,  3  N.  B.  R.  250;  In  re 

59,  F.  C.  1209;  In  re  Bolinger,  108  Poleman,  F.  C.  11247;  In  re  Grimes 

F.  R.   374,   6  A.  B.  R.    171;    In  re  Bros.,  1  N.  B.  N.  426,   2  A.  B.  R. 

Wilson,  108  F.  R.  197,  6  A.  B.  R.  610;  In  re  Richard,  1  N.  B.  N.  487, 

287.     In  some  states  this  rule  does  94  f".  R.  633,  2  A.  B.  R.  506;  In  re 

not  hold  good.     See  In  re  Haskin,  Diller,  100  F.  R.  931. 

109  F.  R.  789,  6  A.  B.  R.  485;  In  45  In  re  Beckerford,  4  N.  B.  R. 

re  Manning,  112  F.  R.  948,  7  A.  B  59,  F.  C.  12091. 

R.  571.  46  In  re  Beede,  19  N.  B.  R.  68,  F. 

41  In  re  Park,  2  N.  B.  N.  R.  981,  C.  1226. 

102  F.  R.  602.  4  A.  B.  R.  432;   In  4- in    re    Woodard,    1    N.    B.    N. 

re  Buckingham,  2  N.  B.  N.  R.  617;  430,  95  F.  R.  955,  2  A.  B.  R.  692. 


148  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  6 

proceeds.'*^  It  has  been  held  that  if  he  fails  to  select  his  ex- 
emptions, before  the  estate  is  sold,  he  loses  his  right  thereto.^" 
Of  a  different  nature  from  these  sales  is  the  case  where  arti- 
cles which  would  have  been  exempt  are  seized  and  sold  under 
distress  for  rent;  under  such  circumstances,  the  bankrupt 
could  not  be  allowed  their  value  from  the  general  fund,  for 
the  proceeds  of  the  sale  did  not  go  to  swell  such  fund.^^ 

§  204.  Indian  allotments  exempt.— The  various  treaties  with 
the  Indian  tribes  setting  apart  portions  of  the  public  domain 
for  their  use,  as  a  rule  contain  restrictions  either  prohibitive 
or  only  after  a  long  period  of  years,  upon  the  alienation  of 
lands  alloted  in  severalty  or  otherwise.  The  bankruptcy  law 
recognize  all  exemptions  whether  state  or  federal,  and  also 
vests  the  trustee  with  title  only  of  such  property  which,  prior 
to  the  filing  of  the  petition,  bankrupt  could  by  any  means 
liave  transferred,  or  which  might  have  been  levied  upon  and 
sold  under  judicial  process  against  him.  Accordingly,  since 
neither  of  these  provisions  applies  to  allotments  to  Indians, 
such  lands  as  here  indicated  would  not  form  a  part  of  the 
assets  of  an  Indian  adjudicated  bankrupt.^^ 

§  205.  Pension  money  exempt.— All  money  due  or  to  become 
due  to  any  person  as  pension  is  exempt  from  attachment, 
levy  or  seizure,  and  is  to  inure  wholly  to  his  benefit,^-  and  will 
be  set  apart  to  him  in  bankruptcy  proceedings,  provided  it  is 
in  his  hands  at  the  time  of  filing  the  petition  as  it  was  received, 
and  not  loaned,  invested  or  changed  in  its  nature  so  as  to  be- 
come intermingled  with  other  property  interests,  thus  render- 
ing the  pension  funds  incapable  of  identification.^^  While 
such  money  need  not  be  turned  over  to  the  trustee,  it  should 
be  scheduled  by  the  bankrupt  as  money  on  hand  with  the 
statement  of  the  exemption.^^ 

§  206.     Costs  payable  from    exemptions.— The    exemptions 

48  In  re  Brown,  1  N.  B.  N.  511.  na  in  re  Ellithorpe,  111  F.  R.  163, 

49  In  re  Solomon,  10  N.  B.  R.  9.  7  A.  B.  R.  18,  aff'g  5  A.  B.  R.  681 ; 
F.  C.  13166.  In  re  Stout,  109  F.  R.  794,  6  A.  B. 

50  In  re  Lawson,  2  N.  B.  R.  19,  R.  505;  Martin  v.  Bank,  14  Atl. 
F.  C.  8149.  649 ;  Bank  v.  Carpenter,  119  N.  Y. 

51  In  re  Russie,  96  F.  R.  601,  3  550. 

A.  B.  R.  6;    In  re  Rennie,  2  A.  B.         54  in  re  Bean,   100  F.  R.   262,   4 
R.  182,  1  N.  B.  N.  335.  A.  B.  R.  53. 

52  U.  S.  R.  S.,  Sec.  4747. 


Ch.  6  MISCELLANEOUS    EXEMPTIONS.  149 

allowed  by  the  law  do  not  excuse  the  payment  from  them  of 
the  fees  of  the  bankruptcy  court,  so  as  to  permit  the  suit  to 
proceed  on  an  affidavit  of  inability  to  advance  the  costs,  as 
required.^^  Rent  for  the  time  the  trustee  is  compelled  to 
occupy  premises  after  adjudication,  is  a  proper  charge  against 
the  estate  and  must  be  paid  before  bankrupt's  exemption  can 
be  set  apart.^^ 

§  207.  Insurance  policies.— An  express  exception  to  the  gen- 
eral provisions  of  section  6  of  the  law  is  found  in  section  70a, 
in  regard  to  life  insurance  policies  having  a  cash  surrender 
value.  Such  policies  become  a  part  of  the  assets  to  be  turned 
over  to  the  trustee,  unless  the  bankrupt  pays  or  secures  to 
him  the  amount  of  such  cash  surrender  vahie  within  thirty 
days  after  such  value  has  been  ascertained.  This  is  the  single 
instance  in  which  the  bankruptcy  law  alters  or  supersedes  the 
provisions  of  state  exemption  laws.^" 

§208.  Rule  governing  construction  of  state  laws.— The 
bankruptcy  law  adopts  the  exemptions  allowed  by  the  state 
statutes,  and  the  federal  court,  in  allowing  exemptions  there- 
under, is  governed  by  the  interpretation  of  the  highest  court 
of  the  state,^*  so  far  as  construed,  and  beyond  that  will  apply 
to  them  the  general  established  rules  of  construction.^^  But 
the  bankruptcy  court  may  look  to  the  state  constitution,  and 
if  the  exemption  statute  is  unconstitutional,  an  exemption 
claimed  thereunder  will  not  be  allowed.^^ 

55  In  re  Hines,  117  F.  R.  790,  9  873;  In  re  Eggert,  2  N.  B.  N.  R.  44, 
A.  B.  R.  27;  In  re  Collier,  93  F.  R.  In  re  Beauchamp,  101  F.  R.  106; 
191,  1  N.  B.  N.  257,  1  A.  B.  R,  182;  In  re  Morris,  2  N.  B.  N.  R.  260; 
In  re  Bean,  100  F.  R.  262,  4  A.  B.  In  re  Lentz  et  al.  2  N.  B.  N.  R. 
R.  53;  Contra,  Sellers  v.  Bell,  94  F.  190,  97  F.  R.  486,  93  F.  R.  789,  2  A, 
R.  801,  2  A.  B.  R.  529.  B.  R.  230;    In  re  Stevenson  et  al. 

56  In  re  Grimes,  1  N.  B.  N.  516,  1  N.  B.  N.  531;   In  re  Camp,  1  N. 

96  F.  R.  528,  2  A.  B.  R.  730.  B.  N.  142,  91  F.  R.  745,  1  A.  B.  R. 

57  In  re  Lange,  1  N.  B.  N.  60,  1  165;  In  re  Stone,  116  F.  R.  35,  8 
A.  B.  R.  189,  91  F.  R.  361;    In  re     A.  B.  R.  416. 

Steele  &  Co.  et  al.  2  N.  B.  N.  R.  59  Richardson  v.  Woodward,  su- 

281,  98  F.  R.  78,  3  A.  B.  R.  549;  pra. 

In  re  Buelow  et  al.  2  N.  B.  N.  R.  26.  60  in  re  Buelow,  2  N.  B.  N.  R.  26; 

5s  In  re  Jones,  2  N.  B.  N.  R.  296,  on  appeal.  Id.  230,  98  F.  R.  86,  3 

97  F.  R.  773,  3  A.  B.  R.  259 ;  Rich-  A..  B.  R.  389. 
ardson    v.    Woodward,    104   F.    R. 


CHAPTER  VII. 

DUTIES    OF    BANKRUPTS. 

§209.   (7a)   Duties  of  bankrupts.  217.  Claim  for  exemptions  to 

210.  Attendance      of      bank-  be  included. 

rupts  at  meetings.  218.  Amendment  of. 

211.  Compliance  with  ordei  s.  219.  Effect       of       including 

212.  Concealment     of     prop-  claim. 

erty.  220.  Effect  of  omission  from. 

213.  Duty  on  presentation  of       ^21.  —False  oath  in. 

false  claims.  222.  Relation  of  schedule  to 

composition  proceedings. 

214.  Schedule,  filing  of.  223.  Payment   of    money  or    sur- 

215.  What  property  to  be  in-  render  of  property. 

eluded.  224.  Waiver  of  protest. 

216.  Creditors  to  be  included.       225.  Examination  of  bankrupt. 

§209.  '(Sec.  7a)  Duties  of  bankrupts.— The  bankrupt 
'shall  (1)  attend  the  first  meeting  of  his  creditors,  if  directed 
'by  the  court  or  a  judge  thereof  to  do  so,  and  the  hearing 
'upon  his  application  for  a  discharge,  if  filed; 

'  (2)   Comply  with  all  lawful  orders  of  the  court ; 

'  (3)  Examine  the  correctness  of  all  proofs  of  claims  filed 
'against  his  estate; 

'  (4)  Execute  and  deliver  such  papers  as  shall  be  ordered 
'  by  the  court ; 

'  (5)  Execute  to  his  trustee  transfers  of  all  his  property  in 
'foreign  countries; 

'  (6)  Immediately  inform  his  trustee  of  any  attempt,  by  his 
'creditors  or  other  persons,  to  evade  the  provisions  of  this 
'Act,  coming  to  his  knowledge; 

'  (7)  In  case  of  any  person  having  to  his  knowledge  proved 
*a  false  claim  against  his  estate,  disclose  that  fact  immedi- 
'ately  to  his  trustee; 

'  (8)  Prepare,  make  oath  to,  and  file  in  court  within  ten 
'days,  unless  further  time  is  granted,  after  the  adjudication, 
'if  an  involuntary  bankrupt,  and  with  the  petition  if  a  vol- 
'untary  bankrupt,  a  schedule  of  his  property,  showing  the 
'amount  and  kind  of  property,  the  location  thereof,  its  money 
'value  in  detail,  and  a  list  of  his  creditors,  showing    their 

150 


Ch.  7  DUTIES  OF  BANKRUPTS.  151 

'residences,  if  known,  if  unknown,  that  fact  to  be  stated,  the 
'amounts  due  each  of  them,  the  consideration  thereof,  the 
'security  held  by  them,  if  any,  and  a  claim  for  such  exemp- 
'tions  as  he  may  be  entitled  to,  all  in  triplicate,  one  copy  of 
'each  for  the  clerk,  one  for  the  referee,  and  one  for  the 
'  trustee ;    and 

'  (9)  When  present  at  the  first  meeting  of  his  creditors,  and 
'at  such  other  times  as  the  court  shall  order,  submit  to  an 
'examination  concerning  the  conducting  of  his  business,  the 
'cause  of  his  bankruptcy,  his  dealings  with  his  creditors  and 
'other  persons,  the  amount,  kind,  and  whereabouts  of  his 
'property,  and,  in  addition,  all  matters  which  may  aifect  the 
'  administration  and  settlement  of  his  estate ;  but  no  testimony 
'given  by  him  shall  be  offered  in  evidence  against  him  in  any 
'criminal  proceeding. 

'Provided,  however,  That  he  shall  not  be  required  to  attend 
'a  meeting  of  his  creditors,  or  at  or  for  an  examination  at  a 
'place  more  than  one  hundred  and  fifty  miles  distant  from 
'his  home  or  principal  place  of  business,  or  to  examine  claims 
'except  when  presented  to  him,  unless  ordered  by  the  court, 
'or  a  judge  thereof,  for  cause  shown,  and  the  bankrupt  shall 
'be  paid  his  actual  expenses  from  the  estate  when  examined 
*or  required  to  attend  at  any  place  other  than  the  city,  town 
*or  village  of  his  residence.'^ 

1  Analogous    provision,    Act    of  wherever    situated ;    and    for    neg- 

1867,  Sec.  11  maltes  provision  for  lect  or  refusal  to  obey  any  order  of 

the  schedule  of  property.  the  court,  such  bankrupt  may  be 

Sec.  14.  .  .  .  The  debtor  committed  and  punished  as  for  a 
shall  also,  at  the  request  of  the  as-  contempt  of  court.  [Provision  is 
signee  and  at  the  expense  of  the  here  made  for  bankrupt's  absence.] 
estate,  make  and  execute  any  in-  He  shall  also  be  at  liberty,  from 
struments,  deeds  and  writings  time  to  time,  upon  oath  to  amend 
which  may  be  proper  to  enable  the  ^^^  correct  his  schedule  of  credit- 
assignee  to  possess  himself  fully  of  ors  and  property,  so  that  the  same 
all  the  assets  of  the  bank-  shall  conform  to  the  facts.  For 
rupt     ^     ^     _  good  cause  shown,  the  wife  of  any 

Sec.   26.    .     .     .     and     he     shall  bankrupt  may  be  required   to  at- 

tend  before  the  court,  to  the  end 


execute  all  proper  writings  and   in- 
struments, and  do  and  perform  all 


that   she   may   be  examined   as   a 

witness ;  and  if  such  wife  do  not 
acts  required  by  the  court  touch-     ^^^^^^  ^^  ^^^  ^.^^  ^^^  pj^^^  ^p^^j. 

ing  the  assigned  property  or  estate,  ged    in    the    order,    the    bankrupt 

and  to  enable  the  assignee  to  de-  shall  not  be  entitled  to  a  discharge 

mand,  recover,  and  receive  all  the  unless  he  shall  prove  to  the  satis- 

property      and      estate      assigned,  faction   of  the  court  that  he  was 


152  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  H 

§210.  Attendance  of  bankrupt  at  meetings.— At  the  first 
meeting  of  the  creditors,  the  judge  or  referee  shall  preside 
and  may  publicly  examine  the  bankrupt  or  cause  him  to  be 
examined  at  the  instance  of  any  creditor,  but  the  place  of  such 
meeting  should  be  one  most  convenient  for  the  parties  in 
interest;  and  it  must  be  held  not  less  than  ten  nor  more  than 
thirty  days  after  the  adjudication.^  The  bankrupt  is  required 
to  be  and  should  be  actually  present  at  the  first  meeting,^ 
and,  if  called  upon,  testify  fully,  fairly  and  truthfully,  and,  if 
he  fails  to  do  so,  only  so  much  of  his  testimony  as  is  corrobo- 
rated will  be  accepted, or  it  may  be  rejected  in  toto  if  it  appears 
unworthy  of  credit.*  His  inability  to  attend  the  meeting  due 
to  sickness  may  be  a  sufficient  excuse,^"*  though  as  to  the  suffi- 
ciency of  which  the  creditors  are  to  determine  and  the  court 
will  not  disturb  their  decision  without  good  cause  shown.*^ 
Since  where  bankrupt  is  dead  it  is  impossible  to  comply  with 
the  requirement  as  to  his  personal  attendance  at  a  hearing 
of  an  application  for  discharge,  or  objections  thereto,  a  court 
of  bankruptcy,  or  the  referee  to  whom  such  application  is 
referred,  has  the  right  to  proceed  with  such  hearing  notwith- 
standing such  absence.'^  If  in  involuntary  proceedings  against 
the  bankrupt  he  neither  enters  appearance  nor  denies  by 
answer  the  allegations  of  the  petition,  he  may  be  ordered  to 
state  in  writing  the  number  of  his  creditors  and  the  amount 
due  them,^  and  a  failure  to  comply  with  such  order  renders 
him  liable  to  proceedings  in  contempt.  He  must  appear  in 
person  or  by  representative  at  the  creditors'  meeting  in  com- 
position,^ if  required  so  to  do. 

unable  to  procure  the  attendance  2  Sec.  55a,  act  of  1898. 

of  his  wife.     ...  3  Eagles  &  Crisp,  2  N.  B.  N.  R. 

Sec.  42.     .     .     .     The     order     of  62,  99  F.  R.  695,  3  A.  B.  R.  733. 

adjudication    of    bankruptcy    shall  •*  In  re  Tudor,  2  N.  B.  N.  R.  168, 

require    the    bankrupt    forthwith,  100  F.  R.  796,  4  A.  B.  R.  78. 

or   within   such   number   of   days,  s  in  re  Carpenter,  1  N.  B.  R.  51, 

not   exceeding  five  after  the  date  F.  C.  2427. 

of  the  order  or  notice  thereof,  as  e  In  re  Wronkow,  18  N.  B.  R.  81, 

shall  by  the  order  be  prescribed,  F.  C.  18105. 

to  make  and  deliver,  or  transmit  7  In  re  Parker,  1  N.  B.  N.  261, 

by  mail,  post-paid,  to  the  messen-  1  A.  B.  R.  615. 

ger,   a    schedule   of   the    creditors  s  Clinton  v.  Mayo,  12  N.  B.  R.  39. 

and  an  inventory  of  his  estate  in  F.  C.   2899;    see  also  Meetings   of 

the  form  and  verified  in  the  man-  Creditors,  post,  §  817. 

ner  required  of  a  petitioning  debt-  »  In  re  Scott,  15  N.  B.  R.  73,  F. 

or  by  section  thirteen.  C.  12519. 


Ch.  7       ATTENDANCE     OF    BANKRUPT    AT    MEETINGS.  153 

§  211.  Compliance  with  orders.— Courts  of  bankruptcy  may 
enforce  obedience  by  bankrupts  and  other  persons  to  all  law- 
ful orders  by  fine  or  imprisonment,  or  both;i^  and,  if  the 
contempt  is  committed  before  the  referee,  he  certifies  the  facts 
to  the  judge,^^  and,  after  a  hearing,  the  latter  is  authorized 
to  impose  punishment.^  ^ 

§212.  Concealment  of  property.— Should  the  bankrupt, 
while  such,  or  after  his  discharge,  conceal  from  his  trustee 
any  property  belonging  to  his  estate  in  bankruptcy,  he  is 
liable  to  imprisonment.^^ 

§  213,  Duty  on  presentation  of  false  claim.— Any  person 
presenting  under  oath,  a  false  claim  for  proof  against  the 
estate  of  a  bankrupt,  or  using  any  such  claim  in  composition, 
personally  or  by  agent,  is  liable  to  imprisonment,^^  and  if 
knowledge  thereof  comes  to  the  bankrupt  it  is  his  duty  to 
disclose  the  fact  immediately  to  his  trustee,  and  if  no  trustee 
has  been  appointed,  it  becomes  not  only  the  right  but  the  duty 
of  the  bankrupt  to  move  to  set  aside  and  expunge  the  proof 
and  to  object  to  the  allowance  of  such  claim.^^  If  a  claim 
omits  one  of  the  essential  facts  required  by  good  pleading, 
but  complies  apparently  with  the  forms,  orders  and  statute,  a 
referee  can  only  allow  it  as  requested  since  he  is  required 
merely  to  see  that  the  formal  requisites  are  complied  with, 
but  it  is  the  bankrupt's  dutj^  or  the  trustee's,  if  one  is  ap- 
pointed, in  such  case  to  file  objection  to  the  claim,  or  petition 
for  a  re-examination.*^ 

§214.  Filing  schedule.— If  the  bankrupt  fails  to  file  the 
schedule  of  property  and  list  of  creditors  required,  the  referee 
must  do  so;^^  but,  if  the  debtor  is  notified  to  furnish  the 
schedule  and  fails,  the  creditor  may  apply  for  an  attachment 
against  him.*^  Such  schedule  must  be  printed  or  typewritten, 
or  written  plainly,  without  abbreviation,  or  interlineation, 
except   such   be   for   the   purpose   of   reference.*^     Schedules 

10  Sec.  2  (13),  act  of  1898.  i5  In  re  Ankeny,  2  N.  B.  N.  R. 

11  Sec.  41b.  act  of  1898.  349,  100  F.  R.  614,  4  A.  B.  R.  72. 

12  Sec.  2  (16),  act  of  1898;  see  le  in  re  Ankeny.  1  N.  B.  N.  511. 
Contempts,  sec.  2  (13),  ante,  p.  43.         "  Sec.  39   (6),  act  of  1898. 

13  Sec.  29b,  act  of  1898.  is  G.  O.  IX. 

14  Sec.  29b,  act  of  1898.  is  G.  O.  V. 


154  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  7 

conforming  in  all  respects  with  the  act  are  suf&cient,  though 
not  containing  all  the  allegations  and  statements  required  by 
the  forms.20  It  has  been  held,  however,  that  a  petition,  or 
other  pleading,  neither  typewritten^^  nor  on  the  prescribed 
printed-2  form,  should  be  dismissed  by  the  court  on  its  own 
motion. 

§  215.    What  property  should  be  included  in  the  schedule.— 

The  schedule  should  include  all  property  which,  prior  to  the 
filing  of  the  petition,  the  bankrupt  could  have  transferred,  or 
which  might  have  been  levied  upon  and  sold  on  judicial 
process;  but  not  property  acquired  after  such  filing.^s  See 
also  Title  of  Trustee,  post  §  1146. 

§  216.  Creditors  to  be  included  in  the  schedule.— A  debtor 
is  required  to  file  a  list  of  his  creditors  and  the  amount  of 
their  respective  claims,-'*  including  his  wife  if  a  creditor  ps 
and  he  should  set  down  in  such  schedule  all  the  papers  upon 
which  he  may  be  liable,  with  proper  explanations  in  regard 
thereto.26  When  all  the  members  of  a  firm  file  a  petition, 
they  are  jointly  and  severally  bound  to  make  the  required 
statements  of  their  debts,  whether  copartnership  or  individual, 
or  due  them  jointly  with  other  persons  not  parties  to  the 
petition  ;27  and  the  existence  of  a  difference  between  the  list  of 
creditors  filed  by  the  debtor  and  the  list  filed  by  the  petition- 
ing creditors  constitutes  an  issue  to  be  tried  and  determined 
as  a  result  of  evidence.^^  The  legal  names  of  creditors,  that 
is,  the  Christian  name  as  well  as  the  surname,  should  appear 
in  the  schedule ;  and  in  giving  the  addresses  of  creditors,  while 
the  ordinary  and  common  abbreviations  for  the  names  of 
states  may  be  used,  the  abbreviations  of  the  names  of  cities 
and  villages,  not  being  in  common  use,  should  not,  nor  is  the 
use  of  ditto  marks  to  be  encouraged;    and  wherever  possible 

20  In  re  Soper,  1  A.  B.  R.  193.  25  in  re  Rosenfield,  2  N.  B.  R.  49, 

21  Mahoney  v.  Ward,  2  N.  B.  N.     F.  C.  12057. 

R.  538,  100  F.  R.  278,  3  A.  B.  R.  26  in  re  Henry,  17  N.  B.  R.  463, 

770.  9  Ben.  449,  F.  C.  6370. 

22  Anon.  1  N.  B.  N.  239.  2-  in  re  Leland,  5  N.  B.  R.  222, 

23  Sec.  70a,  act  of  1898,  post,  p.  5  Ben.  168,  F.  C.  8228. 

691;   In  re  Harris,  1  N.  B.  N.  384.         28  in  re  Hymes,  10  N.  B.  R.  433, 
2  A.  B.  R.  359.  7  Ben.  427,  F.  C.  6986. 

24  Sav.  Bk.  V.  Palmer,  10  N.  B. 
R.  239,  F.  C.  17207. 


Ch.  7  BANKRUPT'S    DUTY— AMENDMENT    OP    SCHEDULE.       155 

the  street  number  should  be  given  in  large  cities.^^  And  any 
debt  which  was  not  duly  scheduled  in  time  for  proof  and 
allowance,  with  the  name  of  the  creditor,  if  known  to  the 
bankrupt,  unless  such  creditor  had  actual  notice  or  knowledge 
of  the  proceedings,  will  not  be  affected  by  a  discharge.^^ 

§217.  Claim  for  exemptions  to  be  included  in  schedule. — 
See  Exemptions,  ante,  §  183, 

§  218.  Amendment  of  schedule. —In  case  the  schedule  and 
list  are  defective,  it  is  the  duty  of  the  referee  to  see  that  they 
are  amended  ;^^  but  this  only  refers  to  defects  in  complying 
with  the  formal  requisites  of  the  forms,  orders  and  statute,  as 
the  referee's  duty  to  examine  the  schedule  and  list  extends 
only  to  such  matters.^-  Schedules  filed  prior  to  the  promul- 
gation of  the  general  orders  by  the  Supreme  Court  should  be 
allowed  to  be  amended  and  supplemented  to  conform  to  the  re- 
quirements of  such  rules,  and  such  amended  schedules  should 
be  filed  as  of  the  date  of  the  filing  of  the  original  schedules.^^ 
In  case  of  ignorance  or  mistake,  either  of  fact  or  law,  the  court 
has  power  in  its  discretion  and,  in  a  proper  case,  to  allow 
amendments  and  will  in  general  exercise  that  power  in  the 
absence  of  fraud  and  when  all  the  parties  can  be  placed  in 
the  same  situation  they  would  have  occupied  if  the  error  had 
not  occurred  and  where  justice  seems  to  demand  such  amend- 
ment;^^ which  may  be  done  on  application  of  the  petitioner. 
The  amendments  should  be  written  or  printed,  signed  and 
verified,  like  the  originals,  and,  if  made  to  separate  schedules, 
must  be  made  separately,  with  proper  references;  and  the 
application  must  state  the  cause  of  the  error  in  the  paper 
originally  filed.^^  The  failure  to  file  a  complete  schedule  orig- 
inally is  not  fatal  provided  it  is  afterwards  corrected  by  an 
amended  schedule,  and,  if  the  bankrupt  has  filed  such  amend- 
ed schedule  and  it  is  accepted  both  by  the  court  and  by  the 

20  In  re  Mackey,  1  A.  B.  R.  593;  32  in  re  Ankeny,  1  N.  B.  N.  511. 

In  re  Brumelkamp,  1  N.  B.  R.  360,  33  in  re  Harris,  1  N.  B.  N.  384, 

2  A.  B.  R.  318,  95  F.  R.  814.  2  A.  B.  R.  359. 

30  Sec.  17a,  act  of  1898;  Barnes  34  in  re  Bean,  100  F.  R.  262,  4 
V.  Moore,  2  N.  B.  R.  174;  Lamb  v.  A.  B.  R.  53;  In  re  Myers,  3  A.  B. 
Brown.  12  N.  B.  R.  522,  F.  C.  8011.  R.  760;  In  re  Wilder,  2  N.  B.  N.  R. 

31  Sec.  39  (2),  act  of  1898;  In  re  629,  101  F.  R.  104,  3  A.  B.  R.  761. 
Mackey,    1    A.    B.    R.    593;    In    re  35  G.  0.  XL 

Brumelkamp,  1  N.  B.  N.  360,  2  A. 
JJ.  R.  318,  95  F.  R.  814. 


156  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  7 

objecting  creditors,  neither  having  objected  to  it  at  the  time 
it  was  filed  or  to  the  manner  of  its  filing,  it  is  sufficient.^*' 
AVhere  the  case  has  been  referred  to  the  referee,  he  may  pass 
npon  the  application  to  amend,  his  action  being  subject  to 
review  by  the  judge.^'^  In  either  case  the  power  exists  but 
its  exercise  rests  in  the  sound  judicial  discretion  of  the  court. 

The  application  to  amend  may  be  made  ex  parte,  and  unless 
good  reasons  are  shown,  the  bankrupt  may  be  allowed  to 
amend  his  schedule  to  include  additional  property -j^^  and  to 
correct  material  mistakes,  as  the  entire  omission  of  a  debt,  or 
the  name  of  a  creditor,^^  in  which  event  it  has  been  held  that 
the  amendment  would  relate  back  to  the  time  of  the  filing  of 
the  petition.-^*^ 

Amendments  should  not  be  allowed,  except  upon  such  con- 
ditions as  to  prevent  injustice,  and  hence,  if  new  creditors  are 
introduced,  or  application  to  amend  is  made  after  adverse 
parties  have  appeared  in  the  case,  notice  should  be  given  to 
all  interested  parties  and,  in  proper  cases,  conditions  should 
be  imposed  on  the  allowance  of  the  amendment.^^  A  bankrupt 
may,  even  after  consideration  of  specifications  in  opposition 
to  discharge,  amend  his  schedule,  by  order  of  the  court,^-  or 
before  the  distribution  of  the  estate  where  the  purpose  is  to 
claim  further  exemptions.'^^ 

§219.  Effect  of  including  claim  in  schedule.— Including  a 
claim  in  his  schedule  is  not  equivalent  to  a  new  promise  by 
the  bankrupt  or  sufficient  to  revive  a  debt  already  barred  by 
the  statute  of  limitations;"^^  but  wherever  any  doubt  exists  as 
to  whether  a  claim  is  barred  in  any  jurisdiction  other  than 
the  one  in  which  proceeding  is  pending,  it  should  be  included 
in  order  that  it  may  be  discharged.  The  classification  in  the 
schedule   as  partnership    assets  of  real    estate    held  by  the 

36  In  re  Mudd,  2  N.  B.  N.  R.  710.  98,  F.  C.  11578;   In  re  Morganthal, 

37  G.  O.  XXVII.  1  N.  B.  R.  98,  F.  C.  9813. 

38  In  re  Watts.  2  N.  B.  R.  145,  3  42  in  re  Preston,  3  N.  B.  R.  27, 
Ben.  166,  F.  C.  17293.  F.  C.  11392. 

39  Beebe  v.  Pyle,  18  N.  B.  R.  162;  43  In  re  Moran,  105  F.  R.  901,  5 
In  re  Heller,  5  N.  B.  R.  46,  F.  C.  A.  B.  R.  472. 

6339.  44  In  re  Lipman,  1  N.  B.  N.  310, 

40  In  re  Beerman,  112  F.  R.  662,  94  F.  R.  353.  2  A.  B.  R.  46;  In  re 
7  A.  B.  R.  434.  Resler,  1  N.  B.  N.  280,  95  F.  R.  804, 

41  In  re  Perry,  1  N.  B.  R.  2,  F.  C.  2  A.  B.  R.  166,  602.  See  Statute 
10998;   In  re  Ratcliff,   1  N.  B.  R.     of  Limitations,  §  995. 


Ch.  7         BANKRUPT'S  DUTY— SCHEDULE.  157 

partners  as  tenants  in  common  will  not  convert  the  separate 
property  of  the  individual  partners  into  firm  property  in 
derogation  of  the  rights  of  the  separate  creditors.^^ 

§  220.  Effect  of  omission  from  schedule.— Whenever  a  claim 
is  not  duly  scheduled  in  time  for  proof  and  allowance,  it  is 
not  released  by  the  discharge  unless  such  creditor  had  notice 
or  actual  knowledge  of  the  proceedings.  It  is  the  province  of 
the  court  to  pass  on  all  questions  of  concealment  of  assets  and 
failure  to  name  creditors.*^  The  correctness  of  the  schedule, 
or  whether  a  creditor  received  notice  of  the  proceedings  by 
creditors,  does  not  determine  the  question  of  jurisdiction  either 
of  the  proceedings  or  to  grant  a  discharge.^"  The  omission  to 
place  a  claim  on  the  list  of  creditors  is  merely  a  circumstance 
of  suspicion  ;-*s  and  the  omission  of  a  debt  contracted  with  a 
creditor  in  his  individual  capacity,  and  subsequent  to  the  date 
of  the  partnership,  under  which  partnership  name  he  claimed 
notice  as  a  creditor,  was  held  not  to  be  a  fraudulent  or  wilful 
omission  ;^9  and,  where  an  involuntary  bankrupt  omitted  a 
certain  claim  from  his  schedule,  his  trustee  cannot  be  said  to 
have  elected  to  abandon  it,  in  the  absence  of  any  evidence  of 
his  knowledge  or  sufficient  means  of  knowledge  of  its  exist- 
ence.^*^ A  deposition  of  a  creditor  setting  forth  a  claim 
against  the  bankrupt  for  unliquidated  damages  for  breach  of 
a  contract,  omitted  from  the  schedule,  is  not  proof  thereof, 
unless  the  amount  is  liquidated  in  the  manner  prescribed, 
application  for  which  must  have  been  made  by  the  creditor.^^ 

For  further  discussion  under  this  head  see  Discharge,  post 
§§  360,  446,  and  Offenses,  post  §§  637,  638. 

§  221.  False  oath  to  schedule.— The  making  of  a  false  oath 
to  a  schedule  constitutes  an  offense  under  the  law  which  would 
operate  as  a  bar  to  a  discharge. 

See  Offenses,  Chap.  XXIX,  post  §  638. 

§222.    Relation  of  schedule  to  composition  proceedings.— 

«  In   re   Zug,    16    N.    B.   R.    280,  533,  3  Sawy.  342,  F.  C.  9420. 

F.  C.  18222.  49  In  re  Pierson,  10  N.  B.  R.  107, 

46  In   re    Scott,   15   N.   B.   R.   73,  F.  C.   11153. 

F.  C.  12519.  50  Dushane   v.    Beall,    161   U.    S. 

4"  In  re  Archenbrown,  11  N.  B.  513. 

R.  149,  F.  C.  504.  r,i  in  re  Clough.  2  N.  B.  R.  59,  2 

4s  In  re  Mendelsohn,  12  N.  B.  R.  Ben.  508,  F.  C.  2905. 


158  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  7 

In  cases  of  composition  the  statement  should  conform  to  the 
schedule  ;^^  but  a  mistake  without  fraud,  made  by  the  debtor 
in  his  statement  of  the  amount  due  to  the  creditor,  will  not 
vitiate  the  composition.^^  Where  the  facts  relating  thereto 
are  brought  out  and  considered  by  the  creditors  in  coming  to 
a  conclusion  as  to  the  composition,  it  is  not  a  good  objection 
that  property  standing  in  bankrupt's  wife's  name  was  omitted 
from  the  schedule;  nor  that  the  schedules  stated  the  debtor's 
real  estate  as  of  unknowTi  or  uncertain  value.^^ 

§223.  Payment  of  money  or  surrender  of  property.— The 
bankrupt  will  not  be  permitted  to  pay  money  which  he  has 
collected  and  which  belongs  to  his  estate  after  the  petition 
was  filed,  as  for  interest  on  mortgages,  unless  such  payment  is 
beneficial  to  the  estate.^^  On  being  adjudicated  bankrupt,  it 
is  his  duty  to  surrender  all  his  assets,  notwithstanding  there 
may  be  a  prospect  of  settlement  with  his  creditors.'^*^ 

§  224.  Waiver  of  protest.— Where  bankrupt  is  endorser  on 
a  note  which  falls  due  after  adjudication  and  before  the 
trustee  is  appointed,  it  has  been  held  that  he  may  waive  de- 
mand and  notice.^^ 

§  225.     Examination  of  bankrupt.— See  Chap.  XXI,  post  §  523. 

52  In  re  Haskell,  11  N.  B.  R.  161,  ss  in  re  Ellinger,  18  N.  B.  R.  222, 
F.  C.  6192.  F.  C.  4543. 

53  In  re  Trafton,  14  N.  B.  R.  507,  se  in  re  Shaffer,  2  N.  B.  R.  178, 
2   Lowell   505,  F.  C.   14133;    Beebe  F.  C.  12694. 

V.  Pyle,  18  N.  B.  R.  162.  st  in  re  Battey,  16  N.  B.  R.  397, 

54  In  re  Welles,  18  N.  B.  R.  525,     2  Lowell  409,  F.  C.  14,  169. 
F.  C.  17377. 


CHAPTER  Vin. 

DEATH    OR    INSANITY    OF    BANKRUPT. 

5226.   (8a)    Effect  of  death   or   in-  228.  Bankrupt's  death. 

sanity  of  bankrupt.  229.  Bankrupt's  insanity. 

227.  Comparison   of  acts  of   1867  230.  Right  of  dower  on  husband's 
and  1898.  bankruptcy. 

§  226.     '  (Sec.  8a)     Effect  of  death  or  insanity  of  bankrupt. 

—  The  death  or  insanity  of  a  bankrupt  shall  not  abate  the 
proceedings,  but  the  same  shall  be  conducted  and  concluded 
in  the  same  manner,  so  far  as  possible,  as  though  he  had  not 
died  or  become  insane :  Provided,  That  in  case  of  death  the 
widow  and  children  shall  be  entitled  to  all  rights  of  dower 
and  allowance  fixed  by  the  laws  of  the  state  of  the  bank- 
rupt's residence. '1 

§227.  Comparison  of  acts  of  1867  and  1898.— Unless  a 
petition  has  been  filed  against  the  insolvent  during  his  life- 
time, the  Court  of  Bankruptcy  has  no  jurisdiction  to  admin- 
ister or  settle  his  estate  upon  a  petition  filed  against  his 
representatives  for  an  act  of  bankruptcy  committed  by  the 
deceased,  nor  has  it  jurisdiction  to  entertain  a  petition  filed 
in  his  behalf  by  his  representative  after  his  decease  for  the 
purpose  of  having  the  estate  adjudged  bankrupt.-  In  com- 
paring the  section  under  the  present  act  with  that  under  the 
former,  it  will  be  observed  that  the  first  covers  death  at  any 
stage  of  the  proceedings,  as  immediately  after  the  filing  of 
the  petition,  while  the  second  fixes  the  time  as  after  the  issu- 
ing of  the  warrant.  Hence  the  decisions  that  the  death  of 
the  bankrupt  prior  to  the  adjudication,^  or  between  the  entry 
of  the  order  of  adjudication  and  the  physical  issuing  of  the 
warrant,^  or  of  one  partner  prior  to  the  adjudication,^  would 

1  Analogous  provision  of  act  of  3  Frazier  v.  McDonald,  8  N.  B.  R. 
1867.     Sec.    12 If     the     237,  F.  C.  5073. 

debtor  dies  after  the  issuing  of  the  •*  In  re  Litchfield,  9  N.  B.  R.  506, 

warrant,  the  proceedings  may   be  7  Ben.  259,  F.  C.  8385;   Adams  v. 

continued    and    concluded    in    like  Terrell,  4  F.  R.  796. 

manner  as  if  he  had  lived.  ■">  Hunt  v.  Pooke,  5  N.  B.  R.  161, 

2  See  In  re  Funk,  4  A.  B.  R.  96.  F.  C.  6896. 

159 


160  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  8 

not  abate  the  proceedings,  become  immaterial.  Since  the 
present  act  has  no  similar  provision  to  that  found  in  section 
29  of  the  act  of  1867,  with  reference  to  bankrupt's  oath  before 
discharge,  the  decisions  that  a  discharge  could  not  be  granted 
where  the  bankrupt  had  died  before  doing  what  he  was  per- 
sonally required  to  do,  do  not  now  apply .^ 

§228.  Bankrupt's  death.— As  illustrative  of  the  effect  of 
the  difference  between  the  former  and  the  present  section,  the 
English  decisions  under  their  Act  of  1S69  (sec.  80)  that  death 
between  the  filing  of  the  petition  and  the  adjudication  would 
abate'''  and  under  the  Act  of  1883  (sec.  108)  which  is  similar 
to  section  8  of  the  law  in  force  in  this  country  that  it  would 
not,®  are  valuable.  The  death  of  the  bankrupt  after  the  filing 
of  the  petition,  although  prior  to  the  adjudication,^  will  have 
no  effect  upon  the  proceedings,  but  they  will  be  conducted 
and  concluded  so  far  as  possible  as  though  he  had  not  died. 
Hence,  a  court  of  bankruptcy,  or  the  referee  to  whom  an 
application  for  discharge  is  referred,  has  the  right  to  proceed 
with  the  hearing  upon  objections  thereto  and  to  conduct  and 
conclude  the  same,  although  by  reason  of  bankrupt's  death  it 
is  impossible  to  comply  with  the  provision  requiring  his  pres- 
ence at  the  hearing  upon  such  application.^** 

A  brother  is  not  a  party  in  interest  and  is  not  entitled  to 
file  a  petition  for  leave  to  dispose  of  the  bankrupt's  property 
in  case  of  his  death.^^  Where  the  debtor  appears  and  confesses 
the  acts  of  bankruptcy  charged  in  a  creditor's  petition  and  a 
trustee  is  appointed,  a  creditor  who  has  proved  his  debt  can 
not  have  the  adjudication  set  aside  after  the  death  of  the  bank- 
rupt and  after  the  right  of  third  parties  have  intervened.i^ 

§229.  Bankrupt's  insanity.— The  Court  of  Bankruptcy  has 
no  jurisdiction  to  entertain  the  petition  of  a  lunatic,  or  of  his 
committee,i3  ^oj.  of  a  petition  filed  against  either ,1*  and  it  has 

6  In  re  O'Farrell,  2  N.  B.  R.  484,  lo  In  re  Parker,  1  N.  B.  N.  261, 
F.  C.   10,   446,    3   Ben.   191;    In   re     1  A.  B.  R.  615. 

Gunike,  4  N.  B.  R.  92,  2  Biss.  354,         n  Karr  v.  Whittaker,  5  N.  B.  R. 

F.     C.     5868;     Contra,    Young    v.  123,  F.  C.  7613. 
Ridenbaugh,  11  B.  R.  563,  3  Dill.         12  in  re  Thomas,  11  N.  B.  R.  330, 

239,  F.  C.  18,  173.  F.  C.  13,  891. 

7  Ex  p.  Obbard,  24  L.  T.  n.  s.  145.         is  in  re  Eisenberg,  117  F.  R.  786, 

8  In  re  Walker,  54  L.  T.  n.  s.  682.  8    A.    B.    R.    551 ;    Compare    In    re 

9  In  re  Hicks,  107  F.  R.  910,  6  A.  Burke,  107  F.  R.  674,  5  A.  B.  R. 
B.  R.  182.  843. 

14  In  re  Funk,  4  A.  B.  R.  96. 


Ch.  8  DEATH    OF    BANKRUPT— DOWER.  161 

been  held  that  a  person  so  unsound  of  mind  as  to  be  wholly 
incapable  of  managing  his  affairs  cannot  in  that  condition 
commit  an  act  for  which  he  can  be  forced  into  bankruptcy.^  ^ 
A  bankrupt  becoming  insane  after  the  filing  of  the  petition 
will  have  no  eft'ect  upon  the  proceedings,  but  they  will  be 
conducted  and  concluded  as  far  as  possible  as  though  he  had 
not  become  insane. 

An  idiot  or  lunatic  must  in  equity,  as  well  as  at  law,  be 
made  a  defendant  to  a  suit  against  him.  He  must  defend  by 
his  committee  who  is  also  a  necessary  party  to  the  suit,  and 
it  is  the  duty  of  the  committee  to  apply  for  appointment  as 
guardian  ad  litem  for  the  purpose  of  making  the  defense.  If 
there  be  no  committee,  or  if  the  committee  be  antagonistic,  a 
guardian  ad  litem  should  be  appointed  on  the  application  of 
either  the  plaintiff  or  defendant.^  ^  Accordingly  a  guardian 
ad  litem  should  be  appointed  to  defend  an  involuntary  petition 
against  a  lunatic  when  he  has  no  regular  guardian  or  com- 
mittee appointed  for  him  or  for  his  estate  by  competent 
authority  of  the  state  having  control  of  his  affairs.  If  he 
have  such  committee  or  guardian  he  must  be  brought  in  by 
process  as  well  as  the  lunatic  to  defend  the  petition  in  behalf 
of  the  lunatic.i'^ 

A  court  of  bankruptcy  has  the  same  power  and  duty  that  a 
court  of  equity  has  ever  had  toward  incompetents  who  are 
interested  in  proceedings  pending  before  it  and  such  duty  is 
to  be  exercised  by  the  appointment  of  a  guardian  ad  litem.^^ 
In  a  case  where  a  partner  not  adjudged  bankrupt  becomes 
insane  and  thereafter  cannot  himself  speak  or  act  in  the  pro- 
ceedings, he  can  do  so  through  a  guardian  appointed  for  him, 
and  it  has  been  held  that  by  such  guardian  he  may  give 
consent  to  the  administration  of  the  partnership  property  in 
bankruptcy  .1^ 

§  230.  Right  of  dower  on  husband's  bankruptcy.— The  pro- 
viso preserves  the  rights  of  the  wife  and  children  in  case  of 
bankrupt's  death  but  leaves  the  dower  and  allowances  to  be 

15  In  re  Marvin,  1  Dill.  178,  F.  C.  is  In  re  O'Brian,  2  N.  B.  N.  R. 
9178.  312;    In   re  Burke,  107  F.  R.  674, 

16  1  Daniell  Ch.  Pr.  219,  600;  2  5  A.  B.  R.  843;  1  Daniell  Ch.  Pr.  8. 
id.  287,  302,  403.  "  In  re  O'Brian,  supra. 

17  In    re    Burke,    supra;    Equity 
Rule.  87. 


162  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  8 

determiiied  by  the  laws  of  the  state  of  bankrupt's  residence. 
It  does  not  establish  a  new  rule  but  is  declaratory  of  the 
existing  law.  The  trustee  takes  the  bankrupt's  property  sub- 
ject to  the  same  burdens  it  bore  in  the  bankrupt's  hands,  one 
of  which  is  the  wife's  right  to  dower,  and  such  right  will  not 
be  divested  by  a  sale  under  order  of  the  court  of  bank- 
ruptcy -^^  and,  where  the  wife  joins  in  a  deed  to  release  dower 
and  the  deed  is  avoided  as  made  to  hinder,  delay  and  defraud 
creditors,  her  right  thereto  is  not  lost.-^  It  has  been  held 
that  she  is  not  entitled  to  dower  in  real  estate  held  as  part- 
nership assets.--  Under  a  statute  providing  that  a  wife  di- 
vorced from  her  husband  shall  be  entitled  to  one-third  of  his 
personal  property  absolutely,  her  interest  after  the  commence- 
ment of  a  divorce  suit  but  before  decree  is  not  such  as  is 
provable  against  the  husband's  estate  nor  as  will  authorize 
the  enjoining  of  the  distribution  of  one-third  of  the  proceeds 
of  such  property.23 

20  Porter  v.  Lazear,  109  U.  S.  84,     2  Dill.  45,  F.  C.  3308,  rev'g  5  N.  B. 
27  L.  Ed.  865;  In  re  Shaeffer,  5  A.     R.  443,  F.  C.  3309. 

B.  R,  248;   In  re  Slack,  111  F.  R.  22  Hiscock  v.  Jaycox  &  Green,  12 

523,  7  A.  B.  R.  121;   In  re  Forbes,  N.  B.  R.  507,  F.  C.  6531. 

7  A.  B.  R.  42;   see  In  re  Seabolt,  23  Hawk  v.  Hawk,  102  F.  R.  679, 

113  F.  R.  766.  8  A.  B.  R.  57.  2  N.  B.  N.  R.  940,  4  A.  B.  R.  463o 

21  Cox  V.  Wilder,  7  N.  B.  R.  241, 


CHAPTER  IX. 

PROTECTION    AND    DETENTION    OF    BANKRUPTS. 

§231.    (9a)  Protection  of  bankrupts       236.  To  whom  given. 

from  arrest.  237.  When  given 

232.  In  what  cases.  238.  How  given. 

233.  Scope   of   inquiry   into  state       239.  Liability  to  arrest. 

court  proceedings.  240.  b.  Detention  of  bankrupt  for 

234.  How  released  from  arrest.  examination. 

235.  Protection    against    arrest —       241.  In     general — Writ    of 

Purpose  of.  ne  exeat. 

§231.     '(Sec.  9a)     Protection  of  bankrupt  from  arrest.— A 

'bankrupt  shall  be  exempt  from  arrest  upon  civil  process  ex- 
'cept  in  the  following  cases:  (1)  When  issued  from  a  court 
'of  bankruptcy  for  contempt  or  disobedience  of  its  lawful 
'orders;  (2)  when  issued  from  a  state  court  having  jurisdic- 
'tion,  and  served  within  such  state,  upon  a  debt  or  claim  from 
'which  his  discharge  in  bankruptcy  would  not  be  a  release, 
'and  in  such  case  he  shall  be  exempt  from  such  arrest  when 
'in  attendance  upon  a  court  of  bankruptcy  or  engaged  in  the 
'performance  of  a  duty  imposed  by  this  Act.'^ 

§  232.  Exemption  from  arrest,  in  what  cases  granted.— A 
bankrupt  is  entitled  to  exemption  from  arrest  on  civil  process 
for  a  claim  from  which  his  discharge  in  bankruptcy  would 
release  him;^  as  in  contempt  proceedings  for  failure  to  obey 
a  state  court's  order  to  pay  costs ;^  but  not  in  the  case  of 
costs  adjudged  against  him  after  adjudication  ;^  or  in  proceed- 
ings in  certain  states  on  a  judgment  for  a  labor  claim  ;^  or 
under  a  state  statute  for  failure  to  pay  the  balance  due  on 

1  Act  of  1867,  Sec.  26 Knott    v.    Putnam,    107    F.    907,    6 

No  bankrupt  shall  be  liable  to  ar-  A.    B.    R.    80;    see   also    debts   dis- 

rest   during   the  pendency  of   the  chargeable,  Ch.  XVII,  post,  §§  418- 

proceedings  in  bankruptcy  in  any  448. 

civil    action,    unless    the    same    is  sin  re  Summers,  1  N.  B.  N.  60; 

founded    on    some    debt   or   claim  In  re  Borst,  2  N.  B.  R.  62,  F.  C. 

from  which  his  discharge  in  bank-  1665. 

ruptcy  would   not  release  him.  *  In  re  Marcus,  104  F.  R.  331,  5 

2  In  re  Baker,  1  N.  B.  N.  547,  3  A.  B.  R.  19;  id.  105  F.  R.  907,  5 
A.  B.  R.  101,  96  F.  R.  954;  In  re  A.  B.  R.  365. 

Fife,  109  F.  R.  880,  6  A.  B.  R.  258;         s  In  re  Grist,  1  A.  B.  R.  89. 

163 


16i  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  9 

goods  sold  on  commission,  the  balance  of  sales  being  payable 
monthly;^  or  on  a  judgment  in  trespass;'^  or  for  a  fraudulent 
conveyance  of  property  prior  to  the  bankruptcy  act;^  or  on 
attachment  in  proceedings  in  a  state  court  to  discover  assets 
to  satisfy  a  lien  established  prior  to  bankruptcy;'*  and  the 
nature  of  the  process  does  not  affect  the  question  whether 
mesne  or  final.^°  Considerable  question  arose  prior  to  the 
amendment  of  1903,  whether  a  bankrupt  would  be  exempt 
from  arrest  upon  a  claim  for  alimony,  and  while  it  was  held 
that  if  under  the  state  law  the  judgment  awarding  the  ali- 
mony, created  a  debt,  as  to  the  accrued  instalments  the  dis- 
charge would  be  a  release,^  ^  in  view  of  the  law  which  now 
specifically  exempts  alimony,  the  bankrupt  would  be  liable 
to  arrest.  If  the  court  of  bankruptcy  has  for  any  reason 
stayed  proceedings  in  such  suit  the  bankrupt  will  be  released 
from  arrest  without  regard  to  whether  the  claim  would  be 
released.^ 2  A  bankrupt  may  commit  a  contempt  against  a 
state  court  with  which  the  court  of  bankruptcy  would  have 
no  power  to  interfere,  as  a  positive  indignity  offered  to  that 
court  in  its  presence,  and  in  other  ways.^^ 

The  bankrupt  is  also  expressly  exempted  from  arrest  on 
civil  process  issued  by  a  state  court  even  in  cases  on  claims 
from  which  his  discharge  M^ould  not  be  a  release  when  in 
attendance  on  the  bankruptcy  court  or  in  the  performance  of 
a  duty  imposed  by  the  act,  to  continue  until  final  adjudication 
on  the  application  for  discharge,^*  and  all  courts  insist  upon 
this  right  as  to  parties  and  witnesses  before  them,  since  it  is 

eGrover  v.  Clinton,  8   N.  B.  R.  305,  2  A.  B.  R.  107,  94  F.  R.  119; 

312s  F.  C.  5845.    Contra,  In  re  Kim-  In  re  Van  Orden,  1  N.  B.  N.  475,  2 

ball,  2  N.  B.  R.  114,  6  Blatch.  292,  A.  B.  R.   801,  96  F.  R.  86 ;   In  re 

F.  C.  7769;   aff'g  2  N.  B.  R.  74,  2  Shufeldt,  2  N.  B.  N.  R.  517;   In  re 

Ben.  554,  F.  C.  7768.  Nowell,  99   F.   R.  931,   3  A.   B.  R. 

7  In  re  Simpson,  2  N.  B.  R.  17,  837;  In  re  Smith,  1  N.  B.  N.  471, 
F.  C.  12879.  3  A.  B.  R.  67;    In  re  Shepard,  97 

8  Goodwin  v.  Sharkey,  3  N.  B.  R.  F.  R.  187;  Barclay  v.  Barclay,  2 
138.  N.   B.   N.  R.   552;    but   see   In   re 

9  Ex  p.  Taylor,  16  N.  B.  R.  40,  1  Challoner,  2  N.  B.  N.  R.  105,  98  F. 
Hughes,  617,  F.  C.  13773.  R.  82,  3  A.  B.  R.  442. 

10  In  re  Wiggers,  2  Biss.  71;  In  12  Wagner  v.  U.  S.  2  N.  B.  N.  R, 
re  Mifflin,  1  Penn.  L.  J.  146.  1116,  104  F.  R.  133,  4  A.  B.  R.  596. 

11  See.   63,  act  of   1898,   post,   p.  i^  In  re  Houston,  supra. 
579;    In   re   Houston,   1   N.   B.   N.  n  G.  O.  XII   (1). 


Ch.  9  EXEMPTION    FROM    ARREST.  165 

necessary  to  the  orderly  conduct  of  business.^^  But  as  the 
court  may  suspend  or  vacate  the  protection  from  arrest,  it 
may  grant  it  on  terms,  and  hence  may  require  the  bankrupt 
to  furnish  a  bond  with  sureties  conditioned  that  during  its 
continuance  he  will  obey  all  orders  of  the  court,  and  not  mean- 
while depart  from  its  jurisdiction-i*^ 

§  233.  Scope  of  inquiry  into  state  court  proceedings.— The 
exemption  is  conferred  because  the  party  becomes  amenable 
to  the  court  of  bankruptcy  the  moment  the  petition  is  filed 
against  him,  and  the  enforcing  of  the  exemption  by  affirma- 
tive action  is  an  act  "to  be  done  under  and  in  virtue  of  the 
bankruptcy."  The  court  of  bankruptcy  will  not  go  behind 
the  face  of  the  papers  in  the  case  in  the  state  court  but  will 
release  the  bankrupt  if  on  their  face  it  appears  that  the  order 
was  made  on  a  claim  that  is  dischargeable ;  or  remand  him  if 
the  contrary  appears,^'''  although  the  right  to  go  behind  the 
face  of  the  papers  is  maintained  in  certain  cases.^^ 

§234.  How  released  from  arrest.— If  at  the  time  of  filing 
his  petition,  a  debtor  is  imprisoned,  the  court,  on  application, 
will  order  him  to  be  produced  on  habeas  corpus  for  the  pur- 
pose of  examination  but  will  not  order  his  release.^^  If 
during  the  pendency  of  the  proceedings  petitioner  is  arrested 
or  imprisoned  on  process  in  any  civil  action,  a  habeas  corpus 
will  issue  on  his  application  to  ascertain  if  the  basis  of  the 
arrest  is  a  provable  debt  and,  if  it  is,  he  will  be  discharged, 
otherwise  he  will  be  remanded.-^  The  use  of  the  term  "prov- 
able" claim  in  the  general  orders  is  in  evident  conflict  with 

15  See  Matthews  v.  Tufts,  87  N.  R.  73,  2  Ben.  180,  F.  C.  5474,  and 
Y.  568;  s.  c.  62  How.  Pr.  508;  and  In  re  Kimball,  1  N.  B.  R.  193,  2 
cases  cited.  Ben.  38,  F.  C.  7767. 

16  In  re  Lewensohn,  2  N.  B.  N.  is  Electoral  College  Case,  1 
R.  381,  99  F.  R.  73,  sec.  2  (15),  Hughes,  571,  F.  C.  4336;  In  re  Als- 
act  of  1898.  berg,  16  N.  B.  R.  116,  F.  C.  261; 

1-  In  re  Robinson,  2  N.  B.  R.  108,  In   re  Williams,  11   N.   B.  R.   145, 

6  Blatch.   253,  F.  C.   11939;   In  re  6    Biss.  233,  F.   C.    17,  700;    In  re 

Devoe,  2  B.  R.  27,  1  Lowell,  251,  Glaser,  supra;    In  re  Kimball,  su- 

F.  C.  3843;  In  re  Migel,  2  N.  B.  R.  pra;    In  re  Smith,  18  N.  B.  R.  24, 

153,  F.  C.  9538;    In  re  Valk,  3  N.  F.  C.  12976. 

B.  R.  73,  3  Ben.  431,  F.  C.  16814;  i9  In  re  Claiborne,  109  F.  R.  74, 

In  re  Kimball,  2  N.  B.  R.  114,  6  5  A.  B.  R.  812. 

Blatch.    292,    F.    C.    7769;    s.    c.    2  20  q.  q.  XXX;  In  re  Fife,  109,  F. 

N.  B.  R.  204,  2  Ben.  554,  F.  C.  7768,  R.  880,  6  A.  B.  R.  258. 
disapproving  In  re  Glaser,  1  N.  B. 


166  THE    NATIONAL    BANKRUPTCY    LAW.  ClL  9 

the  act  which  says  "dischargeable"  debt  and  must  accord- 
ingly yield  thereto.  If  the  cause  of  action  is  dischargeable, 
an  injunction  after  adjudication  is  discretionary  and  should 
be  granted  (1)  if  the  bankrupt  is  threatened  with  arrest;  (2) 
if  the  suit  is  not  yet  in  judgment,  and,  even  after  judgment, 
if  the  rights  of  the  general  creditors,  not  parties  to  the  suit, 
will  be  jeopardized  by  further  proceedings;  or  (3)  if  the 
judgment  is  founded  on  a  transaction  which  is  an  act  of 
bankruptcy,  or  a  fraud  on  creditors  or  the  law;  but  it  should 
never  be  granted  after  the  judgment  has  ripened  into  an 
execution  sale  provided  the  state  court  has  or  can  be  given 
jurisdiction  of  all  interested  parties.-^ 

Application  is  usually  made  to  the  bankruptcy  court  for  a 
w^rit  of  habeas  corpus  and  if  on  the  hearing  bankrupt  appears 
entitled  an  order  for  his  release  will  be  made.  The  motion 
may  be  addressed  to  the  state  court  issuing  the  process  whose 
duty  it  is  to  order  the  bankrupt's  release  in  a  proper  case,  but 
a  failure  or  refusal  to  perform  such  duty  does  not  deprive  the 
bankruptcy  court  of  its  power  to  release  him  ;22  but  the  con- 
sideration of  such  application  may  properly  be  postponed  until 
the  state  court  has  had  an  opportunity  to  pass  on  the  federal 
question.-^  The  bankruptcy  court  of  one  district  has  the  power 
to  order  the  release  of  a  bankrupt  from  arrest  in  another 
district,  if  the  jailor  is  within  its  jurisdiction,^*  and  such  order 
fully  protects  the  officer  holding  him  and  he  will  not  there- 
after be  liable  to  punishment  by  the  state  court  nor  to  an 
action  for  an  escape.^^ 

§  235.  Protection  against  arrest— purpose  of.— This  ex- 
emption is  given  to  protect  a  bankrupt  from  arrest  on  claims 

21  S.  L.  &  T.  Co.  V.  Benbow,  1  265,  1  A.  B.  R.  650;  Ex  p.  Royal], 
N.  B.  N.  499,  3  A.  B.  R.  9,  96  F.  R.  117  U.  S.  254;  Whitten  v.  Tomlin- 
514,  son,  160  U.  S.  241;    Ex  p.   Fonda, 

22  In  re  Williams,  11  N.  B.  R,  117  U.  S.  516 ;  In  re  Duncan,  139 
145,  6  Biss.  233,  F.  C.  17700;  In  re  U.  S.  449;  N.  Y.  v.  Eno,  155  U.  S. 
Glaser,  1  N.  B.  R.  73,  2  Ben.  180,  89. 

F.  C.  5474;  In  re  Simpson,  2  N.  B.         24  in  re  Seymour,  1  N.  B.  R.  29, 

R.  17,  F.  C.   12879;    In  re  Taylor.  1  Ben.  348,  F.  C.  12694;  Hazelton 

16  N.  B.  R.  40,  1  Hughes,  617,  F.  v.  Valentine,  2  N.  B.  R.  12,  1  Low- 

C.  13773;    In  re  Migel,  2  N.  B.  R.  ell,    270,    F.    C.    6287;    Lathrop    v. 

153,  F.  C.  9538;    In  re  Wiggers,  2  Drake,  13  N.  B.  R.  472,  F.  C.  8109, 

Biss.  71,  F.  C.  17623;  In  re  O'Mara.  91  U.  S.  516. 
4  Biss.  506,  F.  C.  10509.  2.-,  in  re  Kimball.  1  N.  B.  R.  193, 

23  Scott  V.  McAleese,  1  N.  B.  N.  2  Ben.  38,  F.  C.  7767. 


Ch.  9  PROTECTION    AGAINST    ARREST.  167 

from  which  his  discharge  will  be  a  release  and  to  prevent 
interference  with  the  bankruptcy  proceedings  and  render  them 
effectual 

§  236. to  whom  given.— This  exemption  is  given  only 

to  "a  bankrupt,"  which  includes  any  person  against  whom 
an  involuntary  petition  or  an  application  to  set  aside  or  re- 
voke a  discharge  has  been  filed  or  who  has  filed  a  voluntary 
petition.-*^ 

§237. when  given  and  for  what  period.— It  begins 

with  the  filing  of  the  petition  and  may  exist  where  there  is 
no  adjudication  of  bankruptcy,  and  where  there  may  never 
be,  the  filing  of  the  petition  fixing  the  time  ;2'^  and  applies  to 
arrest  after  the  institution  of  bankruptcy  proceedings  only, 
but  does  not  render  the  institution  of  such  proceedings  a  cause 
for  release  from  prior  arrest.^^  The  term  "when  in  attend- 
ance upon  a  court  of  bankruptcy  or  engaged  in  the  perform- 
ance of  a  duty  imposed  by  this  act,"  is  not  to  be  restricted 
to  the  particular  occasions  when  the  bankrupt  is  physically 
present  in  attendance  in  court,  or  actually  engaged  in  per- 
forming a  required  duty,  but  is  extended-^  to  the  whole  period 
of  time  during  which  his  performance  of  the  duties  imposed 
by  the  act  may  be  ordered,  that  is,  until  the  final  adjudication 
on  his  application  for  discharge,  or  until  the  time  limited  for 
such  application  has  expired.-^'' 

§238. how  given.— The  order  referring  a  case  to  a 

referee  is  required  to  name  a  day  for  the  attendance  of  a 
bankrupt  before  the  referee,  and  from  that  day  he  may  re- 
ceive protection  against  arrest  to  continue  until  the  final 
adjudication  on  his  application  for  discharge,  unless  sus- 
pended or  vacated  by  order  of  the  court.-^^  The  court  may 
therefore  prescribe  terms,  as  the  giving  of  security  to  obey 
the  court's  orders  and  not  to  depart  from  its  jurisdiction ;^2 
but  when  a  court  of  bankruptcy  has  no  power  to  discharge  a 
judgment,  it  cannot  interfere  to  prevent  its  enforcement  by 

26  Sec.  1(4),  act  of  1898.  Bk.  v.  Hatch,  16  N.  B.  R.  468. 

27  State  V.  Rollins,  13  Mo.  179.  29  g.  O.  XII. 

28  In  re  Walker,  1  N.  B.  R.  60,  1  30  in  re  Lewensohn,  99  F.  R.  73, 
Lowell,    222,    F.    C.    17060;    In    re  2  N.  B.  N.  381. 

Hazelton,  2  N.  B.  R.  12,  1  Lowell,  ?-t  G.  0.  XII  (1). 

270,   F.   C.   6287;    In   re  Claiborne,  •■'.2  In  re  Lewensohn,  2  N.  B.  N.  R. 

109  F.  R.  74,  5  A.  B.  R.  812,  3  N.  381,  99  F.  R.  73. 

B.  A.  R.  622;  but  see  Brandon  Nat. 


168  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  9 

imprisonment,  unless  necessary  to  the  exercise  of  its  juris- 
diction.22  A  composition  satisfies  the  debt,  though  based  on 
a  sale  procured  through  false  representations,  and  avoids  an 
arrest  on  civil  process.^* 

§239.  Liability  to  arrest.— A  bankrupt  is  liable  to  arrest 
where  the  proceeding  is  based  on  a  claim  which  would  not  be 
released  by  his  discharge,  except  when  in  attendance  on  the 
bankruptcy  court  or  in  the  performance  of  a  duty  imposed  by 
ihe  act  which  is  construed  to  be  from  the  day  his  attendance 
before  the  referee  is  required  until  the  final  adjudication  on 
his  application  for  discharge  ;^^  as  in  the  case  of  a  judgment 
for  the  support  of  a  bastard  child,^*^  or  for  alimony ,3"  or  where 
the  bankruptcy  proceedings  were  instituted  between  the  ser- 
vice of  summons  and  time  of  appearance  and  he  failed  to 
appear,38  or  w^here  after  being  sent  to  jail  bankrupt  applied 
for  the  poor  debtor's  oath  and  on  the  last  day  of  the  exami- 
nation filed  a  petition  in  bankruptcy ,^^  or  in  an  action  for 
fraud,*'^  or  if  surrendered  in  discharge  of  bail,  it  being  then 
as  if  he  had  never  been  bailed  ;^i  or  if  recaptured  after  an 
escape  ;^2  b^t  a  civil  action  for  fraud  will  be  stayed  until  the 
determination   of  the   bankruptcy  proceedings,^^   though  the 

33  In  re  Pettis,  2  N.  B.  R.  17,  F.  Barclay,  2  N.  B.  N.  R.  552;  but 
C.  11076.  see  In  re  Challoner,  2  N.  B.  N.  R. 

34  Bamberg  v.  Stern,  18  N.  B.  R.  105,  98  F.  R.  82,  3  A.  B.  R.  442; 
74.  In  re  Shufeldt,  2  N.  B.  N.  R.  517 ; 

35  G.  O.  XII  (1);  In  re  Lewen-  In  re  Houston,  1  N.  B.  N.  305,  2 
sohn,  2  N.  B.  N.  R.  381,  99  F.  R.  A.  B.  R.  107,  94  F.  R.  119;  In  re 
73 ;  In  re  Valk,  3  N.  B.  R.  73,  3  Van  Orden,  1  N.  B.  N.  475,  2  A.  B. 
Ben.   431,  F.  C.  16814;    In  re  Als-  R.  801,  96  F.  R.  86. 

berg,  16  N.  B.  R.  116,  F.  C.  261;  ss  in  re  Graham,  1  N.  B.  N.  59. 

In   re   Walker,   1   N.   B.   R.   60,   1  39  in  re  Casey,  1  N.  B.  N.  166. 

Lowell,    222,    F.    C.    17060;    In    re  4o  in  re  Devoe,  2  N.  B.  R.  11,  1 

Robinson,  2  N.  B.  R.  108,  6  Blatch.  Lowell,  251,  F.  C.  3843. 

253,  F.  C.  11939;   In  re  Patterson,  4i  in  re  Hazelton,  2  N.  B.  R.  12, 

1  N.   B.  R.   58,   2  Ben.   155,  F.  C.  1   Lowell,    270,   F.   C.   6287;    In   re 

10817;    In  re  Whitehouse,  4  N.  B.  Cheney,    5    Law,    Rep.    19.    F.    C. 

R.  15,  1  Lowell,  429,  F.  C.  17564.  2636;    In  re  Rank,  Crabbe,  493,  F. 

36  In  re  Baker,  1  N.  B.  N.  547,  C.  11566;  Foxall  v.  Levi,  1  Cranch 
3  A.  B.  R.  101,  96  F.  R.  954.  C.   C.   139,   F.   C.   5015;    Lingan  v. 

37  In  re  Nowell,  3  A.  B.  R.  837,  Bayley,  1  id.  112,  F.  C.  8370. 

99  F.   R.  931;    In  re  Smith,  1  N.        42  Anderson  v.  Hampton,  1  B.  & 

B.   N.  471,   3   A.   B.   R.   67;    In   re     A.  308. 

Shepard,  97  F.  R.  187;   Barclay  v.         4.-!  in  re  Migel,  2  N.  B.  R.  153,  F. 


€h.  !»  LIABILITY    TO    ARREST.  1G9 

mere  filing-  charges  of  fraud  in  a  pending  civil  suit  does  not 
act  as  such  stay.^^ 

Imprisonment  for  debt  being  generally  abolished  in  this 
country,  neither  the  bankruptcy  nor  state  courts  can  order  one 
confined  therefor,  but  there  are  many  circumstancts  arising 
in  the  prosecution  of  cases  in  which  imprisonment  is  author- 
ized, generally  in  the  nature  of  contempts  for  failure  to 
comply  with  the  court's  orders,  or  for  fraud. 

§240.     'b.    Detention  of  bankrupt  for  examination.— The 

'judge  may,  at  any  time  after  the  filing  of  a  petition  by  or 
'against  a  person,  and  before  the  expiration  of  one  month  after 
'the  qualification  of  the  trustee,  upon  satisfactory  proof  by 
'the  affidavits  of  at  least  two  persons  that  such  bankrupt  is 
'about  to  leave  the  district  in  which  he  resides  or  has  his 
'principal  place  of  business  to  avoid  examination,  and  that  his 
'departure  will  defeat  the  proceedings  in  bankruptcy,  issue  a 
'warrant  to  the  marshal,  directing  him  to  bring  such  bank- 
'rupt  forthwith  before  the  court  for  examination.  If  upon 
'hearing  the  evidence  of  the  parties  it  shall  appear  to  the 
'court  or  a  judge  thereof  that  the  allegations  are  true  and 
'that  it  is  necessary,  he  shall  order  such  marshal  to  keep  such 
'bankrupt  in  custody  not  exceeding  ten  days,  but  not  im- 
'  prison  him,  until  he  shall  be  examined  and  released,  or  give 
'bail  conditioned  for  his  appearance  for  examination,  from 
'time  to  time,  not  exceeding  in  all  ten  days,  as  required  by 
'the  court,  and  for  his  obedience  to  all  lawful  orders  made  in 
'reference  thereto.'*^ 
§  241.    Detention    of    bankrupt— Writ    of   ne    exeat.— The 

C.  9538;  In  re  Lewensohn,  2  N.  B.  marshal  of  the  district,  command- 

N.  R.  381,  99  F.  R.  73.  Ing    him    to    arrest    the    alleged 

■44  Minon  v.  Van  Nostrand,  4  N.  (bankrupt)    and  him  safely  keep, 

B.  R.  28,  1  Lowell,  458^  F.  C.  9642.  unless    he    shall    give    bail   to   the 

45  Analogous  provision  of  Act  of  satisfaction    of   the   court   for   his 

1867,  Sec.  40 If  it  shall  appearance  from  time  to  time,  as 

appear  that  there  is  probable  cause  required   by   the    court,    until   the 

for    believing   that   the    debtor    is  decision  of  the  court  upon  the  pe- 

about  to  leave  the  district,  or  to  tition  or  the  further  order  of  the 

remove  or  conceal  his  goods  and  court,  and  forthwith  to  take  pos- 

chattels  or  his   evidence  of  prop-  session    provisionally    of    all    the 

erty,  or  make  any  fraudulent  con-  property  and  effects  of  the  debtor, 

veyance  or  disposition  thereof,  the  and  safely  keep  the  same  until  the 

court  may  issue  a  warrant  to  the  further  order  of  the  court. 


i;0  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  9 

present  law  gives  the  court  greater  power  than  that  under  the 
Act  of  1867,  but  the  time  within  which  the  debtor  may  be 
detained  is  limited  to  ten  days.  The  marshal  should  be  di- 
rected simply  to  bring  the  debtor  before  the  court  as  the 
power  to  .hold  him  ten  days  depends  on  the  necessary  facts 
being  established  by  evidence  at  the  hearing.  The  affidavits 
should  state  facts  as  distinguished  from  conclusions.  Under 
its  broad  law  and  equity  powers^*'  the  bankruptcy  court  may 
issue  an  order  in  the  nature  of  a  ne  exeat  as  broad  as  that 
provided  by  sections  717  and  5024  of  the  Revised  Statutes  of 
the  United  States,  whenever  necessary  for  the  enforcement  of 
the  provisions  of  the  law,  and  may  thereunder  arres{  the 
bankrupt  whenever  the  facts  warrant  the  belief  that  he  is 
about  to  abscond  with  or  without  his  property  to  the  embar- 
rassment of  the  bankruptcy  proceedings,  and  the  fact  that 
such  order  is  not  in  the  form  provided  in  this  subdivision, 
requiring  the  bankrupt  to  be  brought  before  the  court  for 
examination,  but  in  the  form  usually  employed  under  section 
717  of  the  Revised  Statutes  does  not  make  the  writ  void, 
especially  where  the  arrested  parties  are  immediately  brought 
before  the  judge  and  do  not  ask  for  an  examination  or  object 
that  none  was  given,  but  offer  bail  which  is  accepted.'"^ 
The  right  of  arrest  given  by  this  provision  of  the  law  confers 
no  authority  upon  the  court  of  bankruptcy  to  issue  a  warrant 
for  the  arrest  of  a  bankrupt  who  is  not  within  the  district  at 
the  time,  but  who  removed  therefrom  prior  to  the  commence- 
ment of  the  bankruptcy  proceedings.^^ 

A  defendant  arrested  upon  a  writ  of  ne  exeat  may  obtain 
a  discharge  of  the  writ  upon  giving  bond  with  surety  to 
answer  and  be  amenable  to  the  process  of  the  court."*^ 

4c  Sec.  2  (15),  act  of  1898;  In  re  N.  B.  R.  97,  F.  C.  8859;  In  re  Hale, 

Schenkein  et  al.,  113  F.  R.  421,  7  18  N.  B.  R.  335,  F.  C.  5911. 

A.  B.  R.  162.  48  In  re  Ketchum,  108  F.  R.  35,  5 

47  In  re  Lipke,  2  N.  B.  N.  R.  347.  A.  B.  R.  532. 

98  F.  R.  970,  3  A.  B.  R.  569 ;  Comp.  4o  Griswold  v.  Hazard,  141  U.  S. 

Usher  v.   Pease,   12  N.   B.   R.   305,  260. 
116  Mass.  440;  In  re  McKibben,  12 


CHAPTER  X. 

EXTRADITION    OF    BANKRUPTS. 

§242.   (10a)   Extradition    of   bank-      243.  When  extradited. 

rupt.  244.  How  extradited. 

§242.  '(Sec.  10a)  Extradition  of  bankrupts.— Whenever 
'a  warrant  for  the  apprehension  of  a  bankrupt  shall  have  been 
'issued,  and  he  shall  have  been  found  within  the  jurisdiction 
'of  a  court  other  than  the  one  issuing  the  warrant,  he  may 
'be  extradited  in  the  same  manner  in  which  persons  under 
'indictment  are  now  extradited  from  one  district  within  which 
'a  district  court  has  jurisdiction  to  another.' 

§  243.  When  bankrupt  may  be  extradited.— After  a  war- 
rant, or  order,  of  arrest  has  been  issued  for  a  banlvrupt  for 
the  commission  of  an  offense  under  the  bankrupt  law,^  or  on 
a  charge  of  contempt,-  he  may  be  extradited  if  found  within 
the  jurisdiction  of  a  court  other  than  the  one  issuing  the 
warrant,  or  order.  This  provision  does  not  deal  with  or  con- 
cern the  jurisdiction  or  power  of  the  court  in  which  the 
bankruptcy  case  is  pending  to  issue  a  warrant  for  the  appre- 
hension of  the  bankrupt  for  the  purpose  of  examination,  bat 
only  confers  power  on  a  court  other  than  the  one  issuing  the 
warrant  to  extradite  the  bankrupt.^ 

§244.  How  bankrupt  may  be  extradited.— He  is  to  be  ex- 
tradited in  the  same  manner  in  which  persons  under  indict- 
ment are  now  extradited  from  one  district  within  which  a 
district  court  has  jurisdiction  to  another.  The  statute^  pro- 
vides that  for  any  offense  against  the  United  States,  the 
offender  may  be  arrested  and  imprisoned,  or  bailed,  as  the 
case  may  be,  for  trial  before  the  court  having  cognizance  of 
the  offense;  by  any  United  States  judge.  United  States  com- 
missioner, chancellor,  judge  of  the  supreme,  superior  or 
common  pleas  court,  mayor  of  a  city,  justice  of  the  peace  or 
other  magistrate,  of  any  state  where  he  may  be  found,  and 

1  Sec.  29b,  act  of  1898.  3  in  re  Ketchum,  108  F.  R.  35,  5 

2  Sec.    2    (14),    and    41a.    act    of     A.  B.  R.  532. 

1898.  i  Rev.  Stat.  U.  S.,  Sec.  1014. 

171 


172  THE    NATIONAL    BANKRUPTCY    LAW.      .  Ch.  10 

agreeably  to  the  usual  mode  of  process  in  such  state,  and  at 
the  expense  of  the  United  States ;  and,  where  any  offender  is 
committed  in  any  district  other  than  the  one  where  the  offense 
is  triable,  the  judge  of  the  district  where  the  offender  is  im- 
prisoned shall  seasonably  issue,  and  the  marshal  execute,  a 
warrant  for  his  removal  to  the  trial  district.  Though  there 
may  be  slight  differences  in  the  mode  of  procedure  in  different 
states,  the  usual  course  is  to  present  a  sworn  complaint  to  a 
United  States  commissioner,  or  other  committing  magistrate, 
who  thereupon  issues  a  warrant  to  the  marshal  to  arrest  and 
bring  the  bankrupt  before  him.  When  brought  before  such 
officer,  the  bankrupt  makes  his  plea,  and,  if  it  be  guilty,  he  is 
bailed  to  appear  for  trial  in  the  proper  court,  or  committed 
to  await  the  order  of  removal,  as  the  case  may  be.  Other- 
wise he  waives  examination  or  demands  a  hearing.  In  the 
former  case,  the  same  disposition  is  made  of  him  as  on  a  plea 
of  guilty.  At  the  examination  evidence  is  introduced  for  and 
against,  counsel  heard  and  the  identity  of  the  offender  and 
his  probable  guilt  must  be  established.  If  this  is  done  he  is 
bailed  or  committed  as  before  stated.  Thereupon  the  district 
attorney,  accompanied  by  the  marshal  and  the  prisoner,  go 
before  the  judge  and  apply  for  an  order  of  removal,  and  the 
judge  after  satisfying  himself  of  the  prisoner's  identity,  his 
probable  guilt,  and  that  he  is  charged  with  an  offense  within 
the  jurisdiction  of  the  trial  court,  should  issue  an  order  di- 
recting the  marshal  to  remove  the  prisoner  to  the  trial  district, 
or  may  admit  him  to  bail ;  or,  if  it  appears  the  removal  should 
not  be  made,  discharge  him.^ 

When  a  bankrupt  has  once  been  extradited,  he  may  be 
detained^  and  obedience  to  all  lawful  orders  enforced  by  fine 
or  imprisonment,  or  both."^ 

5  In    re    Dana,    68    P.    R.    886;         6  Sec.  9,  act  of  1898. 
Horner  v.  U.  S.  143  U.  S.  207.  t  Sec.  2  (13),  act  of  1898. 


CHAPTER  XI. 

SUITS    BY    AND    AGAINST    BANKRUPTS. 


§245.   (11a)   Stay   of   suits  against       265. 
bankrupt. 

246.  Distinction  between  suits  on       266. 

claims  discharged  and  not.       267. 

247.  Stay   compulsory — Voluntary       268. 

and     Involuntary     proceed- 
ings. 269. 

248.  Jurisdiction      over      applica-       270. 

tions  to  stay  proceedings. 

249.  Of  referees.  271. 

250.  Proceedings    in    rem,    effect       272. 

of. 

251.  State  courts  not  to  adminis-       273. 

ter  bankrupt's  estate.  274. 

252.  Class  of  suits  stayed — in  gen-      275. 

eral. 

253.  Proceedings    to    enforce       276. 

valid  liens. 

254.  Where   decree   procured       277. 

by  fraud. 

255.  To     administer     assign-       278. 

ments. 

256.  Proceedings     on     judg-       279. 

ments.  280. 

257.  Contempt  proceedings.  281. 

258.  Stay    where    more    than 

one  petition  filed.  282. 

259.  Ejectment. 

260.  Fraudulent   preferences.      283. 

261.  Suits  not  stayed.  284. 

262.  To  foreclose  liens. 

263.  Mechanics'  liens.  285. 

264.  Proceedings    to    enforce 

judgment  for  alimony.  286. 


In  which  there  are  re- 
ceivers. 

Nature  of  stay. 

Permission  to  sue. 

Application  for  a  stay — form 
— service. 

Where  made. 

Time  proceedings  will  be 
stayed. 

When  stay  dissolved. 

Revival  of  right  to  sue  after 
bankruptcy  proceedings. 

Grounds  must  be  pleaded. 

Review  of  stay. 

(lib)  Trustee  to  defend 
pending  suits. 

When  trustee  may  become  a 
party. 

How  he  should  become  a 
party. 

Effect  of  trustee's  appear- 
ance. 

What  trustee  may  plead. 

Necessary  parties. 

(lie)  Trustee  to  prosecute 
suits. 

Suits  of  bankrupt  prosecuted 
by  trustee. 

What  the  trustee  may  do. 

(lid)  Time  for  bringing 
suits  against  trustee. 

When  limitation  begins  to 
run. 

When  may  be  pleaded. 


§  245.  '  (Sec.  11a)  Stay  of  suits  against  bankrupt.— A  suit 
'which  is  founded  upon  a  claim  from  which  a  discharge  would 
'be  a  release,  and  which  is  pending:  against  a  person  at  the 
'time  of  the  filing  of  a  petition  against  him,  shall  be  stayed 
'until  after  an  adjudication  or  the  dismissal  of  the  petition; 
'if  such  person  is  adjudged  a  bankrupt,  such  action  may  be 

173 


174  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  U 

'further  stayed  until  twelve  months  after  the  date  of  such 
'adjudication,  or,  if  within  that  time  such  person  applies  for 
'a  discharge,  then  until  the  question  of  such  discharge  is 
'  determined.  '^ 

§246.  Distinction  between  suits  on  claims  discharged  and 
not. — This  section  makes  a  distinction  between  suits  upon 
claims  from  which  a  discharge  would  be  a  release  and  those 
from  which  it  would  not.  The  logic  of  this  provision  is  plain. 
To  prosecute  to  judgment  a  suit  pending  against  a  person  at 
the  time  the  petition  is  filed  is  useless,  if  it  is  based  upon  a 
claim  from  which  a  discharge  would  be  a  release,  unless  neces- 
sary to  settle  disputed  questions,  establish  the  plaintiff's  right, 
or,  under  the  direction  of  the  court  of  bankruptcy,  liquidate 
a  provable  claim,-  as  under  any  circumstance  each  creditor 
would  share  equally  with  the  others  in  the  distribution  of  the 
estate  and  his  rights  would  be  fully  preserved  by  proving  his 
claim  against  the  estate.  If,  however,  the  bankrupt  is  not 
discharged,  the  suit  may  then  be  prosecuted  to  judgment. 
The  stay  must  be  until  after  an  "adjudication,"  which  means 
the  date  of  the  entry  of  a  decree  that  the  defendant  in  a  bank- 
ruptcy proceeding  is  a  bankrupt,  or,  if  such  decree  is  appealed 
from,  then  the  date  when  such  a  decree  is  finally  confirmed.^ 

§247.     Stay  compulsory— Voluntary  and    involuntary  pro- 

1  Analogous  provision  of  Act  of  any  such  suit  of  proceedings  ^haii 
1867.  "Sec.  21 That  no  upon  the  application  of  the  bank- 
creditor  proving  his  debt  or  claim  rupt,  be  stayed  to  await  the  de- 
shall  be  allowed  to  maintain  any  termination  of  the  court  in  bank- 
suit  at  law  or  in  equity  therefor  ruptcy  on  the  question  of  the  dis- 
against  the  bankrupt,  but  shall  be  charge,  provided  there  be  no  un- 
deemed  to  have  waived  all  right  reasonable  delay  on  the  part  of  the 
of  action  and  suit  against  the  bankrupt  in  endeavoring  to  obtain 
bankrupt,  and  all  proceedings  al-  his  discharge,  and  provided,  also, 
ready  commenced  or  unsatisfied  that  if  the  amount  due  the  creditor 
judgments  already  obtained  there-  is  in  dispute,  the  suit,  by  leave  of 
on,  shall  be  deemed  to  be  dis-  the  court  in  bankruptcy,  may  pro- 
charged  and  surrendered  thereby;  ceed  to  judgment  for  the  purpose 
and  no  creditor  whose  debt  is  prov-  of  ascertaining  the  amount  due, 
able  under  this  act  shall  be  allowed  which  amount  may  be  proved  in 
to  prosecute  to  final  judgment  any  bankruptcy,  but  execution  shall  be 
suit  at  law  or  in  equity  therefor  stayed  as  aforesaid." 
against  the  bankrupt,  until  the  2  63b,  act  of  1898. 
question  of  the  debtor's  discharge  •'s  Sec.  1  (2),  act  of  1898. 
shall   have  been   determined;    and 


Ch.  11  STAY    OF    SUITS    AGAINST    BANKRUPT.  Uo 

ceedings. — It  should  be  observed  that  the  first  three  subdi- 
visions of  this  section  deal  with  suits  pending  w^lien  the 
l^etition  is  filed,  that  subdivision  "a"  makes  the  stay  of  all 
suits  founded  on  dischargeable  claims  and  pending  when  the 
petition  is  filed  compulsory  until  an  adjudication  is  made  or 
the  petition  is  dismissed;  and  leaves  the  further  stay  only  to 
the  court  to  determine,  and  also  that  though  the  phrase  is 
"petition  against  him,"  voluntary  proceedings  are  included. ^ 

§248.    Jurisdiction  over  application  to  stay  proceedings.— 

Application  for  injunction  to  stay  proceedings  in  a  state  court 
should  be  made  to  the  court  of  bankruptcy,^  who  may  hear 
and  decide  the  question,  though  he  may  refer  such  application, 
or  any  specified  issue  arising  thereon,  to  the  referee  to  ascer- 
tain and  report  the  facts.*^  The  jurisdiction  of  the  bankruptcy 
court  to  determine,  for  the  purpose  of  such  application, 
whether  the  claim  on  which  the  proceedings  in  the  state  court 
are  founded  is  one  from  which  a  discharge  would  be  a  release, 
is  exclusive  and  its  determination  conclusive  until  revised,''' 
and  its  power  to  enjoin  proceedings  in  a  state  court  on  a 
dischargeable  debt  is  plenary  but  its  exercise  is  discretionary. 
An  injunction  will  usually  issue  (1)  if  the  bankrupt  is  threat- 
ened with  arrest  or  needless  annoyance,  (2)  if  the  suit  is  not 
yet  in  judgment,  and  (3)  even  after  judgment  if  (a)  the 
rights  of  general  creditors,  not  parties  to  such  proceedings, 
will  be  jeopardized,  or  (b)  the  judgment  is  based  on  an  act 
of  bankruptcy  or  a  fraud  on  creditors  or  the  law;  but  in  the 
absence  of  (a)  and  (b)  it  should  never  issue  after  execution 
sale  provided  the  state  court  has  or  can  be  given  jurisdiction 
of  all  the  interested  parties.^     Thus  it  will  restrain  a  third 

4  Sec.  1,  act  of  1898;  In  re  Geis-  514,  3  A.  B.  R.  9;  Globe  Cycle  Wks., 
ter,  2  N.  B.  N.  R.  297,  97  F.  R.  1  N.  B.  N.  421,  2  A.  B.  R.  447,  in 
322,  3  A.  B.  R.  228.  which  the  cases   are  collated  and 

5  In  re  Bolinger,  1  N.  B.  N.  254;  distinguished;  In  re  Sabine,  1  N. 
In  re  Klein,  1  N.  B  N.  486,  97  F.  B.  N.  45,  1  A.  B.  R.  315 ;  In  re 
R.  31;  Contra,  In  re  Geister,  2  N.  Northrop,  1  A.  B.  R.  427;  Bear  v. 
B.  N.  R.  297,  97  F.  R.  322,  3  A.  B.  Chase,  3  A.  B.  R.  746,  99  F.  R.  920, 
R.  228.  citing  Ex  p.  Christy,  3  How.  292; 

6  G.  O.  XII.  Chapman  v.  Brewer,  114  U.  S.  158, 

7  Wagner  v.  U.  S.,  2  N.  B.  N.  R.  173;  Moran  v.  Sturges,  154  U.  3. 
1116,  104  F.  R.  133,  4  A.  B.  R.  596.  256,  269,  270,  274;  In  re  Bruss-Rit- 

8  In  re  Southern  L.  &  T.  Co.  v.  ter,  90  F.  R.  651,  1  N.  B.  N.  39;  Lea 
Benbow,  1  N.  B.  N.  499.  96  F.  R.  v.  Geo.  M.  West  Co..  1  N.  B.  N.  79, 


176  THE    NATIONAL    BANKRUPTCY    LAW.  ClL  11 

person  from  selling  or  incumbering  property  of  the  bank- 
rupt;^ or  to  restrain  action  against  the  trustee,  if  the  con- 
tinuance of  the  action  will  embarrass  the  administration  of 
the  estate.^ *^  The  jurisdiction  to  issue  an  injunction  in  certain 
cases  exists  notwithstanding  the  fact  that  a  discharge  has 
been  granted.^^  The  court  of  bankruptcy  has  not  authority 
to  withdraw  from  the  state  court  suits  pending  therein  be- 
tween the  bankrupt  and  other  parties  and  compel  their  trial 
in  the  district  court.^^ 

§249. of  referees.— Wherever  the  court  has  jurisdic- 
tion the  referee  also  has  jurisdiction,  except  where  the  case  is 
referred  to  him  for  a  special  purpose,  or  it  is  a  question  arising 
out  of  applications  of  a  bankrupt  for  composition  or  dis- 
charge; even  though  it  be  a  case  where  the  premises  affected 
are  in  another  county  of  the  same  Federal  judicial  district. 
While  this  is  true,  applications  for  an  injunction  to  stay  pro- 
ceedings of  a  court  or  officer  must  be  heard  and  decided  by 
the  judge  unless  he  refers  the  application  in  any  specified 
issue  arising  thereon  to  the  referee  to  ascertain  and  report  the 
facts,  in  which  case  the  referee  also  has  like  power  with  the 
court  to  stay  suits  in  the  state  courts.^^ 

1  A.  B.  R.  261,  91  F.  R.  237;  In  re  Bk.  of  Providence,  87  F.  R.  833; 
Smith,  92  F.  R.  135,  1  N.  B.  N.  356,     James  v.  Central  Trust  Co.  98  F. 

2  A.  B.  R.  9;    In  re  Kenney,  1  N.  .  R.  489;  Mueller  v.  Nugent,  7  A.  B. 

B.  N.  401,  2  A.  B.  R.  494,  95  F.  R.     R.  224. 

427,  s.  c.  2  N.  B.  N.  R.  141,  3  A.  B.  lo  In  re  Gutman,  114  F.  R.  1009. 
R.  353,  97  F.  R.  557,  558;  In  re  n  Southern  L.  &  T.  Co.  v.  Ben- 
Clark,  9  Blachf.  372,  F.  C.  2801;  bow,  1  N.  B.  N.  499,  96  F.  R.  514, 
Watson  V.  Bk.,  2  Hughes,  200.  F.  3  A.  B.  R.  9. 

C.  17279;  In  re  Whipple,  6  Biss.  12  Samson  v.  Burton,  4  N.  B.  R. 
516,  F.  C.  17512;   In  re  Merchants'  1,  5  Ben.  343,  F.  C.  12285. 

Ins.  Co.,  3  Biss.  162^  F.  C.  9441;  In         la  In  re  Mussey,  2  N.  B.  N,  R. 

re  Miller,  6  Biss.  30,  F.  C.  9551;  In  113,  99  F.  R.  71,  3  A.  B.  R.  592; 

re  Kimball,  1  N.  B.  N.  515,  97  F.  In  re  Adams,  1  N.  B.  N.  167,  1  A. 

R.   29,  3  A.  B.  R.  161;    In  re  See-  B.  R.  94;   In  re  Sabine.  1  N.  B.  N. 

bold,  105  F.  R.  910,  5  A.  B.  R.  358.  45,  1  A.  B.  R.  315;  In  re  Northrop, 

0  In  re  Smith,  8  A.  B.  R.  55.  113  1  A.  B.  R.  427 ;  In  re  Huddlestou, 

F.  R.  993;  Beach  v.  Macon  Grocery  1  N.  B.  N.  214,  1  A.  B.  R.  572;  In 

Co.,  116  F.  R.  143,  8  A.  B.  R.  751;  re  Adams.  1  N.  B.  N.  167,  1  A.  B. 

In  re  Gutman  &  Wenk,  8  A.  B.  R.  R.  94;   In  re  Bolinger,  1  N.  B.  N. 

252;    Dietzsch  v.   Huidekoper,   103  254;   In  re  Rogers,  1  A.  B.  R.  541, 

U.  S.  494;  Chapman  v.  Brewer,  114  ]  N.  B.  N.  211. 
U.  S.  158;  Garner  v.  Second  Nat. 


Cil.  11    STAY  OF  SUITS— JURISDICTION  OF  REFEREES.  177 

§  250.  Proceedings  in  rem— Effect  of.— An  adjudication  of 
bankruptcy  operates  in  rem,  and  from  the  moment  of  the 
adjudication  the  bankrupt's  estate  is  under  the  jurisdiction  of 
the  bankruptcy  court,  which  will  not  permit  any  interference 
with  its  possession  even  though  it  be  by  an  officer  of  a  state 
court  acting  under  its  process.i'*  The  assertion  of  any  right 
against  or  to  participate  in  the  res  so  in  custodia  legis  must 
be  sought  in  the  court  in  whose  custody  it  is.  An  attempt  to 
assert  such  right  elsewhere  would  be  a  contempt.  All  persons 
interested  in  the  res  are  regarded  as  parties  to  the  bankruptcy 
proceedings,  including  not  only  the  bankrupt  and  trustee  but 
all  the  creditors,  including  lienors.  Hence  the  district  court 
has  full  jurisdiction  over  the  liens  and  mortgages  upon  the 
bankrupt's  property  and  may  inquire  into  their  validity  and 
extent  and  grant  the  same  relief  as  could  the  state  courts  but 
for  the  bankruptcy,  without  regard  to  the  consent  of  the 
lienor.i^  Property  in  its  possession  cannot  be  interfered  with 
by  a  sheriff  under  a  writ  of  replevin  issued  out  of  a  state 
court,  and  such  proceeding  will  be  stayed  ;^'^  nor  can  a  suit 
be  maintained  in  a  state  court  by  one  claiming  to  be  owner  to 
determine  title  and  enjoin  the  officers  of  the  bankruptcy  court 
from  proceeding;^'''  nor  to  restrain  a  trustee  from  paying  out 
to  creditors  a  fund  in  his  hands,  pending  the  determination  of 
a  suit  to  establish  a  lien  on  such  fund;  but  application  must 
be  made  to  the  court  of  bankruptcy;!^  nor  to  prevent  a  trustee 
from  collecting  a  note  payable  to  the  bankrupt;!^  nor  will  a 
state  court  interfere  by  injunction  with  a  party  applying  for 
the  benefit  of  the  bankrupt  law;^^  nor  bj^  an  injunction  re- 
straining the  collection  of  taxes,  prevent  a  Federal  court 
proceeding  to  judgment  in  an  action  of  which  it  has  jurisdic- 

14  In  re  Chambers,  2  N.  B.  N.  R.  al.,  2  N.  B.  N.  R.  234,  3  A.  B.  R. 
388,  98  F.  R.  865,  3  A.  B.  R.  537;  224,  97  F.  R.  326;  In  re  Gutwillig. 
Byers  v.  McAuley,  149  U.  S.  608;  1  N.  B.  N.  19;  In  re  Agins,  1  N.  B. 
Ex  p.  Johnson,  167  U.  S.  120;  Jor-  N.  180. 

dan  V.  Taylor,  98  F.  R.  643;  Kee-  iTKeegan  v.  King,  3  A.  B.  R.  79, 

gan  V.  King,  96  F.  R.  758,  3  A.  B.  96  F.  R.  758. 

R.  79;    Chapin  v.  James,  11  R.  I.  is  Chatt.  Nat.  Bk.  v.  Rome  Iron 

87;  In  re  True,  8  A.  B.  R.  285.  Co.,   99  F.   R.  82,  3  A.  B.  R.   582. 

15  Carter  v.  Hobbs,  1  N.  B.  N.  m  Southern  v.  Fisher,  16  N.  B. 
191,  1  A.  B.  R.  215,  92  F.  R.  594.  R.  414. 

16  In  re  Russell,  101  F.  R.  248,  2"  Fillingin  v.  Thornton,  12  N, 
2  A.  B.  R.  658;   In  re  Schloerb  et  B.  R.  92. 


178  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  11 

tion,  nor  J'rom  enforcing  its  judgment  by  mandamus  to  compel 
the  levy  and  collecting-  of  taxes  to  pay  it.^^ 

In  order  to  preserve  the  property  and  protect  the  rights  of 
all  the  creditors,  a  court  of  bankruptcy  in  which  the  bank- 
ruptcy proceedings  are  pending  has  the  unquestionable  juris- 
diction and  power  to  enjoin  any  disposition  thereof  which 
would  be  in  violation  of  the  spirit,  intent  and  purpose  of  the 
act--  and  may  fine  and  imprison  any  of  said  creditors  for 
attempting  to  interfere  without  leave  through  proceedings  in 
the  state  court.-^ 

§251.     State  courts  not  to  administer  bankrupt's  estate.— 

The  jurisdiction  of  a  state  court  does  not  extend  to  the  ad- 
ministration of  a  bankrupt's  estate,-^  so  that  an  attempt  on 
its  part  to  collect  and  distribute  the  assets  of  an  insolvent  is 
in  contravention  of  the  bankruptcy  law,  although  the  law 
under  which  the  state  court  proceeds  does  not  provide  for  or 
purport  to  discharge  the  debtor  from  his  liabilities.-^  When 
the  right  of  the  state  court  is  to  be  questioned,  it  can  only  be 
done  by  the  intervention  of  the  trustee.-^ 

In  order  that  the  state  court  may  have  proper  notice  of  the 
bankruptcy  proceedings,  the  bankrupt,  who  is  defendant  in 
such  court,  should  file  there  a  proper  pleading  setting  up  such 
proceedings.^'^  After  it  is  shown  that  the  defendant  has  been 
adjudged  a  bankrupt,  the  court  is  bound  to  take  judicial 
notice  that  all  his  property  is  vested  in  the  trustee,  and  in  the 

21  Clapp  V.  Otoe  County,  Neb.,  In  re  Whipple,  13  N.  B.  R.  373.  6 
104  F.  R.  473.  Biss.  516,  F.  C.  17512. 

22  In  re  Nathan,  1  N.  B.  N.  326,  24  Thornhill  v.  Bk.,  3  N.  B.  11. 
563,  92  F.  R.  590;  In  re  Calendar,  110,  F.  C.  13990;  In  re  Independent 
F.  C.  2308;  In  re  Camp,  Id.  2346;  Ins.  Co.,  6  N.  B.  R.  260  Holmes, 
In  re  Holland,  12  N.  B.  R.  403,  F.  103,  F.  C.  7011;  In  re  Merchants 
C.  6605;  In  re  Smith,  F.  C.  12993,  Ins.  Co.,  6  N.  B.  R.  43,  3  Biss.  162, 
12994;  In  re  Francis- Valentine  Co ,  F.  C.  9441;  Carling  v.  Seymour 
1  N.  B.  N.  104,  529,  2  A.  B.  R.  Lumber  Co.,  8  A.  B.  R.  29;  In  re 
522,  94  F.  R.  793;  In  re  Murphy,  2  Rogers,  8  A.  B.  R.  723. 

N.  B.  N.  R.  393,  3  A.  B.  R.  499 ;  In  2f.  in  re  Merchants'  Ins.  Co.,  su- 
re Russell,  101  F.  R.  248.  3  A.  B.  R.  pra. 

658:  In  re  Chambers,  2  N.  B.  N.  R.  26  Valliant  v.  Childress,  11  N.  B. 

388,  98  F.  R.  865,  3  A.  B.  R.  537.  R.   317;    see  Bear  v.   Chase,  99  F. 

23  In  re  Winn,  1  N.  B.  R.  131,  P.  R.  920,  3  A.  B.  R.  746. 

C.  17876;  Markson  v.  Heaney,  4  N.         27  in   re  Geister,    2  N.   B.   N.  R. 
B.   R.    165,    F.   C.    9098;    Irving  v.     297.  3  A.  B.  R.  228,  97  F.  R.  322. 
Hughes,  2  N.  B.  R.  20,  F.  C.  7076; 


Oh.  11  CLASS    OF    SUITS    STAYED.  179 

case  of  proceeds  of  mortgaged  property  in  its  possession,  not 
brought  there  by  final  process  to  enforce  the  mortgage  lien, 
such  proceeds  must  be  paid  to  such  trustee  and  the  mortgagee 
remitted  to  the  bankruptcy  court  to  assert  his  lien.^^ 

§252.  Class  of  suits  stayed— in  general.— Any  suit  inter- 
fering with  the  control  of  the  court  of  bankruptcy  over  the 
bankrupt  or  his  property,  or  with  the  due  and  complete  ad- 
ministration of  his  estate,  pursuant  to  the  provisions  of  the 
bankrupt  law  will  be  stayed.-^  To  determine  whether  a  suit 
is  stayed  under  this  subdivision,  it  is  necessary  to  ascertain  if 
the  cause  of  action  in  the  case  is  one  from  which  a  discharge 
would  be  a  release,  and  if  it  is,^^^  the  stay  will  be  granted.^^ 
But  it  is  not  confined  to  technical  debts  or  fixed  liabilities.^- 
Upon  a  petition  for  an  injunction  to  restrain  the  enforcement 
of  an  execution  from  a  state  court,  the  court  of  bankruptcy  is 
not  bound  by  the  finding  of  the  state  court  that  the  debt  is 
one  not  released  by  the  discharge.^^ 

§253. Proceedings  to  enforce  valid  liens.— Proceed- 
ings to  enforce  valid  liens  against  the  bankrupt's  property 
may  be  stayed  until  the  trustee  can  look  into  the  matter  and 
decide  if  any  benefit  can  be  secured  from  the  encumbered 
property  for  the  estate;  and  may  be  stayed  permanently  as 
far  as  any  personal  judgment  against  the  bankrupt  is  con- 
cerned.^^ 

§254. Where    decree  procured  by  fraud.— A  bank- 
ruptcy court,  notwithstanding  bankrupt  has  received  his  dis- 
ss Morris  V.   Davidson,  11  N.  B.  Ball,  121  U.  S.  457;  Scott  v.  Ellery, 

R.  454.  142  U.  S.  381. 

^9  Booth  V.  Nickerson,  1  N.  B.  N.  si  See  In  re  Rogers,  1  N.  B.  N. 

476,  96  F.  R.  943,  2  A.  B.  R.  770;  211,  1  A.  B.  R.  541;  see  also  Chap. 

In  re  Spencer,  1  N.  B.  N.  154;  In  XVII. 

re  Gutman,  114  F.  R.  1009.  32  in  re  Hilton,  3  N.  B.  N.  R.  105, 

30  In  re  Katz,  1  N.  B.  N.  165,  1  104  F.  R.  981. 

A.  B.  R.  19;  Reid  v.  Cross,  1  N.  B.  33  Knott   v.    Putnam,    107    F.   R. 

N.  165,  1  A.  B.  R.  34;  In  re  Winn.  907.  6  A.  B.  R.  80. 

1  N.  B.  R.  131,  F.  C.  17876 ;  In  re  34  Porter  v.  Cummings,  1  N.  B. 

Van  Biiren.  19  N.  B.  R.  149,  F.  C.  N.  520;    In  re  Ball,  118  F.  R.  672; 

16833;    In   re   Belden,   6   N.   B.   R.  McKay  v.  Funk,  13  N.  B.  R.  334; 

443,   5    Ben.    476,   F.   C.   1239;    Mc-  Markson   v.    Heaney,   12   N.   B.  R. 

Gehee  v.  Hentz,  19  N.  B.  R.  136,  F.  484;    In   re   Snedaker,   3   N.   B.  R. 

C.  8794;  Penny  v.  Taylor,  10  N.  B.  155;    In  re  Migell,  2  N.  B.  R.  153, 

R.    200,   F.    C.   10957;    Boynton    v.  F.  C.  9538. 


180  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  11 

charge,  will  enjoin  an  officer  of  a  state  court  and  all  others 
from  selling  bankrupt's  property  under  a  decree  procured  by 
fraud,  and  direct  its  sale  by  the  trustee  in  bankruptcy  free  of 
all  liens,  transferring  to  the  proceeds  of  the  sale  all  valid  liens 
on  the  property.^^ 

§  255. To  administer  assignments.— A  suit  in  a  state 

court  for  the  administration  of  an  estate  under  a  general 
assignment  for  the  benefit  of  creditors  should  be  stayed  by 
the  court  of  bankruptcy  when  an  adjudication  has  been  made 
within  four  months  of  such  assignment,  notwithstanding  the 
state  court  had  prior  to  the  filing  of  the  petition  secured  pos- 
session of  the  corpus  of  the  estate  ;^^  and  service  of  a  copy  of 
the  injunction  issued  by  the  court  of  bankruptcy  against  the 
assignee  is  unnecessary,  in  order  to  put  him  in  contempt  for 
a  violation  thereof.^^  Where  after  such  an  assignment  a 
vendor  of  goods  alleged  to  have  been  fraudulently  obtained 
assigned  his  claim  and  the  assignee  replevied  the  goods,  a 
miscellaneous  seizure  being  made  thereunder  prior  to  the  bank- 
ruptcy, proceedings  under  said  replevin  should  be  enjoined 
on  account  of  the  abuse  of  the  replevin  writ  and  the  proper 
protection  of  bankrupt's  other  creditors.^^  A  protest  by  cred- 
itors, made  in  a  state  court,  against  further  proceedings  under 
a  general  assignment  executed  by  the  debtor  before  their 
petition  in  bankruptcy,  does  not  have  the  effect  of  a  writ  of 
injunction  from  the  Federal  court.^^ 

§  256. Proceedings  on  judgments.— A  court  of  bank- 
ruptcy has  jurisdiction  over  a  judgment  creditor  of  the  bank- 
rupt for  the  purpose  of  enjoining  him  from  proceeding  in 
a  state  court  for  the  enforcement  of  his  judgment  against 
property  of  the  debtor,  where  the  judgment  was  rendered 
null  or  inoperative  by  the  adjudication  of  the  debtor  as  a 
bankrupt  within  four  months  after  its  rendition,  because  all 
creditors  are  parties  to  the  proceedings  in  bankruptcy,  and 

35  Southern  L.  &  T.   Co.  v.  Ben-     F.  R.  337,  1  A.  B.  R.  388. 

bow,  1  N.  B.  N.  499,  96  F.  R.  514,  3         3-  in  re  Krinsky,  112  F.  R.  972, 

A.  B.  R.  9.  7  A.  B.  R.  535. 

36  Lea  V.  Geo.  M.  West  Co.,  1  N.         ss  in  re  Gutwillig,  1  N.  B.  N.  19, 

B.  N.  79,  1  A.  B.  R.  261,  91  F.  R.     166,  90  F.  R.  481. 

237;  In  re  McKee,  1  A.  B.  R.  311;         ^n  in  re  Scholtz,  106  F.  R.  834,  5 
In  re  Solomon,  2  N.  B.  N.  R.  460;      A.  B.  R.  782. 
In  re  Gutwillig,  1  N.  B.  N.  554,  92 


Ch.  11         STAY    OF    PROCEEDINGS    ON    JUDGMENTS. 


181 


also  because  the  court  has  power  to  restrain  any  person  from 
illegall}^  possessing  himself  of  assets  of  the  estate.^*^  Where 
the  proceedings  are  against  the  bankrupt  and  another,  it  will 
enjoin  them  as  to  the  bankrupt  but  not  as  to  the  other  judg- 
ment debtor;'*^  or  will  enjoin  an  action  to  revive  a  judgment 
so  that  it  will  operate  as  a  lien  on  real  estate;"*-  or  an  action 
to  enforce  a  lien  when  the  trustee  has  appeared  therein  and 
the  stay  of  execution  is  asked  that  parties  may  apply  to  the 
Federal  court.^^  The  bankruptcy  court  will  also  restrain  a 
threatened  levy  by  a  sheriff  to  satisfy  a  judgment  against  the 
trustee.^^  If  a  levy  be  made  upon  the  bankrupt's  property 
upon  an  attachment  granted  within  four  months  of  the  filing 
of  the  petition,  the  sheriff  is  not  required  to  assume  the  re- 
sponsibility of  releasing  the  levy,  but  the  trustee  should  apply 
to  the  court  granting  the  attachment,  for  an  order  releasing 
the  same.*^  If  the  judgment  was  recovered  more  than  four 
months  prior  to  the  filing  of  the  petition  in  bankruptcy,  the 
creditor  may  be  permitted  to  enforce  his  judgment  by  execu- 
tion against  real  property  of  the  bankrupt  on  which  it  is  a 
legal    lien.     In  case  the  suit  is  stayed    the    trustee  will  be 


40  In  re  Lesser,  3  A.  B.  R.  815,  2 
N.  B.  N.  R.  599,  100  F.  R.  433,  s.  c. 
99,  F.  R.  913,  3  A.  B.  R.  758;  In  re 
Kletchka,  1  N.  B.  N.  160,  92  F.  R. 
901,  1  A.  B.  R.  479;  Johnson  v. 
Rogers,  15  N.  B.  R.  1,  F.  C.  7408; 
In  re  Pitts,  9  F.  R.  542;  Olney  v. 
Tanner,  10  F.  R.  101,  113;  Becker 
V.  Torrance,  31  N.  Y.  631;  First 
Nat.  V.  Shuler,  153  N.  Y.  172;  Kit- 
chen V.  Lowry,  127  N.  Y.  53 ;  In  re 
Spencer,  1  N.  B.  N.  154;  In  re 
Globe  Cycle  Wks.,  1  N.  B.  N.  421,  2 
A.  B.  R.  447 ;  In  re  Kenney.  1  N.  B. 
N.  401,  2  A.  B.  R.  494,  95  F.  R.  427  ; 
Booth  V.  Nickerson,  1  N.  B.  N.  476, 
96  F.  R.  943,  2  A.  B.  R.  770;  In  re 
Francis-Valentine  Co.,  1  N.  B.  N. 
529.  94  F.  R.  793,  2  A.  B.  R.  522, 
aff'g  1  N.  B.  N.  532,  93  F.  R.  953,  2 

A.  B.  R.  188;  In  re  Pruschen,  1  N. 

B.  N.  526. 

This  is  contradicted  In  re  Eas- 
ley,  1  N.  B.  N.  230,  1  A.  B.  R.  715, 
93  F.  R.  419,  but  as  that  was  de- 


cided on  the  theory  that  sec.  67f 
only  applied  to  involuntary  pro- 
ceedings, which  position  is  now 
held  to  be  erroneous,  it  is  of  no 
force.  See  also  Jones  v.  Leach,  1 
N.  B.  R.  165,  F.  C.  7475;  In  re  Tifft, 
19  N.  B.  R.  201,  F.  C.  14034;  but 
the  rule  which  obtained  under  the 
act  of  1867  that  an  honest  execu- 
tion levied  prior  to  the  petition 
was  not  voidj  no  longer  obtains; 
Goddard  v.  Weaver,  6  N.  B.  R.  440, 
F.  C.  5495;  Beattie  v.  Gardner,  4 
N.  B.  R.  106,  F.  C.  1195;  In  re 
Shuey,  9  N.  B.  R.  526,  F.  C.  12821. 

41  In  re  De  Long,  1  N.  B.  N.  26,  1 
A.  B.  R.  66. 

42  Bratton  v.  Anderson,  14  N.  B. 
R.  99. 

43  Rowe  v.  Page,  13  N.  B.  R.  366. 

44  In  re  Neely,  108  F.  R.  371,  5 
A.  B.  R.  836. 

i->  Hardt   v.    Schuylkill   Plush   & 
Silk  Co.,  8  A.  B.  R.  479. 


182  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  11 

subrogated  to  the  rights  of  such  plaintiffs  and  may  continue 
it  for  the  benefit  of  all  the  creditors.-**^  After  the  bankrupt's 
discharge,  execution  of  a  judgment  upon  a  debt  within  the 
operation  of  the  discharge,  will  be  perpetually  stayed.'*'^ 

§  257. Contempt  proceedings.— A  bankrupt  should  at 

all  times  from  his  adjudication  in  bankruptcy  until  the  hear- 
ing on  his  application  for  discharge  be  at  the  disposal  of  the 
referee  and  the  court,  and  any  proceeding  which  may  or  will 
result  in  his  arrest  and  imprisonment  during  the  pendency  of 
bankruptcy  proceedings,  even  though  such  arrest  and  impris- 
onment might  be  contempt  of  court  and  habeas  corpus  would 
lie,  will  be  stayed.**^ 

§  258. Stay  where  more  than  one  petition  filed.— In 

case  two  or  more  petitions  are  filed  against  the  same  indi- 
vidual in  different  districts,  the  first  hearing  should  be  had 
in  the  district  in  which  the  debtor  has  his  domicile  or  if 
against  the  same  partnership  or  corporation  in  dift'erent  courts, 
each  having  jurisdiction  over  the  case,  the  petition  first  filed 
should  be  first  heard;  and,  in  either  ease,  the  proceedings 
upon  the  other  petitions  should  be  stayed  until  an  adjudica- 
tion is  made  upon  the  petition  first  heard,  and  the  court 
making  the  first  adjudication  will  retain  jurisdiction  over  all 
proceedings  therein  until  the  same  are  closed.*^ 

§  259. Ejectment. — Where  a  receiver  or  trustee  ap- 
pointed by  the  bankruptcy  court,  has  taken  possession  of  a 
building  containing  bankrupt's  stock  in  trade  or  property,  he 
cannot  be  ousted  by  proceedings  in  ejectment  brought  by  the 
landlord  in  the  state  court,  but  such  proceeding  will  be 
enjoined  especially  where  it  appears  that  the  enforcement  of 
judgment  therein  would  seriously  interfere  with  the  admin- 
istration of  the  estate  and  cause  loss  to  creditors.     In  such 

46  In    re   Lesser,    supra;     In   re  104  F.  R.  133,  4  A.  B.  R.  596;  In  re 

Adams,  1  N.  B.  N.  167,  1  A.  B.  R.  Grist,  1  A.  B.  R.  89;  In  re  Migel,  2 

94;  Smith  v.  Meisenhemier,  1  N.  B.  N.  B.  R.  153,  P.  C.  9538;  In  re  Pat- 

N.   19;    Goodwin  v.   Starkey,  3  N.  terson,  1  N.  B.  R.  58,  2  Ben.  155,  F. 

B.  R.  138;  In  re  Hufnagel,  12  N.  C.  10817;  In  re  Williams,  11  N.  B. 

B.  R.  554,  F.  C.  6837;  In  re  McNa-  R.  145,  6  Biss.  233,  P.  C.  17700;  but 

mara,  2  N.  B.  N.  R.  341.  see  In  re  Graham,  1  N.  B.  N.  59 ;  In 

4T  Barnes  Mfg.  Co.  v.  Norden,  7  re  Baker,  1  N.  ^.  N.  325. 

A.  B.  R.  553.  49  G.  O.  VI;    In  re  Boston  H.  & 

48  In  re  Summers,  1  N.  B.  N.  60 ;  E.   R.   R.   Co.,   6   N.   B.   R.   209,  9 

Wagner  v.  U.  S.,  2  N.  B.  N.  R.  1116,  Blatch.  101,  F.  C.  1678. 


Ch.  11       STAY— FRAUDULENT  PREFERENCES.         183 

case  the  landlord  must  seek  his  remedy  in  the  bankruptcy 
court  which,  in  the  exercise  of  its  equitable  powers,  whil;> 
giving  the  fullest  recognition  to  the  landlord's  legal  right, 
will  regulate  the  time  and  manner  of  its  exercise  so  as  to 
cause  no  unnecessary  loss  to  others^^  and  will  direct  the 
receiver  to  surrender  the  premises  at  the  expiration  of  such 
time  as  may  be  reasonably  necessary  for  the  execution  of  his 
trust,  (unless  it  is  the  purpose  to  assume  the  lease  as  an  asset,} 
awarding  the  landlord  suitable  compensation  for  such  occu- 
pation.^i 

§260. Fraudulent  preferences.— Creditors  who  have 

received  preference  with  reasonable  cause  to  believe  a  prefer- 
ence was  intended  should  be  enjoined  from  disposing  of  the 
property  transferred  pending  the  adjudication  in  bankruptcy 
and  the  appointment  of  a  trustee;^-  and  it  is  immaterial  that 
the  debt  which  is  preferred  was  contracted  in  good  faith 
before  the  passage  of  the  bankrupt  law,  or  that  the  preferred 
creditor  claims  to  have  disposed  of  the  property  when  it  is 
found  such  disposition  was  merely  similated  ;^^  or  in  any  way 
proceeding  to  carry  such  preference  into  effect,  as  by  collect- 
ing accounts  transferred  by  bankrupt.^^ 

§  261.  Suits  not  stayed.— It  will  be  observed  that  two 
principles  luiderlie  the  bankrupt  act,  (1)  the  bankrupt's  dis- 
charge from  his  provable  debts  and  (2)  the  equitable  and 
ratable  distribution  of  his  collectible  assets  among  his  cred- 
itors. Wherever  these  principles  are  involved  the  district 
court  has  exclusive  jurisdiction  and  pending  suits  in  state 
courts  may  be  stayed  until  the  bankruptcy  proceedings  are 
closed;  but,  if  the  cause  of  action  pending  in  the  state  court 
is  not  dischargeable  in  bankruptcy  or  for  some  other  reason 
the  pending  suit  does  not  violate  the  spirit,  intent  and  purpose 
of  the  act,  it  should  not  be  enjoined.  Therefore,  since  subject 
to  certain  stated  exceptions  prior  liens  upon  the  bankrupt's 
assets  are  not  divested  by  bankruptcy  proceedings,  only  the 
residue  going  to  the  trustee,  a  judgment  creditor's  bill  seeking 

50  Deweese  V.  Reinhard,  165  U.  S.  F.  C.  12167;  see  In  re  Brown,  91 
386,  390.  F.  R.  358,  1  A.  B.  R.  107. 

51  In  re  Chambers,  2  N.  B.  N.  R.  ss  in  re  Nathan,  1  N.  B.  N.  326, 
388,  98  F.  R.  865,  3  A.  B.  R.  537.  563,  92  F.  R.  590. 

52  In  re  Rockwood,  1  N.  B.  N.  34  in  re  Kerski,  1  N.  B.  N.  328, 
134,  91  F.  R.  363,  1  A.  B.  R.  272;  2  A.  B.  R.  79. 

Sedgwick  v.  Menck,  1  N.  B.  R.  108, 


184  THE    NATIONAL    BANKRUPTCY    LAW.  (Jh.  11 

to  subject  specific  assets  to  the  payment  of  the  judgment,  filed 
more  than  four  months  before  the  bankruptcy  proceedings, 
should  not  be  stayed,  but  the  trustee  may  intervene  for  the 
protection  of  the  estate.^^ 

The  granting  of  a  stay  after  adjudication  is  always  discre- 
tionary, but  this  will  not  be  exercised  unless  the  suit  to  be 
stayed  is  founded  upon  a  claim  from  which  a  discharge  would 
be  a  release  f^  consequently  on  a  motion  for  a  stay  for  the 
purpose  of  determining  if  a  debt  is  dischargeable,  a  claim 
sounding  in  tort  on  which  a  verdict  assessing  the  damages 
has  been  rendered,  but  which  is  not  yet  in  judgment,  will  be 
considered  so  far  liquidated  as  to  come  within  "judgments  in 
actions.  "^^  Where  a  state  court  has  acquired  jurisdiction  by 
levy  of  an  execution  on  a  judgment  prior  to  the  filing  of  the 
petition,  a  court  of  bankruptcy  will  not  enjoin  the  sale  of 
property  under  the  execution  upon  petition  of  the  bank- 
rupt.^^  Neither  will  it  enjoin  the  enforcement  of  judgment 
and  execution  against  the  surety  on  a  bail  bond  taken  in  a 
state  court  suit  pending  at  the  date  of  the  adjudication  in 
bankruptcy.^*^  Where  an  action  is  commenced  long  prior  to 
bankruptcy  proceedings,  the  bankruptcy  court  has  not  juris- 
diction to  enjoin  such  action,  or  to  order  the  property  turned 
over  to  the  trustee  in  bankruptcy .^^ 

The  court  of  bankruptcy  cannot  enjoin  the  bankrupt's  co- 
licensee  in  a  liquor  license  from  applying  for  a  renewal,  nor 
require  him  to  join  in  transferring  it  to  a  prospective  pur- 
chaser, though  such  license,  as  far  as  bankrupt's  interest  is  con- 
cerned, passes  to  the  trustee  ;'^^  nor  can  it  enjoint  attaching 
creditors,  and  a  state  court  receiver  appointed  at  their  in- 
stance, because  they  do  not  become  amenable  to  its  jurisdiction 
by  the  filing  of  a  petition  against  the  debtor,  though  they  are 
therein  charged  with  having  received  an  unlawful  preference, 

55  Continental  Bk.  v.  Katz,  1  N.  •'^-  In  re  Sullivan,  1  N.  B.  N.  380. 

B.  N.  165,  1  A.  B.  R.  19;    Reid  v.  2  A.  B.  R.  30. 

Cross,  1  N.  B.  N.  165,  1  A.  B.  R.  ss  in    re    Shoemaker,    112    F.    R. 

34;    Treadwell  v.  Halloway,  12  N,  648,  7  A.  B.  R.  437. 

B.  R.  61;    In  re  Pitts,  19  N.  B.  R.  o9  In  re  Franklin,  106  F.  R.  666, 

63,  F.  C.  11190;  Mason  v.  Warthen,  5  A.  B.  R.  284. 

14  N.  B.  R.  346.  fio  Pickens  v.  Dent.  9  A.  B.  R.  47; 

50  In   re   Cole,   106   F.  R.    837,   5  Metcalf  v.  Barker,  9  A.  B.  R.  37. 

A.  B.  R.  780.  '■■1  In  re  Brodbine,  1  N.  B.  N.  325, 

279,   93   F.   R.   643,   2   A.   B.   R.   53. 


Ch.  11      STAY— PROCEEDINGS    TO    FORECLOSE    LIENS.  185 

unless  they  are  made  parties  and  served  with  process  or 
voluntarily  appear  ;^2  j^or,  where  a  creditor  undertaking  to 
reach  assets,  held  in  alleged  fiduciary  capacity,  by  trustee 
process  in  a  state  court,  stipulates  to  discontinue  such  suit, 
and  if  carried  out  will  avoid  the  necessity  of  any  injunction, 
since  such  questions  relate  to  the  discharge  and  not  to  the 
assets  or  the  trustee's  right  thereto,  which  is  what  the  court 
seeks  to  protect  ;*^^  nor  proceedings  on  appeal  taken  by  the 
bankrupt  before  bankruptcy.^^ 

§262. To  foreclose  liens.— Since  the  stay  is  purely 

discretionary  with  the  bankruptcy  court,  unless  it  appears 
that  a  larger  sum  would  be  realized  from  a  sale  by  the  trustee 
in  bankruptcy  than  under  authority  of  the  state  court,  and 
the  general  creditors  would  be  the  beneficiaries  of  this  in- 
creased price,  the  proceedings  in  the  state  court  to  foreclose 
a  mortgage  should  not  be  stayed,^^  but  the  trustee  should  be 
permitted  to  intervene  or  otherwise  keep  himself  informed  so 
as  to  protect  the  interest  of  the  estate  should  a  surplus  be 
unexpectedly  realized.^^  The  same  is  true  where  the  trustee 
claims  that  the  amounts  claimed  by  the  mortgagees  are  sub- 
ject to  credits  and  set-offs  ;^^  nor  will  it  be  stayed  where  the 
holder  of  a  chattel  mortgage  took  possession  of  the  mortgaged 
property  long  prior  to  the  filing  of  the  petition  and  brought 
suit  to  foreclose  such  mortgage  in  a  state  court,  that  being  the 
only  court  in  which  he  could  bring  it;^^  but  it  will  be  stayed 
if  such  suit  is  commenced  after  the  filing  of  the  petition  and 
the  validity  of  the  mortgage  lien  or  some  part  of  it  is  involved 
in  the  bankruptcy  proceedings.^''  The  filing  of  a  petition  by 
the  defendant  in  a  state  court  proceeding  to  foreclose  a  lien 

62  In  re  Ogles,   1   N.   B.   N.   326,  land,  F.  C.  648 ;  Eyster  v.  Gaff,  91 
S3  F.  R.  426,  1  A.  B.  R.  671.  U.  S.  521. 

63  In  re  Jackson,  1  N.  B.  N.  531,  66  in    re   Holloway,    1    N.   B.    N. 
94  F.  R.  797,  2  A.  B.  R.  501.  264,  1  A.  B.  R.  659,  93  F.  R.  638;  In 

64  O'Neil  V.  Dougherty,  10  N.  B.  re  Tait,  1  N.  B.  N.  140. 

R.  294;  Flanagan  V.  Pearson,  14  N.  fi"  In  re  Porter,  109  F.  R.  Ill, 
B.  R.  37.  6  A.  B.  R.  259. 

65  In  re  Sabine,   1   N.   B.  R.   45,         6^^  Heath  v.   Shaffer,   1  N.  B.   N. 

1  A.  B.  R.  315;  In  re  Pittelkow,  1  326,  399,  93  F.  R.  647,  2  A.  B.  R.  98. 
N.  B.  N.  234,  92  F.  R.  901,  1  A.  "s  In  re  San  Gabriel  Sanatorium 
B.   R.   472;    see  Kerosene  Oil  Co.,  Co.,  2  N.  B.  N.  R.  827,  102  F.  R, 

2  N.  B.  R.  529;   In  re  Duryea,  17  310,  4  A,  B.  R.  197. 
N.  B.  R.  495;  Augustine  v.  McFar- 


186  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  11 

on  realty  created  more  than  four  months  before  the  filing  of 
the  petition,  does  not  affect  the  right  of  the  plaintiff'  to  pro- 
ceed, unless  he  prove  his  demand  in  the  bankruptcy  court.'^'^ 

If  the  trustee  takes  no  steps  to  redeem  mortgaged  property, 
the  mortgagee  may  institute  foreclosure  proceedings  in  a  state 
court  ;'^  after  first  obtaining  leave  of  the  court  of  bank- 
ruptcy;"- and  a  decree  made  and  a  sale  had  thereafter  are 
valid  and  a  good  title  passes  ;'^3  and  in  like  manner  proceed- 
ings may  be  taken  to  subject  encumbered  property  to  secured 
creditors'  claims  where  the  general  creditors  and  trustee  have 
voluntarily  abandoned  claim  to  itJ* 

Though  the  bankrupt  may  apply  for  a  stay  at  any  time,  it 
has  been  held  that  the  trustee's  application  will  be  denied 
and  he  will  be  charged  with  costs  where  he  waited  until  all 
the  costs  except  those  attending  the  sale  had  been  incurred  in 
a  foreclosure  suitJ^ 

§263.  Mechanics'  Liens.— It  is  abundantly  established  by 
the  courts  of  last  resort.  Federal  and  state,  that  when  the 
jurisdiction  of  a  state  court  to  enforce  the  liens  of  a  mechanic 
or  material  man  has  attached,  that  jurisdiction  will  not  be 
divested  by  proceedings  in  bankruptcy  instituted  subsequently 
thereto."^  After  the  adjudication  in  bankruptcy,  proceedings 
may  be  taken  to  enforce  the  liens'^'^  thus  obtained,  though  the 
better  practice  is  to  first  obtain  leave  of  the  bankruptcy  court 
to  enforce  the  same. 

§  264. Alimony,  proceedings  to  enforce  judgments  fcr. 

—As  has  been  said,  the  claim  on  which  the  judgment  is 
founded  must  be  one  which  is  released  by  a  discharge,  to 
authorize  the  court  of  bankruptcy  to  stay  further  proceedings. 
Since  Congress  has  by  its  amendment  of  February  5,  1903, 

70  Reed  V.  Equitable  Trust  Co.,  F.  C.  18117;  Jerome  v.  McCarter, 
8  A.  B.  R.  242.  15  N.  B.  R.  546. 

71  McKay  v.  Funk,   13   N.  B.  R.  74  Bk.  v.  Bk.,  11  N.  B.  R.  49. 
334.  75  In   re   Brinkman,    6   N.   B.  R. 

72  In  re  Brinkman,  7  N.  B.  R.  541,  F.  C.  1883;  The  World  Co.  v 
421,  F.  C.  1884;  In  re  Duryea,  17  Brooks,  3  N.  B.  R.  146. 

N.    B.   R.   495,    F.    C.   1196;    In   re  76  Seibel  v.  Simeon,  62  Mo.  255; 

Kerosene  Oil  Co.,  2  N.  B.  R.  164,  see  also  post  §  1094. 

3  Ben.  35,  F.  C.  7725.  77  in   re  Emslie,   2   N.  B.   N.   R. 

73  Eyster  v.  Gaff,  13  N.  B.  R.  546,  992,  102  F.  R.  291,  4  A.  B.  R.  126, 
91  U.  S.  521;  Cutter  v.  Dingee,  14  rev'g  2  N.  B.  N.  R.  324.  98  F.  R. 
N.  B.  R.  294,  8  Ben.  469,  F.  C.  716,  3  A.  B.  R.  516;  In  re  Beck  Pro- 
3518;   In  re  Wynne,  4  N.  B.  R.  5,  vision  Co.,  2  N.  B.  N.  R.  532;  In  re 


Ch.  11    STAY   OF   SUITS   GROWING   OUT  OF  COMPOSITIONS.   187 

specifically  excepted  alimony  from  the  effects  of  a  discharge, 
the  court  of  bankruptcy  will  not  stay  proceedings  to  enforce 
payment  of  the  same. 

§265. In  which  there  are  receivers.— A  stay  should 

not  be  granted  in  an  interlocutory  proceeding  for  the  appoint- 
ment of  a  receiver  to  take  charge  of  realty  claimed  by  the 
plaintiff,  in  which  the  order  was  framed  to  avoid  conflict 
between  the  state  and  Federal  courts  as  to  the  final  disposi- 
tion of  the  realty  and  the  rents  and  profits  which  might  accrue 
therefrom  in  the  receiver's  hands,  further  than  to  enjoin  the 
granting  of  any  money  judgment  against  the  defendant:'''^ 
nor  where  a  receiver,  appointed  in  proceedings  supplementar;^ 
to  execution  had  more  than  a  year  before  the  bankruptcy 
proceedings,  secured  a  judgment  setting  aside  certain  trans- 
fers by  bankrupt  as  fraudulent,  but  he  should  be  allowed  to 
administer  the  property  recovered  for  the  benefit  of  the 
creditor  he  represents;^'-*  nor  will  a  receiver  appointed  by  {«, 
state  court  or  attaching  creditors  be  stayed,  merely  on  a 
prayer  in  a  petition  in  involuntary  bankruptcy,  from  dispos- 
ing of  the  property  in  his  hands.^^ 

§  266.  Nature  of  stay. — A  restraining  order,  under  section 
11,  granted  ex  parte,  with  permission  therein  to  move  to  vacate 
at  any  time,  is  in  the  nature  of  an  order  to  show  cause,  and 
the  party  restrained  thereby  becomes  a  party  to  the  proceed- 
ing in  bankruptcy,  even  before  adjudication,  for  the  purpose 
of  moving  to  vacate  the  order  ;^i  but  not  to  make  a  motion  to 
declare  a  preference  in  his  favor  in  the  proceeds  of  property 
attached  by  him  in  the  state  court,  if  he  has  not  filed  his 
claim  in  the  bankruptcy  court.^^  Such  an  order  is  in  its 
nature  temporary  only,  and  should  ordinarily  be  vacated  as 
a  matter  of  course  on  application  of  the  creditor,  after  the 
bankrupt  has  been  discharged.^^ 

§  267.     Permission  to  sue.— The  bankruptcy  court  may  re- 

Drolesbaugh,  2  N.  B.  N.  R.  1079;  Ogles,  1  N.  B.  N.  326,  1  A.  B.  R. 

Clifton  V.  Foster,  3  N.  B.  R.  162.  671.   93  F.  R.   426. 

78  Porter  v.  Cummings,  1  N.  B.  si  In  re  Globe  Cycle  Wks.,  1  N. 

N.  520.  B.  N.  421,  2  A.  B.  R.  447. 

T3  In  re  Meyers,  1  N.  B.  N.  293,  §2  in  re  Ogles,  1  N.  B.  N.  400,  2 

1  A.  B.  R.  347.  A.  B.  R.  514. 

so  Mather  v.  Coe,  1  N.  B.  N.  554,  ss  in  re  Rosenthal,  108  F.  R.  368, 

92  F.  R.  333,  1  A.  B.  R.  504;  In  re  5  A.  B.  R.  799. 


188  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  11 

strain  a  secured  creditor  from  enforcing  his  claim  in  any  other 
court  or  it  may  authorize  him  to  litigate  his  claim  in  a  state 
court  ;'^^  and  this  will  be  done  as  the  justice  of  the  case  seems 
to  require.^^  It  may  be  permitted  for  the  purpose  of  ascer- 
taining the  amount  due,  which  amount  shall  be  proved  in  the 
bankruptcy  proceedings,  but  execution  will  be  stayed  ;^^  or  to 
liquidate  a  claim  in  composition  cases  ;^'^  or  to  prevent  the 
running  of  the  statute  of  limitations  against  it,  or  to  make 
service,  or  that  testimony  may  not  be  lost,  in  the  case  of  a 
debt  from  which  a  discharge  would  not  be  a  release  ;^^  or  it 
may  permit  a  sale  under  execution,  where  an  injunction  has 
been  granted  restraining  such  sale,  and  the  judgment  creditors 
are  bound  by  the  order  of  the  bankruptcy  court  and  cannot 
recover  the  proceeds  of  the  sale  from  the  sheriff  ;8^  or  a  sale 
upon  executions  issued,  on  judgment  notes  dated  six  months 
previous  and  payable  one  day  after  date,  no  resistance  being 
made  to  the  judgments,  the  liens  to  remain  on  the  proceeds 
which  were  held  subject  to  the  court's  order ;9o  or  to  bring  an 
action  of  detinue  ;^^  but  leave  is  not  necessary  to  enable  a 
landlord  to  sue  a  receiver  in  bankruptcy  for  fixtures  removed 
from  the  premises  during  such  receiver's  occupancy.^- 

§268.  Application  for  stay— Form— Service.— The  applica- 
tion for  stay  when  addressed  to  a  court  of  bankruptcy,  should 
be  in  the  form  of  a  motion  or  petition,  setting  forth  the 
necessary  facts  as  to  the  nature  of  the  debt  and  grounds  for 
relief,  supported  by  affidavits.  When  the  application  is  made 
to  a  state  court  direct,  in  addition  to  the  foregoing,  the  better 
rule  requires  that  it  should  be  accompanied  by  a  certified  copy 

84  Carter  v.  Hobbs,  1  N.  B.  N.  s7  Ex  p.  Trafton,  14  N.  B.  R.  507, 
191,  1  A.  B.  R.  215,  92  F.  R.  594;  2  Lowell,  505,  F.  C.  14133;  In  re 
In  re  Brinkman,  7  N.  B.  R.  421,  F.     Wehe,  1  N.  B.  N.  267. 

C.  1884;   In  re  Duryea,  17  N.  B.  R.  ss  In  re  Ghirardelli,  4  N.  B.  R.  42. 

495,  F.  C.  1196;  In  re  Kerosene  Oil  §9  O'Brien  v.  Weld,   15   N.  B.  R. 

Co.,  2  N.  B.  R.  164,  3  Ben.  35,  F.  405;   Samson  v.  Burt,   6  N.  B.   R. 

C.  7725;  In  re  Holloway,  1  N.  B.  N.  403;    Markson  v.  Heaney,  4  N.  B. 

264,  1  A.  B.  R.   659,  93  F.  R.  638.  R.  165,  1  Dill.  497,  F.  C.  9098. 

85  In  re  Pittelkow,  1  N.  B.  R.  234,  9o  In  re  Meyer,  1  N.  B.  N.  99. 

1  A.  B.  R.  472,  92  F.  R.  901.  9i  In  re  Huddleston,  1  N.  B.  N. 

86  Allen  V.  Montgomery,  10  N.  B.     214,  1  A.  B.  R.  572. 

R.  503;   In  re  Rundle,  2  N.  B.  R.        92  In  re  Kelly  Dry  Goods  Co.,  102 
49,  F.  C.  12138;   In  re  Winn,  1  N.     F.  R.  7474,  4  A.  B.  R.  528. 
B.  R.  132,  F.  C.  17876. 


Ch.  11  APPLICATION    FOR    STAY.  189 

of  the  petition  in  bankruptcy,  and  a  copy  of  the  motion  should 
be  served  upon  the  party  to  be  restrained.  As  a  foundation 
for  enforcing  the  order  by  proceedings  in  contempt,  a  copy 
should  be  served  upon  the  parties  against  whom  it  runs.  It 
has  been  held,  however,  that  a  stay  directed  to  the  debtor  and 
"all  other  persons"  if  served  upon  the  persons  to  be  re- 
strained, need  not  contain  their  names.^^  Injunctions  in 
bankruptcy,  at  least  when  issued  in  the  primary  stage  of  the 
proceedings,  may  be  allowed  and  issued  without  notice,®^  and 
when  issued  on  a  creditor's  petition,  the  order  should  con- 
form to  the  language  of  the  statute  f^  but  an  injunction  will 
not  be  granted  where  the  grounds  are  alleged  m  the  petition 
on  information  and  belief  merely,  and  the  petition  is  not  ac- 
companied by  affidavits  sustaining  the  allegations.*"^  If  the 
papers  disclose  that  the  moving  creditor  lives  at  a  distance, 
the  application  may  be  made  by  his  attorney  in  his  behalf.  It 
should  be  apparent  from  the  application  papers,  in  which 
court  the  bankruptcy  proceedings  are  pending.^''' 

§  269. Where  made.— The  application  for  stay  may  be 

made  either  to  the  state  court  direct  or  to  the  court  of  bank- 
ruptcy. If  the  purpose  is  to  enjoin  the  action  of  some  person 
not  a  party  to  the  proceeding,  he  should  be  named  in  the 
petition  and  brought  in  by  subpoena.  Thus  a  bankrupt  who 
is  defendant  in  a  state  court  should  file  in  that  court  proper 
pleadings  setting  up  the  pendency  of  the  bankruptcy  proceed- 
ings and  ask  for  a  stay;  as  otherwise  the  court  is  without 
proper  notice  upon  which  to  act;  and  it  is  also  the  necessary 
procedure  because  the  creditors,  who  are  plaintiffs  in  the  suit 
to  be  stayed,  being  parties  to  such  action  are  within  the  state 
court's  jurisdiction,  and  will  be  bound  accordingly,  while  they 
are  not  subject  to  the  jurisdiction  of  the  bankruptcy  court, 
and  otherwise  have  not  had  proper  notice  of  the  petition,  nor 
in  any  way  been  brought  within  its  actual  jurisdiction.^ 

§270.  Time  when  proceedings  will  be  stayed.— Courts  of 
bankruptcy  will  only  interfere  by  summary  order  to  avoid  a 

93  In  re  Lady  Bryan  Min.  Co.,  6  ofi  In  re  Bloss,  4  N.  B.  R.  37,  F. 
N.  B.  R.  252,  F.  C.  7980.  C.  1562. 

94  In  re  Muller,  3  N.  B.  R.  86 ;  f'  In  re  Goldberg.  117  F.  R.  692. 
Deady,  513.  F.  C.  9912.  3  A.  B.  R.  156. 

95  In  re  Keiler,  18  N.  B.  R.  10.  i  In  re  Geister,  2  N.  B.  N.  R.  297, 
F.  C.  7647.  3  A.  B.  R.  228,  97  F.  R.  322;    Hill 


190  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  11 

conflict  of  jurisdiction  between  the  officers  of  state  courts 
and  those  of  the  court  of  bankruptcy  when  such  conflict 
clearly  appears  to  exist,-  and  their  jurisdiction  extends  to  the 
enjoining  of  state  court  bankruptcy  proceedings,  though  the 
latter  were  commenced  prior  to  the  filing  of  the  petition  in  the 
bankrupt  court.^  They  will  not  restrain  proceedings  against 
a  bankrupt  in  a  state  court  unless  bankruptcy  proceedings  are 
pending;^  but  as  soon  as  they  are  commenced,  the  court  of 
bankruptcy  acquires  sole  jurisdiction  and  may  enjoin  further 
proceedings  in  other  courts.^ 

§271.  When  stay  dissolved.— The  general  rule  is  that  if 
the  discharge  is  granted,  it  may  be  pleaded  in  the  state  court, 
but  if  refused,  the  injunction  will  be  dissolved.  If  the  judg- 
ment creditor  seeks  to  have  it  dismissed,  it  must  be  by  motion 
to  dissolve  and  not  by  petition  to  dismiss  ;^  and,  if  it  restrained 
a  suit  pending  adjudication,  it  is  dissolved  by  a  discharge  in 
bankruptcy."  The  fact  that  the  bankrupt  had  given  bond  in 
an  action  to  release  an  attachment  prior  to  his  bankruptcy, 
and  the  effect  of  his  discharge  on  the  liabilities  of  the  sureties 
under  the  state  statute,  are  matters  which  cannot  be  taken 
into  consideration  by  the  court  on  a  motion  to  vacate  the  stay, 
but  both  parties  should  be  remitted  to  their  rights  in  the  court 
where  the  action  is  pending.^ 

§272.  Revival  of  right  to  sue  after  bankruptcy  proceed- 
ings.— Since  the  stay  of  a  suit  does  not  operate  as  a  dismissal 
but  merely  suspends  the  proceedings,  if  the  time  within  which 
a  discharge  may  be  granted  expires  without  action,  it  has 
been  held  that  the  right  of  action  revives,  since  bankruptcy 
proceedings  are  not  terminated  without  a  discharge.^  The 
right  of  a  bankrupt  who,  prior  to  the  bankruptcy  proceedings, 

V.  Harding,  107  U.  S.  631;  Boynton  N.  B.  R.  15,  F.  C.  14328 ;  In  re  Wal- 

V.   Ball,   121  U.  S.   457;    Eyster   v.  lace,   2  N.   B.   R.   52,  F.  C.   17094; 

Gaff,  91  U.  S.  521.  Keenan  v.  Shannon,  9  N.  B.  R.  441, 

2  In  re  Davidson,  2  N.  B.  R.  49,  F.  C.  7640. 

2  Ben.  506,  F.  C.  3598.  e  in  re  Mallory,  6  N.  B.  R.  22,  1 

3  In  re  Citizens'   Sav.  Bk.,  9  N.     Sawy.  88,  F.  C.  8991. 

B.  R.  152,  F.  C.  2735.  -  In  re  Thomas,  3  N.  B.  R.  7,  F. 

4  In   re  Richardson,    2  N.  B.  R.     C.  13890. 

74,  2  Ben.  517,  F.  C.  11774.  s  In  re  Rosenthal,  108  F.  R.  368, 

5  In  re  Vogel,  2  N.  B.  R.  138,  F.     5  A.  B.  R.  799. 

C.  16983;  Zahm  v.  Fry,  9  N.  B.  R.  "Wood  v.  Hazen,  15  N.  B.  R. 
ri46,  F.  C.   18198;    In  re  Ulrich,   S     491. 


Ch.  11  STAY— GROUND    MUST    BE    PLEADED.  191 

had  brought  suit,  reverts  to  him  to  commence  such  action 
after  the  trustees  in  bankruptcy  have  been  discharged  upon 
completion  of  their  trusts,  if  they  have  done  nothing  in  the 
original  suit  in  the  interval.^*^ 

§  273.  Ground  must  be  pleaded.— The  mere  filing  of  a  peti- 
tion in  bankruptcy  does  not  divest  the  jurisdiction  of  a  state 
court  over  an  action  ;ii  but  to  affect  such  jurisdiction  over 
pending  actions,  the  adjudication  or  discharge  must  be  plead- 
ed,^- which  may  be  done  at  any  time  after  the  institution  of 
bankruptcy  proceedings,  but,  if  the  bankrupt  does  neither,  a 
judgment  rendered  against  him  is  lawful  and  valid.^^  A 
plaintiff  will  be  estopped  from  proceeding  further  with  his 
suit  without  an  order  authorizing  it  where  the  pendency  of 
the  bankruptcy  proceedings  has  been  suggested  and  not  de- 
nied,^"* or  where  an  affidavit  of  defense,  setting  up  the  adju- 
dication, is  filed  and  the  time  has  not  arrived  for  discharge.^ ^ 
If  a  discharge  would  be  a  bar  to  a  suit  restrained,  the  cred- 
itor's remedy  is  to  oppose  the  discharge  in  the  manner 
provided  by  the  act.^^ 

§  274.  Review  of  stay.— The  power  of  the  bankruptcy  court 
to  stay  pending  suits  after  adjudication  being  purely  discre- 
tionary, the  appellate  court  will  not  interfere  Mnth  its  action 
in  the  matter  on  petition  for  review  unless  such  discretion  has 
been  abused.^  ^  An  order  staying  an  action  of  replevin  brought 
in  a  state  court  against  a  trustee  in  bankruptcy  by  a  third 
party,  is  not  a  final  decision  or  appealable,  but  may  be  brought 
before  the  appellate  court  for  review  by  petition  invoking  the 
supervisory  power  of  that  court.^** 

10  Connor  v.  Southern  Exp.  Co.,  9  is  Cutter  v.  Evans,  11  N.  B.  R. 
N.  B.  R.  138.  448;    Flanagan   v.   Pearson,   14   N. 

11  In  re  Irving,  14  N.  B.  R.  289,     B.  R.  37. 

8  Ben.  463,  F.  C.  7073;   Murphy  v.  i*  Penny  v.  Taylor,  10  N.  B.  R. 

Young,  18  N.  B.  R.  505.  200,  F.  C.  10957. 

12  In  re  Wesson,  88  F.  R.  855;  i5  Frostman  v.  Hicks,  15  N.  B. 
Serra  e  Hijo  v.  Hoffman,  17  N.  B.  R.  41. 

R.  124;   Haber  v.  Klauberg,  15  N.  ifi  In   re  Archenbrown,  11  N.  B. 

B.  R.  377;  Holden  v.  Sherwood,  18  R.  149,  F.  C.  504. 

N.  B.  R.  Ill;  Bracken  v.  Johnson,  it  In    re   Lesser,    2   N.   B.    N.   R. 

15  N.  B.  R.  106,  4  Dill.  518,  F.  C.  599,  100  F.  R.  433,  3  A.  B.  R.  815. 

1761;   Revere  Copper  Co.  v.  Dim-  is  Sec.   24  b,  act  of  1898;  In  re 

ock,    19    N.    B.   R.    372;    Smith   v.  Russell,  101  F.  R.  248,  3  A.  B.  R. 

Engle.  14  N.  B.  R.  489;   Hubert  v.  658. 
Horter,  14  N.  B.  R.  430. 


192  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  11 

§275.  'b.  Trustee  to  defend  pending  suits.— The  court 
'may  order  the  trustee  to  enter  his  appearance  and  defend 
'any  pending  suit  against  the  bankrupt.'^'' 

§  276.  When  trustee  may  become  a  party.— Suits  begun 
against  a  bankrupt  before  the  latter 's  bankruptcy  may  be 
defended  or  stayed,  in  the  discretion  of  the  court  of  bank- 
ruptcy, according  as  the  interests  of  the  bankrupt's  creditors 
shall  require  p^  and,  if  it  is  decided  to  defend  them,  the  trustee 
is  entitled  to  be  made  a  party,  and  the  bankrupt  will  be 
enjoined  from  interfering.^^  The  court  in  which  an  action  is 
pending  against  the  bankrupt  will  not  compel  the  trustee  to 
become  a  party,^^  and  if  he  be  appointed  during  the  pendency 
of  an  action,  the  other  defendants  cannot  make  him  a  party 
defendant.  If  they  have  a  claim  for  contribution  against  the 
bankrupt,  their  remedy  is  by  intervention  in  the  bankruptcy 
proceedings.^^ 

§277.  How  he  should  become  a  party.— The  trustee  in 
bankruptcy  should  appear  in  the  state  court  and,  by  pleading 
the  adjudication  of  bankruptcy  and  his  appointment  as  trustee, 
lay  the  foundation  for  the  protection  of  his  rights.  If  he 
questions  the  jurisdiction  of  the  state  court,  he  can  plead 
thereto  in  proper  form.  If  the  case  be  one  that  is  removable 
under  the  provisions  of  the  Judiciary  Act,  he  can  make  the 
requisite  showing.  If  he  does  not  dispute  the  validity  of  any 
lien  asserted  by  the  plaintiff,  he  can  set  up  his  title  and  rights 
as  trustee,  subject  to  the  admitted  lien,  and  the  state  court 
will  protect  his  rights  in  the  premises.  If  he  wishes  to  con- 
test the  validity  or  extent  of  the  adverse  claim  asserted  by 
the  plaintiff  in  the  state  court,  he  can  do  so  by  answer  or 
cross-bill. 2-*  It  has  been  held  that  upon  an  application  to 
intervene  by  a  trustee,  the  statutes  of  the  state  and  the  rules 
and  practice  of  its  courts,  govern  as  to  whether  or  not  the 
intervention  will  be  permitted,  the  same  as  when  any  other 
party  invokes  such  court's  jurisdiction.^'' 

10  For  corresponding  feature  of  22  Serra   e   Hijo  v.   Hoffman,  17 

act  of  1867,  vide  notes  under  "c,"  N.  B.  R.  124. 

this  section.  2.!  Oliver  v.   Cunningham,   19   N. 

20  In  re  St.  Albans  Foundry  Co.,  B.  R.  400,  F.  C.  10493. 

2  N.  B.  N.  R.  1093,  4  A.  B.  R.  594.         24  Heath  v.   Shaffer,  1   N.  B.   N. 

21  Samson  v.  Burton,  4  N.  B.  R.     399,  93  F.  R.  647,  2  A.  B.  R.  98. 

1,  F.  C.  12285;  In  re  O'Connor,  1  N.         2.^  Bank  of  Commerce  v.  Elliott, 
B.  N.  132,  1  A.  B.  R.  381.  6  A.  B.  R.  409. 


Ch.  11         TRUSTEE'S    APPEARANCE    AND    PLEADING.  193 

§278.  Effect  of  trustee's  appearance.— If  the  trustee  ap- 
pears and  pleads  in  an  action  he  waives  want  of  notice  before 
the  bringing  of  the  suit-**  and,  should  he  be  substituted  for 
the  bankrupt,  he  is  bound  by  the  judgment  and  the  bank- 
ruptcy court  will  not  interfere  to  prevent  its  execution,  nor 
will  he  be  allowed  to  attack  such  judgment  any  more  than 
any  other  party.-" 

§279.  What  trustee  may  plead.— A  trustee  may  plead  any 
defense  which  the  bankrupt  may  plead,  unless  it  is  purely 
personal  to  the  bankrupt,  as  is  a  plea  of  discharge,^**  which 
must  be  pleaded  affirmatively  in  a  proceeding  by  scire  facias 
to  revive  a  judgment  as  well  as  in  an  original  suit.-'^*  Where, 
with  the  consent  of  the  referee,  a  scire  facias  is  issued  after 
the  adjudication  and  before  the  appointment  of  a  trustee  upon 
a  mortgage  given  by  the  bankrupt,  he  will  not  be  allowed  to 
have  such  judgment  opened,  the  testimony  showing  the  claim 
to  be  valid  and  his  bankruptcy  not  relieving  the  defendant 
of  the  duty  of  filing  an  affidavit  of  defense ;  but  the  court  will 
permit  the  trustee,  after  his  appointment,  to  set  up  any  meri- 
torious defense  and  open  the  judgment  for  that  purpose,  except 
when  it  appears  that  the  claim  is  valid  and  permission  had 
been  given  to  enforce  it,  in  which  latter  case,  however,  the 
trustee  should  be  permitted  to  intervene  to  be  heard  on  any 
question  arising  upon  subsequent  proceedings.^'^ 

§280.  Necessary  parties.— A  bankrupt  before  bankruptcy, 
or  his  trustee  thereafter,  is  a  necessary  party  to  suits  concern- 
ing the  bankrupt's  property,  as  a  suit  in  equity  or  an  action 
at  law.^i 

§281.  'c.  Trustee  to  prosecute  suits.— A  trustee  may,  with 
*the  approval  of  the  court,  be  permitted  to  prosecute  as  trustee 
'any  suit  commenced  by  the  bankrupt  prior  to  the  adjudica- 
tion, with  like  force  and  effect  as  though  it  had  been  com- 
'meneed  by  him.'^- 

26  Rowe  V.  Page,  13  N.  B.  R.  366.         -»  In  re  Wesson,  88  F.  R.  855,  4  ^ 

27  In  re  Van  Alstine,  100  F.  R.     Hughes   522. 

929,  2  N.  B.  N.  R.  642,  4  A.  B.  R.  -o  Neiman  v.  Shoolbraid.  2  N.  B. 

42;  In  re  Skinner,  3  A.  B.  R.  163,  N.  R.  668. 

97  F.  R.  190.  "1  Walker  v.  Seigel,  12  N.  B.  R. 

2s  Serra  e   Hijo  v.   Hoffman,   17  394.  F.  C.  17085;    In   re  Carow,   4 

N.  B.  R.  124;    In  re  Kitzinger,  19  N.  B.  R.  178.  F.  C.  2426. 

N.  B.  R.  152,  F.  C.  7861.  32  Analogous  provision  in  act  of 


194  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  11 

§  282.  Suits  of  bankrupt  prosecuted  by  trustee.— The  suits 
commenced  by  the  bankrupt  prior  to  the  adjudication  which 
the  trustee  may,  with  the  approval  of  the  court,  be  permitted 
to  prosecute,  are  only  those  in  which  the  estate  of  the  bank- 
rupt has  an  interest,  or  which  may  be  prosecuted  by  the  trustee 
for  the  benefit  of  all  the  creditors,  and  not  one  that  is  personal 
to  the  bankrupt.^^  Upon  the  question  as  to  the  effect  of  the 
trustee's  refusal  to  prosecute  a  suit  in  which  he  is  entitled 
to  enter  his  appearance,  the  decisions  are  conflicting,  it  being 
held  on  the  one  hand  that  such  suit  must  be  dismissed,-^^  and 
on  the  other  that  it  might  be  prosecuted  in  the  name  of  the 
bankrupt;^"'  or  more  properly  by  creditors.^<^  There  seems  to 
be  no  good  reason  why  the  bankrupt  should  not  be  permitted 
to  prosecute  such  suit  where  the  trustee  declines  to  do  so. 
The  trustee  may  be  made  a  party  by  supplemental  bill  to  a 
.suit  in  equity  as  the  bankruptcy  of  the  plaintiff"  merely  makes 
such  suit  defective;^"  and  it  is  not  necessary  to  allege  his 
representative  character  ;^'^  or  be  substituted  on  motion  as 
appellant  in  a  case  before  the  U.  S.  Supreme  Court  on  appeal 
where  the  appellant  becomes  bankrupt  after  appeal.^'^  Where 
the  trustee  brings  suit  he  may  be  required  under  state  laws 
to  give  security  for  costs.^*^ 

§  283.    What  the  trustee  may  do.— Wherever  it  is  for  the 

1867.    "Sec.    14.    .     .     .     he   may  manner  and  with  like  effect  as  if 

sue  for  and  recover  the  said  estate  it  had  been  originally  commenced 

debts  and  effects,  and  may  prose-  by  him." 

cute  and  defend  all  suits  at  law  or  ■■'a  In  re  Haensell,  1  A.  B.  R.  286, 

in  equity,  pending  at  the  time  of  91  F.  R.  355,  1  N.  B.  R.  340  (note) ; 

the  adjudication  of  bankruptcy,  in  Towle  v.   Davenport,   16   N.  B.   R. 

which  such  bankrupt  is  a  party  in  478;  Noonan  v.  Orton,  12  N.  B.  R. 

his  own  name,  in  the  same  manner  405;   In  re  Franks,  2  A.  B.  R.  634, 

and   with  the   like    effect   as  they  95  F.  R.  635;  In  re  Price,  92  F.  R. 

might  have  been  presented  or  de-  987,  1  A.  B.  R.  606. 

fended  by  such  bankrupt.     ...  s^  Towle  v.  Davenport,   supra. 

Sec.  16.     .     .     .     If,  at  the  time  25  Noonan  v.  Orton.  supra. 

of  the  commencement  of  proceed-  36  in  re  Groves,  2  N.  B.  N.  R.  466. 

ings   in   bankruptcy,    an   action   is  37  Bk.  v.  Fowler,  12  N.  B.  R.  289. 

pending  in  the  name  of  the  debtor  38  Dambmann  v.  White,  12  N.  B. 

for  the  recovery  of  a  debt  or  other  R.  438. 

thing    which    might    or    ought    to  -"n  Herndon  v.  Howard,  4  N.  B.  R. 

pass  to  the  assignee  by  the  assign-  61,  9  Wall.  664. 

ment,  the  assignee  shall,  if  he  re-  ^n  Joseph  v.  Raff,  9  A.  B.  R.  227 ; 

quires  it,  be  admitted  to  prosecute  .Joseph  v.  Makley,  8  A.  B.  R.  18. 
the  action  in  his  own  name,  in  like 


Ch.  11  BANKRUPT    PLAINTIFF.  195 

best  interest  of  the  estate,  the  trustee  will  be  authorized  to 
institute  suit;  thus  he  may  have  a  partner  enjoined  in  an  action 
for  an  accounting  by  one  partner  against  another,  which  was 
pending  at  the  time  the  firm  was  adjudged  bankrupt,*^  or 
have  reinstated,  on  motion,  a  case  which  has  been  compro- 
mised and  dismissed  by  the  bankrupt's  counsel  before  the  trus- 
tee's appointment,  but  after  the  adjudication,  although  the 
bankrupt  had  assigned  the  subject  matter  of  the  action  to  the 
counsel  for  his  fees;^-  or  may  enforce  a  judgment  which  was 
recovered  in  a  suit  instituted  in  the  name  of  the  husband  and 
wife  on  the  wife's  choses  in  action,  to  which  suit  the  trustee 
was  made  party  plaintiff  with  the  bankrupt's  wife,  and  dis- 
tribute the  proceeds  among  the  creditors  ;^^  or,  upon  petition 
in  a  state  court,  have  a  judgment  which  was  obtained  within 
four  months  of  the  bankrujitc^',  set  aside.^^ 

§284.  'd.  Time  for  bringing  suits  against  trustee.— Suits 
'shall  not  be  brought  by  or  against  a  trustee  of  a  bankrupt 
'estate  subsequent  to  two  years  after  the  estate  has  been 
'  closed. '-'s 

§285.  When  limitation  begins  to  run.— Courts  of  bank- 
ruptcy may  close  estates  whenever  they  have  been  fully  admin- 
istered, though  they  may  be  re-opened  whenever  it  appears 
that  they  were  closed  before  being  fully  administered;  in 
which  event  it  would  seem  that,  although  the  two  years  had 
commenced  to  run,  the  fact  that  an  estate  was  re-opened  would 
cause  the  two-year  period  to  run  from  the  time  it  was  last 
closed.  Under  the  act  of  1867  the  limitation  began  to  run  when 
the  estate  vested  in  the  assignee  as  such;^^  but  under  the 
present  act  it  does  not  begin  to  run  until  the  estate  has  been 
closed.  The  limitation  here  is  a  statutory  limitation  as  to  suits 
l)y  or  against  a  trustee  in  bankruptcy  in  his  capacity  as  such ; 

41  In  re  Clark,  3  N.  B.  R.  123,  4  an  action   against   an  assignee  in 

Ben.  88,  F.  C.  2798.  bankruptcy  for  anything  done  by 

4-  Home  Ins.  Co.  v.  Hollis,  14  N.  him  as  such  assignee,  without  pre- 

B.   R.   337.  viously   giving   him    twenty    days' 

i-^  In  re  Boyd,  5  N.  B.  R.  199,  2  notice   of   such   action,   specifying 

Hughes,  349,  F.  C.  1745.  the  cause  thereof,  to  the  end  that 

■t^  Jordan  v.  Downey,  12  N.  B.  R.  such  assignee  may  have  an  oppor- 

427.  tunity  of  tendering  amends,  shouM 

45  Analogous  provision  of  act  of  he  see  fit  to  do  so." 

1867.     "Sec.  14.     .     .     .       No  per-  46  Foreman  v.  Bigelow,  18  N.  B. 

son  shall  be  entitled  to  maintain  R.  457,  F.  C.  9434. 


196  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  11 

but,  even  if  the  action  be  commenced  within  two  years  after 
the  estate  has  been  closed,  there  is  another  limitation  growing 
out  of  the  nature  of  the  action  or  the  character  of  the  other 
parties  to  the  suit,  established  by  the  lex  fori,  which  nuist  also 
be  considered.  An  action  may  be  barred  by  the  one  and 
not  by  the  other. 

§286.  When  limitation  may  be  pleaded.— The  two  years' 
limitation  can  not  be  pleaded  in  an  action  by  the  purchaser  at 
a  trustee's  sale  to  recover  possession;-*"  nor  where  the  defend- 
ant files  a  bill  of  review  four  years  after  a  judgment  declar- 
ing a  mortgage  on  the  bankrupt's  real  estate  void  in  a  suit  in 
equity  brought  by  the  trustee,  for  a  bill  of  review  is  not  a  suit 
within  the  meaning  of  the  limitation  of  the  act.*'^ 

1"  Steele  v.  Moody,  16  N.  B.  R.  recovered.      (Freelander  v.   Hollo- 

558.  man,  9  N.  B.  R.  331,  F,  C.  5081; 

4sWilt  V.  Stickney,  15  N.  B.  R.  Bean  v.  Brookmire,  4  N.  B.  R.  57, 

23,  F.  C.  17854.  F.  C.  1168;  Norton  v.  De  La  Ville- 

Effect  of  limitation. — It  was  held,  burn,  13  N.  B.  R.  304,  1  Woods,  163, 
under  the  act  of  1867,  that  this  F.C.  10350.)  Where  more  than  two 
limitation  applied  only  to  cases  years  after  his  appointment  an  as- 
brought  in  regard  to  property  held  signee  was  substituted  as  plaintiff 
adversely  to  the  bankrupt  and  as-  in  an  action  commenced  in  the 
signee,  or  cases  where  suit  was  name  of  the  bankrupt  and  a  re- 
brought  to  recover  a  debt  due  oovery  had,  the  bankrupt  could  not 
bankrupt;  and,  in  other  cases,  claim  the  amount  recovered  on  the 
that  the  limitation  was  a  bar  to  ground  that  the  limitation  of  the 
recovery  by  the  assignee  although  act  barred  his  remedy  at  time  of 
he  had  no  notice  of  the  existence  substitution.  Maybin  v.  Raymond, 
of    the     property     sought    to     be  15  N.  B.  R.  353,  F.  C.  9338. 


CHAPTER  XII. 


WHEN    COMPOSITIONS    CONFIRMED. 


§287.    (12a)    "When      compositions 
may  be  offered. 

288.  Procedure. 

289.  Petition  for  composition. 

290.  The  statements  or  schedules. 

291.  Rights  of  litigating  creditors. 

292.  b.  When  application  for  con- 

firmation may  be  filed. 

293.  Composition  meetings. 

294.  Minority  of  creditors. 

295.  Voting  at  composition  meet- 

ings. 

296.  Consideration,  nature  of. 

297.  Amount  of. 

298.  Deposit  of. 

299.  Effect  of  failure  to  perform 

composition. 

300.  Secured  creditors  in  case  of 

compositions. 

301.  Liens  and  attachments. 

302.  Trustee  and  set  off. 

303.  Double  security. 

304.  c.  Hearings    upon    confirma- 

tion of  composition. 

305.  Practice  upon  hearings. 

306.  Power  of  referee  at  meetings. 

307.  d.  Confirmation    of    composi- 

tions. 


308. 

Objections  to. 

309. 

Power  of  court  over. 

310. 

Best    interest    of    credi- 

tors. 

311. 

Acts  in  bar  of. 

312. 

Good  faith. 

313. 

Frauds    and    omissions 

preventing. 

314. 

Fraud  in  creation  of  debt. 

315. 

Certified  copy  as  evidence. 

316. 

e.  Distribution  of  considera- 

tion on  confirmation. 

317. 

In  general. 

318. 

Dismissal  of  proceedings. 

319. 

Effect     of     composition    ou 

bankrupt's  debts. 

320. 

As  a  discharge. 

321. 

As  to  its  terms. 

322. 

On  after  litigation. 

323. 

On    bankrupt's    co-debt- 

ors. 

324. 

On  attachments. 

325. 

On  bankrupt's  property. 

326. 

Must    be    pleaded. 

327. 

Refusal  to  receive  share. 

328. 

Conclusiveness. 

329. 

Appeal. 

§  287.     '  (Sec.  12  a)      When  composition  may  be  oflfered.— 

'A  bankrupt  may  offer  terms  of  composition  to  his  creditors 
'after,  but  not  before,  he  has  been  examined  in  open  court  or  at 
'a  meeting:  of  his  creditors  and  filed  in  court  the  schedule  of  his 
'property  and  list  of  his  creditors,  required  to  be  filed  by 
'  bankrupts.  '^ 


1  Act  of  1867  contained  no  anal- 
ogous provision  to  this,  but  by  the 
amendment  of  June  22,  1874  (18 
St.  L.  182,  par.  17)  terms  of  compo- 
sition might  be  offered  either  be- 
fore or  after  adjudication,  follow- 


ing largely  the  provision  in  the 
126th  section  of  the  English  Act  of 
1869.  which,  however,  was  open  to 
serious  objection.  The  provisions 
of  the  two  acts  may  be  found  in  In 
re  Scott,  15  N.  B.  R.  73.  F.  C.  12519. 


197 


198  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  12 

j^  288.  Procedure,— The  calling  of  a  special  meetiny  of  cred- 
itors to  receive  an  offer  of  composition  is  not  required,  and  a 
submission  of  such  offer  to  the  creditors  at  their  first  meeting 
after  an  examination  of  the  bankrupt  is  competent  and  suffi- 
cient; such  submission  being  within  the  terms  of  the  notice 
l)rescribed,  which  states  that  the  purpose  of  the  meeting  em- 
braces the  transaction  of  "such  other  business  as  may  properly 
come  before  said  meeting.  "- 

Unless  waived,  at  least  ten  days'  notice  by  mail  must  be 
given  of  all  hearings  upon  applications  for  the  confirmation  of 
compositions.^  The  effect  of  this  confirmation  is  to  discharge 
a  bankrupt  from  his  debts,  other  than  those  agreed  to  be  paid 
by  the  terms  of  the  composition  and  those  not  affected  by  a 
discharge,^  and  revests  him  with  the  title  to  his  property.^ 
Questions  arising  out  of  the  applications  of  bankrupts  for  the 
confirmation  of  compositions  nmst  be  heard  by  the  courts  of 
bankruptcy  and  not  by  the  referees.*"' 

§289.  Petition  for  composition.— The  petition  for  a  com- 
position should  set  forth  the  number  of  creditors  to  whom  pre- 
sented, the  proposed  percentage  of  payment,  and  conclude 
with  a  prayer  for  a  meeting  of  creditors  to  consider  its  terms.' 
Under  the  act  of  1867  it  was  held  that  on  filing  a  petition  for  a 
composition,  the  court  would  call  a  meeting  of  creditors.^  Any 
one  adjudged  bankrupt  may  off'er  terms  of  composition." 
These  provisions  as  to  compositions  are  to  be  strictly  con- 
Under  the  amendment  of  1874,  a  them,  unaccompanied  by  laches, 
composition  might  be  confirmed  would  not  defeat  it  (In  re  Cavan. 
before  an  examination  of  the  19  N.  B.  R.  303,  F.  C.  2528);  and 
bankrupt,  although  a  petition  for  a  the  creditors  affixing  signatures  to 
composition  might  be  included  in  the  resolution  need  not  have  been 
the  petition  for  adjudication,  or  present  at  the  meeting,  but  their 
presented  at  any  time  before,  in  names  must  have  been  attached  at 
which  event  a  meeting  of  the  cred-  or  before  the  hearing  ( In  re  Scott, 
ilors  was  necessary  for  the  exam-     supra). 

ination  of  the  debtor  and  the  filing         -'  in  re  Hilborn,  104  F.  R.  866; 
of    a    schedule    of    assets    (In    re     4  A.  B.  R.  741. 
Spades,  13  N.  B.  R.  72,  6  Biss.  448.         ■'  Sec.  58a,  act  of  1898. 
F.   C.   13196).     If  a   resolution    of         ■•  Sec.  14c,  act  of  1898. 
composition  was  adopted,  a  reason-         ■"■  Sec.  70f,  act  of  1898. 
able  time  might  be  allowed  to  se-         e  Sec.  38  (4),  act  of  1898. 
cure  the  additional  signatures  nee-         '  Form  60. 

essary  to  confirm  it  (Idem;    In  re         «  In  re  Spades,  13  N.  B.  R.  72,  6 
Spillman,   13   N.   B.   R.   214,   F.  C.     Biss.  448,  F.  C.  13196. 
13242);  but  the  delay  in  obtaining        'Jin  re  Weber  Furniture  Co..  13 


Cii.  12  PETITION    FOR    COMPOSITION.  ,  IJJ 

strued  and  an  offer  of  composition  must  be  presented  to  all 
of  the  creditors  of  the  bankrupt,  either  separately  or  collect- 
ively, whether  they  have  proved  their  claims  or  not,  though 
they  will  not  be  permitted  to  vote  on  it  until  they  have  done 
so,  and  all  must  have  a  reasonable  opportunity  to  consider  it 
and  it  must  be  accepted  thereafter  by  a  majority  in  number 
and  amount  of  those  whose  claims  have  then  been  allowed.^*^ 
It  is  not  essential  that  proofs  of  claims  shall  be  made  before, 
or  at,  the  first  meeting,  but  may  be  made  at  any  time  within 
a  year  after  the  adjudication.^^ 

§290.  The  statements  or  schedules.— The  schedules  the 
bankrupt  is  required  to  file  are  the  same  as  those  prescribed 
when  filing  a  voluntary  petition.  If  the  bankrupt  in  composi- 
tion understates  a  debt  unintentionally ,12  or  omits  a  claim 
which  he  believes,  on  the  advice  of  counsel,  to  be  worthless,  or 
omits  an  asset  from  the  statement  without  fraud  and  with 
knowledge  of  the  creditors,^^  or  makes  a  mistake  without  fraud 
in  the  statement  of  the  amount  due  a  creditor,i^  or  states  the 
value  of  his  real  estate  as  unknown,^  ^  such  defects  will  not 
vitiate  the  composition.  The  statement  of  composition 
should  conform  to  the  schedule  in  bankruptcy ,1*^  and  debtor's 
testimony  under  oath  at  meeting  of  creditors  may  be  consid- 
ered as  part  of  his  statement.^ '^ 

§291.  Rights  of  litigating  creditors.— Attaching  creditors 
have  no  right  to  participate  in  a  composition  meeting^  ^  unless 
they  first  relinquish  their  security.^  ^  Under  the  act  of  1874,  it 
was  held  that  when  the  debtor  filed  a  petition  in  bankruptcy 
and  also  for  composition  and  was  not  adjudicated,  and  a  cred- 
itor began  suit  before  composition  approved,  the  debtor  was 
not  entitled  to  restrain  ereditor.20 

N.  B.  R.  529;    s.  c.  on  appeal.  Id.  2  Lowell,  505,  F.  C.  14133. 

559,  F.  C.  17330;  Pool  v.  McDonald,  is  In  re  Welles,  18  N.  B.  R.  525, 

15  N.  B.  R.  560,  F.  C.  11268.  F.   C.   17377. 

10  In  re  Rider,    1   N.   B.   N.   483,  10  In  re  Haskell,  11  N.  B.  R.  164, 

3  A.  B.  R.  178,  96  F.  R.  808;   see     F.  C.  6192. 

also  In  re  Shields,  15  N.  B.  R.  532.  it  In  re  Reiman,  supra. 

4  Dill.  588,  F.  C.  12784.  is  In  re  Shields,  15  N.  B.  R.  532. 

11  Sec.  5'7n,  act  of  1898.  5  Dill.  588,  F.  C.  12784. 

12  Beebe  v.  Pyle,  18  N.  B.  R.  162.  i9  In    re   Scott,   15   N.   B.   R.   7n. 

13  In  re  Reiman.  13  N.  B.  R.  128,  F.  C.  12519 ;  Sec.  57e.  act  of  1898. 
12  Blatch.  562.  F.  C.  11675.  20  in  re  Tifft,  18  N.  B.  R.  78.  F. 

14  Ex  p.  Trafton,  14  N.  B.  R.  507,  C.  14031. 


•200  THE    NATIONAL    BANKRUPTCY    LAW.  Cu.  12 

§292.  *b.  When  application  for  confirmation  may  be 
'filed. — An  application  for  the  confirmation  of  a  composition 
'may  be  filed  in  the  court  of  bankruptcy  after,  but  not  before, 
'it  has  been  accepted  in  writing  by  a  majority  in  number  of  all 
'creditors  whose  claims  have  been  allowed,  which  number  must 
'represent  a  majority  in  amount  of  such  claims,  and  the  con- 
'sideration  to  be  paid  by  the  bankrupt  to  his  creditors,  and  the 
'money  necessary  to  pay  all  debts  which  have  priority  and 
'the  cost  of  the  proceedings,  have  been  deposited  in  such  place 
'as  shall  be  designated  by  and  subject  to  the  order  of  the 
'judge.' 

§  293.  Composition  meetings.— A  submission  of  an  offer  of 
composition  may  be  made  at  the  first  meeting  of  creditors  after 
the  examination  of  the  bankrupt.-^  Since  the  bankrupt's  ex- 
amination and  the  filing  of  his  schedule  must  now  precede 
the  offer  of  composition,  no  necessity  exists  for  a  subsequent 
meeting  of  creditors,  unless  for  conference,  though  Form  60 
evidently  contemplates  one  after  the  offer  of  composition  has 
been  presented  to  the  creditors.  The  rules,  forms  and  orders 
can  not  add  to  or  subtract  from  the  act  and  must  yield  when 
any  inconsistency  appears  as  here.--  But,  if  upon  presentation 
of  such  an  offer  to  all  the  creditors  collectively,  or  separately,  a 
majority  in  number  of  those  Avhose  claims  have  been  allowed 
and  a  majority  in  amount  of  such  claims  accept  the  offer,  no 
reason  would  exist  for  the  meeting.  In  such  case  as  soon  as 
the  consideration  to  be  paid  by  the  bankrupt  to  his  creditors, 
and  the  money  necessary  to  pay  all  debts  which  have  priority 
and  the  costs,  have  been  properly  deposited,  an  application 
for  confirmation,  alleging  such  facts,  may  be  presented  to 
the  Judge,  by  whom  it  must  be  "heard  and  decided,"  though 
he  may  refer  the  application  or  any  issue  arising  thereon  to 
the  referee,23  and  set  a  time  for  a  hearing  thereon.  But  a 
composition  cannot  be  confirmed  until  after  it  has  been  pre- 
sented to  all  of  the  creditors  of  the  bankrupt,  whether  they 
have  proved  their  debts  or  not,  and  has  been  accepted  in  writ- 
ing by  the  requisite  majority  in  number  and  amount  of  those 
whose  claims  have  been  allowed.-^    Under  the  act  of  1874,  it 

21  In  re  Hilborn,  104  F.  R.  866,  24  in  re  Rider,  1  N.  B.  N.  483.  3 
4  A.  B.  R.  741.  A.  B.  R.  178.  96  F.  R.  808;   In  re 

22  In  re  Slade,  1  N.  B.  N.  182,  i  Walker,  1  N.  B.  N.  510,  96  F.  R. 
A.  B.  R.  193.  550.  3  A.  B.  R.  35. 

2SCt.   O.  XII    <Z). 


ClI.  1;:J  COMPOSITION— NATURE    OF    CONSIDERATION.        201 

was  held  that  a  composition  which  provided  that  the  payment 
should  be  guaranteed  by  a  satisfactory  bond  to  a  committee 
of  creditors  might  be  confirmed,-^  which  would  also  probably 
now  suffice. 

s^  294.  Minority  of  creditors.— A  creditor  is  not  bound  to 
accede  to  a  composition,-*^  nor  is  he  legally  or  iiorally  censur- 
able because  he  refuses  to  unite  with  others,  if  his  refusal 
proceeds  from  want  of  confidence  in  the  debtor  •,2'^  but  a  minor- 
ity of  creditors  will  not  be  permitted  to  defeat  a  proposed 
composition  because,  if  defeated,  some  special  benefit  will 
accrue  to  them,^^  but  they  may  examine  the  bankrupt  before 
the  composition  is  confirmed.-^  It  must  appear  that  wrong 
has  been  done  such  minority  by  the  vote  of  the  majority  on 
the  composition  before  the  court  will  interfere  ;3<*  and  the 
determination  that  a  proper  proportion  of  the  creditors  have 
agreed  to  the  composition  cannot  be  impeached  in  a  collateral 
action.''! 

§  295.  Voting  at  composition  meetings.— A  submission  of  an 
offer  of  composition  at  the  first  meeting  of  creditors  after  the 
examination  of  the  bankrupt  is  sufficient  and  is  in  law  a  sub- 
mission to  all  the  creditors^-  and  they  may  pass  a  resolution 
as  part  of  the  proceedings  that  in  their  opinion  such  composi- 
tion is  desirable  and  in  the  interests  of  creditors.^s  It  has 
been  held  that  a  creditor  who  was  present  at  such  meeting 
and  filed  his  proof  of  claim,  but  was  not  present  at  the  session 
when  the  vote  was  taken  on  the  composition,^^  or  failed  to  act 
thereon,^^  should  be  counted  as  voting  against  it,  but  such 
is  not  true  under  the  present  law.  Only  creditors  present  in 
person  or  represented  by  proper  proxy,  or  who  have  signified 
their  acceptance  or  rejection  in  writing,  should  be  counted. 
An  objection  to  a  claim  and  the  right  to  vote  thereon  made 

25  In  re  Lewis,  14  N,  B.  R.  144-,  si  Smith  v.  Engle,  14  N.  B.  R. 
P.  C.  8314.  481. 

26  In  re  Rider,  supra.  32  Sees.  12  and  56,  act  of  1898. 

2T  Bean  v.  Brookmire,  7  N.  B.  R.  ^^  In  re  Hilborn,  104  F.  R.  866, 

568,  2  Dill.  108,  F.  C.  1170.  3  N.  B.  N.  R.  62. 

28  In  re  Scott.  15  N.  B.  R.  73,  P.  s*  In  re  Richmond,  18  N.  B.  R. 
C.  12519.  362,  F.  C.  11798. 

29  In  re  Little.  19  N.  B.  R.  234,  ss  in  re  Lissberger.  18  N.  B.  R. 
F.  C.  8392.  230,  F.  C.  6632a. 

30  In  re  Wronkow,  18  N.  B.  R.  81, 
15  Blatch.  38.  F.  C.  18105. 


202  THE    NATIONAT.    BANKRUPTCY    LAW.  Ch.  12 

for  the  first  time  at  a  composition  meeting,  has  been  held  to 
be  too  late.^*^ 

Only  those  who  prove  and  have  their  claims  allowed-^'^  can 
vote  at  a  composition  meeting.^^  The  fact  that  a  creditor^^ 
has  bought  a  debt  to  prevent  a  composition  will  not  prevent 
him  from  voting  on  it,  if  he  have  no  fraudulent  motive.^*'  In 
voting,  a  creditor  to  whom  a  number  of  claims  have  been  as- 
signed, will  have  but  one  vote.^^ 

Creditors  who  have  signed  an  acceptance  of  an  offer  of  com- 
position and  procured  the  court  to  act  thereon  will  not  be 
permitted  to  withdraw  their  signatures ;  unless  it  appears  that 
they  were  procured  by  fraud  or  misrepresentation.'^- 

§  296.  Consideration,  nature  of.— The  consideration  is  not 
limited  to  money  but  must  be  something  equivalent  thereto 
Avhich  may  ultimately  be  convertible  into  money  and  extends 
to  reasonably  safe  securities  or  promises  to  pay,  such  as  a  good 
business  man  would  naturally  accept  in  payment  of  merchan- 
dise sold.^^  A  composition  providing  for  deferred  payments 
or  promises  to  pay,^"'  evidenced  by  time  notes  or  other  nego- 
tiable paper,'^^'  is  not  inconsistent  with  a  statute  requiring  pay- 
ment "in  money,"  but  a  composition  deed  that  provides  for 
preferred  payments  evidenced  by  notes,  "to  be  satisfactorily 
endorsed, ' '  is  too  indefinite  and  void.^^  Delay  in  paying  notes 
occasioned  by  legal  difficulties  will  not  prejudice  bankrupt's 
right  as  to  creditors  who  have  been  paid;"*'''  and  a  composition 
will  not  be  deemed  uncertain  because  payment  is  not  secured.'*'^ 

36  In  re  Block,  18  N.  B.  R.  328,  ^-^  In   re   Rider,   1   N.   B.  N.   483, 

F.  C.  1551.  3  A.  B.  R.  178. 

3'  See  56a,  act  of  1898.  ^^  In  re  Reiman,  11  N.  B.  R.  21, 

38  In  re  Scott,  15  N.  B.  R.  73.  F.  7  Ben.  455,  F.  C.  11673,  s.  c.  13  N. 

C.  12519 ;  In  re  Keller,  18  N.  B.  R.  B.    R.    128,    12    Blatch.    562,    F.   C. 

331,    F.    C.    7654;    In   re    Mathers,  11675;  In  re  Langdon,  13  N.  B.  R. 

17  N,  B.  R.  225,  F.  C.  9274;   In  re  60,  2  Lowell,  387,  F.  C.  8058;  In  re 

Rider,  1  N.  B.  N.  483,  3  A.  B.  R.  Lewis,  14  N.  B.  R.  144.  F.  C.  8314. 

178;    In  re  Bruce,  19  N.  B.  R.  287,  ^  In  re  McNab,  18  N.  B.  R.  388. 

F.  C.  2069.  F.  C.  8906;  In  re  Hurst,  13  N.  B.  R. 

"s>  In  re  Trafton,  14  N.  B.  R.  507,  455,  1  Flip.  462,  F.  C.  6925. 

2  Lowell,  509,  F.  C.  14133;  see  also  46  in  re  Reiman,  supra, 

sec.  1  (9),  act  of  1898.  47  in   re  Kohlsaat,   18   N.   B.   K. 

40  Ex  p.  Morris,  12  N.  B.  R.  170.  570,  F.  C.  7918. 

41  In  re  Messengill,  113  F.  R.  366,  4^  In  re  Wilson.  18  N.  B.  R.  300. 
7  A.  B.  R.  699.  F.  C.  17785. 

42  In  re  Levy.   110   F.   R.  744,  6 
A.  B.  R.  299. 


ril.l2  COMPOSITION    SECURED    CREDITORS.  203 

A  proposed  composition,  payable  in  thirty  days,  on  condition 
that  bankrupt's  property  be  surrendered  and  all  suits  discon- 
tinued, is  not  improper.^" 

§  297.  Amount  of.— The  amount  of  the  consideration  must 
be  at  least  as  much  as  the  creditors  could  reasonably  expect  to 
receive  if  the  estate  was  administered  in  bankruptcy  ;^^  and 
since  it  is  to  be  presumed  that  the  owner  of  a  business  can 
make  more  out  of  it  than  another  who  is  a  stranger,  though 
l)0ssibly  of  greater  business  capacity,  a  bankrupt  can  afford  to 
offer  his  creditors  more  than  they  could  obtain  by  the  adminis- 
tration of  the  estate  in  bankruptcy  and  yet  have  a  margin 
left  for  himself.^^  In  accordance  with  the  general  rule  in 
composition  proceedings,  the  consideration  must  be  pro  rata  on 
all  the  debts"'-  scheduled  by  the  bankrupt.  In  addition  there 
must  be  sufficient  deposited  to  pay  all  costs,'^^  expenses  and 
claims  entitled  to  priority.'^'* 

§  298.  Deposit  of.— Before  the  application  to  confirm  is 
made,  "the  consideration  and  the  money  necessary  to  pay  all 
debts  which  have  priority  and  the  costs  of  the  proceedings" 
must  be  deposited  in  a  designated  depository.''^  The  amend- 
ment of  1874  provided  that  ''the  composition  should,  subject 
to  the  priorities  declared  in  the  act,  provide  for  a  pro  rata 
payment,  etc."  It  was  held  under  that  provision  that  priority 
of  payment  out  of  the  assets  of  the  debtor  was  meant  and, 
where  there  were  no  assets,  there  could  be  no  priority  and 
therefore,  the  means  of  making  the  composition  being  derived 
from  other  sources,  debts  having  priority  under  the  act  stood 
no  higher  than  the  claims  of  general  creditors.^^     In  view  of 

49  In  re  Cavan,  19  N.  B.  R.  303,  In  re  Weber  Furniture  Co.,  13  N. 

F.  C.  2528.  B.  R.  529,  F.  C.  17330,  s.  con  ap- 

so  In   re   Rider,   1  N.  B.  N.   483,  peal,  13  N.  B.  R.  559,  F.  C.  17331. 

3  A.  B.  R.  178,  96  F.  R.  808;  In  re  52  in  re  Trafton.  14  N.  B.  R.  507, 

Reiman,  11  N.  B.  R.  21,  7  Ben.  455,  2  Lowell,  505,  F.  C.  14133;    Drake 

F.  C.  11673,  s.  c.  13  N.  B.  R.  128,  v.  McQuade,  66  N.  H.  303. 

12  Blatch.  562,  F.  C.  11675;    In  re  53  in  re  Harris,  117  F.  R.  575,  9 

Wells,  18  N.  B.  R.  525,  F.  C.  17377;  A.  B.  R.  20. 

In  re  Snelling,  19  N.  B.  R.  120,  F.  -,4  in   re   Fox  et  al.,    6  A.   B.  R. 

C.  13140;  see  In  re  Arrington  Co.,  525. 

113  F.  R.  498,  8  A.  B.  R.  64.  •"  In  re  Mayer,  2  N.  B.  N.  R.  527. 

51  In  re  Morris,  11  N.  B.  R.  443;  se  in  re  Chamberlin,  17  N.  B.  R. 

In  re  Whipple,  11  N.  B.  R.  524,  2  49,  9  Ben.  149,  F.  C.  2580. 
Lowell,   404,  F.  C.  17513;  see  also 


204  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  13 

the  change  of  phraseology,  and  that  the  law  must  be  strictly 
construed,^^  the  application  to  confirm  can  be  made  only  under 
the  circumstances  stated  in  the  act,  including  the  deposit  of 
the  money  necessary  to  pay  debts  having  priority  and  the 
costs;  and  the  position  taken  under  the  former  act  would  not 
apply. 

§299.  Effect  of  failure  to  perform  composition.— The  fail- 
ure of  the  bankrupt  to  perform  a  composition  according  to  its 
terms  does  not  empower  a  creditor  to  disregard  the  proceed- 
ings and  sue  for  his  debt;^^  but  if  fraud  was  practiced  in 
securing  it,  there  seems  to  be  no  reason  why  it  might  not  be 
set  aside.  An  offer  to  compromise  is  not  a  defense  to  an  invol- 
untary petition.^'' 

§  300.     Secured  creditors  in  case  of  compositions.— Under  the 

act  of  1898,  secured  creditors  may  vote  and  their  claims  will 
be  counted  in  computing  the  number  and  amount  but  only  for 
the  excess  over  the  security ,^^  but  where  one  considers  him- 
self fully  secured,  but  is  not,  he  cannot  be  counted  to  make  a 
majority.®^  A  secured  creditor  taking  no  part  in  composi- 
tion proceedings  though  present,  is  entitled  to  the  agreed  per- 
centage on  his  unpaid  balance  after  exhausting  his  security;^- 
or  may  have  his  security  valued  and  come  in  for  the  differ- 
ence.^^ If  a  creditor  holds  a  bond,  mortgage  or  other  security 
for  his  debt,  where  no  present  liability  has  arisen,  and  the 
value  of  the  security  is  not  capable  of  present  determination, 
because  the  debt  is  subject  solely  to  the  contingency  of  a  de- 
ficiency arising  upon  foreclosure,  such  deficiency  being  merely 
contingent  and  not  provable,  the  holder  of  such  security  is 
neither  necessary  nor  a  proper  party  to  a  composition.^^  A 
composition  is  not  uncertain  because  payment  is  not  secured.^^ 
§  301.     Liens  and  attachments.— After   filing   a   petition    a 

B7  In  re  Rider,  1  N.  B.  N.  483,  3  co  Sees.  56  b,  57  c,  h,  act  of  1898. 

A.  B.  R.  178,  96  F.  R.  808;   In  re  «!  In  re  Snelling,  19  N.  B.  R.  120, 

Shields,   15    N.   B.   R.   532,   5   Dill.  F.  C.  13140. 

588,  F.  C.  12784.  ''>-  Paret  v.  Ticknor,  16  N.  B.  R. 

58  In  re  Bayly,  19  N.  B.  R.  73.  315,  4  Dill.  Ill,  F.  C.  10711. 

F.  C.  1144.  63  The  "Home,"  18  N.  B.  R.  557, 

r'S  Simonson  v.  Sinsheimer,  95  F.  F.  C.  6657. 

R.  948.  37  C.  C.  A.  337.  3  A.  B.  R.  «*  In  re  Kahn,  9  A.  B.  R.  107. 

824,  reversing  1  N.  B.  N.  230.  92  F.  65  in  re  Wilson.  18  N.  B.  R.  300, 

R.  904,  1  A.  B.  R.  197.  F.  C.  17785. 


Ch.  1^  CONFIRMATION    OF    COMPOSITIONS.  305 

creditor  cannot  acquire  a  lien  and  this  is  not  affected  by  com- 
position proceedings.^*^  An  attachment  within  four  months 
before  proceedings  in  bankruptcy  will  fail  where  a  composi- 
tion has  been  proposed,  adopted  and  confirmed,  destroying  the 
debt.«8 

§302.  Trustee  and  set-off.— Under  the  act  of  1867  it  was 
held  that  the  Bankruptcy  Act,  in  authorizing  a  composition 
before  adjudication,  contemplated  that  it  be  made  without  ap- 
pointment of  an  assignee,  and  without  requiring  debtor  to  sur- 
render his  assets,'^  which  is  practically  the  rule  adopted  under 
the  present  act."^  The  bankrupt  in  a  composition  stands,  as  to 
set-off,  in  the  position  of  a  trustee,  if  none  has  been  appoint- 
ed,"- but  a  creditor  who  receives  a  composition  payment  from 
his  bankrupt  debtor,  with  knowledge  of  all  the  facts,  is  not 
entitled  to  have  a  set-oft'  enforced  which  he  neglected  to  assert 
when  the  composition  was  made.'^^ 

§  303.  Double  security.— Holders  of  a  note  who  take  no  part 
in  composition  proceedings  of  indorsers  are  not  bound,  and  can 
recover  from  them,  the  maker  not  paying,  where  the  note  did 
not  become  due  until  after  the  bankruptcy  of  the  indorsers.'^^ 

§304.  'c.  Hearings  upon  confirmation  of  compositions.— A 
'date  and  place,  with  reference  to  the  convenience  of  the  par- 
'ties  in  interest,  shall  be  fixed  for  the  hearing  upon  each  appli- 
'  cation  for  the  confirmation  of  a  composition,  and  such  objec- 
'tions  as  may  be  made  to  its  confirmation.' 

§305.  Practice  upon  hearings.— Unless  waived  in  writing 
at  least  ten  days'  notice  must  be  given  to  creditors,  by  mail, 
of  all  hearings  upon  applications  for  confirmation  of  composi- 
tions;'^^ and  where  objection  is  made  to  the  confirmation,  the 
creditor  is  required  to  appear  on  the  day  of  the  return  of  the 
order  to  show  cause  and  within  ten  days  thereafter,  unless  the 

66  In   re  Tifft,   19  N.   B.  R.   201,  -^  Ex  p.  Howard  Nat.  Bk.,  16  N. 

F.  C.    14034.  B.  R.  420,  2  Lowell,  487,  F.  C.  6764. 

68  Miller  v.  Mackenzie.  13  N.  B.  73  Hunt  v.  Holmes,  16  N.  B.  R. 

R.   496.  101,  F.  C.  6890. 

70  In  re  Van  Auken,  14  N.  B.  R.  74  Smith  v.  Krauskopf,  18  N,  B. 
425,  F.  C.  16828.  R.   6. 

71  In  re  Rung,  1  N.  B.  N.  406,  2  -■<  Sec.  58a,  act  of  1898. 
A.  B.  R.  620. 


206  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  12 

time  is  enlarged  by  special  order  of  the  judge,  file  a  specifica- 
tion in  writing  of  the  ground  of  his  opposition J^  A  "party  in 
interest,"  being  any  one  affected,  is  entitled  to  be  heard  so  that 
any  one  having  a  provable  claim,  although  it  has  not  been 
proven  and  allowed,^^  or  a  partially  secured  creditor,^^  j^^t 
not  one  fully  secured"*^  should  be  heard. 

The  confirmation  need  not  be  made  at  a  meeting^"  and  it  is 
only  necessary  to  record  the  decree  containing  the  resolution.*^^ 

§  306.  Power  of  referee  at  meetings,— The  law  expressly 
excepts  from  the  duties  of  the  referee  all  connection  with 
bankrupt's  application  for  approval  of  composition,  but  such 
applications  or  any  specified  issue  arising  thereon  may  be 
referred  to  the  referee  to  ascertain  and  report  the  facts,^^  and 
upon  questions  arising,  the  referee,  when  requested,  should 
appoint  a  day  for  bringing  the  composition  before  the  court, 
and  to  issue  the  required  notices  to  creditors,  suggesting  in 
his  report  any  legal  questions  arising  upon  the  composition 
papers.^3  He  has,  however,  power  to  conduct  inquiries  and 
adjourn  meetings,^^  and  examine  disputed  claims  and  report 
thereon  f^  but  the  court  may  re-open  questions  in  regard  to  his 
rulings  on  all  points.^^ 

§307.  'd.  Confirmation  of  compositions.— The  judge  shall 
•confirm  a  composition  if  satisfied  that  (1)  it  is  for  the  best 
'interests  of  the  creditors;  (2)  the  bankrupt  has  not  been 
'  guilty  of  any  of  the  acts  or  failed  to  perform  any  of  the  duties 
'which  would  be  a  bar  to  his  discharge;  and  (3)  the  offer  and 
'its  acceptance  are  in  good  faith  and  have  not  been  made  or 
'procured  except  as  herein  provided,  or  by  any  means,  prom- 
'ises,  or  acts  herein  forbidden.' 

§308.     Objections  to  confirmation.— It  is  the  duty  of  the 

•re  G.  O.  XXXII;   City  Nat.  Bank  f^i  Smith  v.  Barnhard,   14   N.  B. 

of    Dallas   v.    Doolittle,   107    F.   R.  R.  41. 

236,  5  A.  B.  R.  736.  s^  G.  0.  XII.    (3). 

77  In  re  Walker,  1  N.  B.  N.  510,  S3  in  re  Hilborn,  104  F.  R.  866, 
96  F.  R.  550,  3  A.  B.  R.  35.  3  N.  B.  N.  R.  62,  4  A.  B.  R.  741. 

78  Sec.  56b  and  57e,  h,  *act  of  »*  In  re  Proby,  17  N.  B.  R.  175, 
1898.  F.  C.  11439. 

79  In  re  Scott,  15  N.  B.  R.  73,  F.  §5  in  re  Keller,  18  N.  B.  R.  331, 
C.  12519.  F.  C.  7654. 

«o  In  re  Spillman,  13  N.  B.  R.  ■*••  In  re  Spencer,  18  N.  B.  R.  199, 
214,  F.  C.  13242.  F.  C.  13229. 


Ch.  1:^  CONFIRMATION    OF    COMPOSITIONS.  -.'07 

court  to  examine  objections  of  a  minority  fully  as  to  requisite 
number  ;'^^  and  the  composition  cannot  be  confirmed  if  the 
statement  of  assets  and  debts  shows  that  the  requisite  propor- 
tion have  not  accepted  it;^^  but  it  is  too  late  to  raise  an  objec- 
tion to  the  right  of  a  creditor  to  vote  for  the  first  time  at  the 
confirmation  hearing.'^*^  Objections  to  the  confirmation  of  the 
composition  have  been  overruled  Avhere  it  was  contended,  for 
instance,  that  a  corporation  was  not  entitled  to  the  privileges 
of  composition;'"^  that  property  in  name  of  bankrupt's  wife 
should  have  been  included  in  the  schedules  ;'''i  or  that  the 
estate  could  pay  more  than  the  composition  y^'^  or  that  debtor 
paid  more  in  composition  than  his  estate  would  pay  in  bank- 
ruptcy f^  or  that  he  was  excused  from  examination  on  account 
of  illness.^^ 

Objections  to  the  confirmation  of  a  composition  have  been 
sustained  where  the  trustees  were  to  leave  the  estate  in  the 
hands  of  the  president  of  a  corporation  who  was  a  defaulter 
and  not  trustworthy;''^  or  where  deferred  payments  were  pro- 
vided and  the  property  was  to  be  returned  to  bankrupt,  he  not 
being  trustworthy.^*^  Objections  as  to  regularity  of  a  compo- 
sition and  as  to  what  is  for  the  best  interest  of  the  parties  can 
be  presented  at  the  hearing  of  confirmation.'''^ 

§  309.  Power  of  court  over.— The  court  has  no  power  to  con- 
firm or  reject  a  composition  except  pursuant  to  section  12  of 
the  law.^^  If  the  papers  presented  to  the  judge  on  the  hearing 
of  the  application  to  confirm  show  that,  after  his  examination 
and  the  filing  of  his  schedule  of  property  and  list  of  creditors, 
the  bankrupt  offered  a  composition  which  was  presented  to  all 
his  creditors;  that  a  majority  in  number  and  amount  of  those 
whose  claims  have  been  allowed,  agreed  to  accept  such  com- 

"  In  re  Kciler,  18  N.   B.  R.  36,  os  in  re  Snelling,  19  N.  B.  R.  120. 

F.  C.  7648.  F.  C.   140. 

J^s  In  re  Asten,  14  N.  B.  R.  7,  8  '■>*  In  re  Wilson,  18  N.  B.  R.  300, 

Ben.  350,  F.  C.  594.  F.  C.  17785. 

"*!•  In  re  Bloch,  18  N.  B.  R.  328,  os  In  re  Scott,  15  N.  B.  R.  73,  F. 

F.  C.  1551.  C.  12519. 

90  In  re  Weber  Fiirn.  Co.,  13  N.  96  in  re  Bloch,  18  N.  B.  R.  328, 
B.  R.  529,  F.  C.  17330.  F.  C.  1551. 

91  In  re  Welles,  18  N.  B.  R.  525.  97  in  re  Scott,  supra. 

F.  C.  17377.  98  In  re  Rudnick,  1  N.  B.  N.  531, 

92  Id.;    In  re  Arrington  Co.,  113     2  A.  B.  R.  174,  93  F.  R.  787. 
F.  R.  498,  8  A.  B.  R.  64. 


•.'08  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  12 

position;  that  the  consideration  agreed  to  be  paid  and  the 
money  necessary  to  pay  all  debts  which  have  priority  and  the 
costs  of  the  proceedings  have  been  deposited  in  the  designated 
depository;  and  it  does  not  appear  on  the  face  of  the  papers 
that  the  amount  the  creditors  will  receive  by  such  composition 
is  less  than  they  would  receive  by  the  administration  of  the 
estate  in  bankruptcy  or  that  there  is  any  fraud  or  other  valid 
grounds  for  refusing  to  confirm  such  composition,  it  should 
be  confirmed,  as  of  course,  that  is,  if  a  prima  facie  case  is 
made,  unless  the  dissenting  creditors  have  filed  proper  objec- 
tions and  support  them  by  satisfactory  evidence.  The  burden 
of  proving  the  existence  of  valid  grounds  for  refusing  to  con- 
firm the  composition  is  on  the  dissenting  creditors'*'*  and  the 
decision  of  the  majority  in  number  and  amount  accepting  the 
composition  will  not  be  disturbed  except  on  sufficient  evidence 
unless  manifest  fraud,  accident  or  mistake  is  shown.  The 
offer  and  its  acceptance  by  the  majority  of  the  creditors  indi- 
cate that  it  is  for  the  interest  of  the  creditors  until  attacked 
by  the  dissentients  who  ma}'  rely  on  the  record  and  need  not 
always  produce  extrinsic  proof.^  While,  in  England,  the  court 
will  closely  scrutinize  a  composition  and  must  be  first  satis- 
fied that  it  is  for  the  creditor's  benefit;-  here  a  composi- 
tion will  not  be  confirmed  if  it  appears  not  to  be  for  the 
interest  of  the  creditors,  no  matter  how  small  a  proportion 
dissent;^  or  where  the  money  deposited  is  not  sufficient  to 
pay  the  costs,  or  notice  of  the  proceedings  has  not  been  given 
the  creditors,  although  a  majority  of  those  who  had  notice 
and  proved  their  claims  had  accepted.'*  How  far  the  court 
should  go  into  the  merits  of  the  composition  to  determine  its 
advisability  for  the  creditors  as  between  themselves  and  reject 
it  against  the  wish  of  the  majoritiS'  as  not  for  the  interest  of  the 
creditors  is  an  open  question. 

§  310.  Best  interests  of  the  creditors.— Scotland  adopted  the 
French  cession,  the  Roman  cessio  bonorum,  and,  while  her 
courts  passed  on  the  reasonableness    of  a  composition,    the 

99  City   Nat.   Bank   of   Dallas  v.  3  in  re  Whipple,  11  N.  B.  R.  524, 

Doolittle,  107  F.  R.  236,  5  A.  B.  R.  2    Low.    404,    S.    C.    17531;    In    re 

736.  Reinheimer,  1  N.  B.  N.  361. 

1  In  re  Weber  Furn.  Co.,  13  N.  *  In  re  Rider,  1  N.  B.  N.  483,  3 
B.  R.  59,  F.  C.  17330.  A.  B.  R.  178,  96  F.  R.  808. 

2  In  re  Burr,  9  Morrell,  133. 


Ch.  12  BEST  INTERESTS    OF    CREDITORS.  209 

tendency  was  to  uphold  it  if  fairly  adopted.  England  intro- 
duced insolvent  laws  later  and  there  the  decision  of  the  cred- 
itors was  accepted,  unless  fraudulently  procured,  though,  if 
grossly  unreasonable,  it  was  presumptively  fraudulent.^  The 
present  act  expressly  requires  the  judge  to  be  satisfied  that 
the  composition  is  for  the  best  interests  of  the  creditors,  thus 
laying  on  the  court  the  difficult  burden  of  instructing  parties 
as  to  their  own  interests,  which  practically  will  usually  be 
discharged  by  adopting  the  creditors'  view,  in  the  absence 
of  fraud  or  collusion  and  when  the  offered  composition  is 
equally  or  more  advantageous  pecuniarily  to  the  creditors 
than  the  administration  of  the  estate  in  bankruptcy  would  be  f 
but  if  the  offered  composition  would  not  yield  the  creditors 
as  much  as  the  administration  of  the  estate  in  bankruptcy, 
the  composition  should  not  be  confirmed.  A  great  variance 
between  the  probable  value  of  the  assets  and  the  composition 
would  justify  the  court  in  acting  on  its  own  motion,  though 
an  apparent  discrepanc}^  between  the  estimated  value  of  the 
assets  and  the  composition  is  not  sufficient,"  and  it  has  been 
held,  that  a  discrepancy  of  as  much  as  15  per  cent  would  not 
warrant  the  court  in  overruling  the  discretion  of  the  creditors.^ 
The  consideration  must  be  prorated  among  creditors  and  the 
interest  to  be  considered  is  that  of  the  creditors  at  the  time  of 
acceptance'^  and  of  all  of  them  because  the  fact  that  one 
might  be  specially  benefited  by  the  refusal  to  confirm  the  com- 
position would  not  justify  such  refusal.^o 

In  determining  whether  the  composition  will  yield  the  cred- 
itors more,  or  less,  than  the  administration  of  the  estate  in 
bankruptcy,  the  costs  of  such  administration,  the  fact  that 
no  one  can  ordinarily  administer  a  man's  affairs  as  well  as 

-  In  re  Whipple,  11  N.  B.  R.  524,  F.  C.  17330;  In  re  Reinheimer,  1  N. 
2  Lowell,  404,  F.  C.  17513.  B.    N.    361;     See    In    re    Criterion 

^  In  re  Rider,  1  N.  B.  N.  483,  3     Watch  Case  Mfg.  Co.,  8  A.  B.  R. 

A.  B.  R.  178,  96  F.  R.  808;  In  re     206. 

Morris,    11    N.    B.    R.    443;    In    re  sin  re  Arrington  Co.,  113  F.  R. 

Weber  Furniture  Co.,  F.  C.  17331;  498,   8  A.  B.  R.   64;    In   re  Weber 

In  re  Kahn,  9  A.  B.  R.  107.  Furniture  Co.,  F.  C.  17331;   Adler 

-  In  re  Reiman,  11  N.  B.  R.  21,  v.  Jones,  109  F.  R.  967,  6  A.  B.  R. 
7  Ben.  455,  F.  C.  11673.  s.  c.  13  N.  245,  48  C.  C.  A.  763. 

B.  R.,  12  Blatch.  562.  F.  C.  11675;  a  In  re  Haskell,  11  N.  B.  R.  164, 
In  re  Whipple.  11  N.  B.  R.  524,  2     F.  C.  6192. 

Lowell.  404,  F.  C.  17513;  In  re  iMn  re  Scott,  15  N.  B.  R.  73.  F. 
Weber  Furn.  Co.,  13  N.  B.  R.  529,     C.  12519. 

14 


310  THE    NATIONAL    BANKRUPTCY    LAW.  Cll.  l;i 

himself,  the  delay  caused  thereby,  and  the  fact  that  a  forced 
sale  brings  less  than  a  private  sale  must  all  be  taken  into 
consideration. 

In  ascertaining  if  the  composition  is  for  the  best  interests 
of  the  creditors  the  fact  that  there  is  no  security  for  the  pay- 
ment of  the  composition  notes  should  be  considered  ;^i  or  that 
the  debtor  proposes  advance  in  per  cent  of  composition  ;i 2  or 
that  the  consideration  which  is  offered  is  satisfactory  to  the 
requisite  majority  of  creditors.^ ^  Either  party  may  furnish 
evidence  on  the  question  whether  the  composition  is  for  the 
best  interests  of  tlie  creditors,^'*  and  unless  specific  errors  can 
be  pointed  out  on  the  confirmation  of  a  composition,  whether 
it  is  for  the  best  interests  of  the  creditors  will  not  be  inquired 
into  by  the  appellate  court.'  ^ 

§  311.  Acts  in  bar  of  confirmation.— Guilt  of  any  of  the  acts 
or  failure  to  perform  any  of  the  duties  which  would  be  a  bar 
to  discharge  are  expressly  made  a  bar  also  to  the  confirmation 
of  a  composition.  Those  acts  are  the  concealment  of  property 
from  the  trustee,  making  a  false  oath  or  presentation  or  use 
in  composition  of  a  false  claim,^^  and  fraudulently,  and  in 
contemplation  of  bankruptcy,  destroying,  concealing,  or  failing 
to  keep  books  of  account.' '''  If  the  bankrupt  has  been  guilty 
of  any  of  the  acts  or  failed  to  perform  any  of  the  duties  named 
the  judge  must  reject  the  composition.  The  fact  that  a  dis- 
charge was  barred  by  failure  to  apply  for  it  in  time  would 
seem  not  to  be  one  of  the  acts,  if  a  discharge  could  have  been 
obtained  if  applied  for  in  time,  since  the  purpose  is  to  prevent 
a  bankrupt  obtaining  at  his  creditor's  hands  a  discharge  which 
his  conduct  prohibited  his  getting  otherwise.  Until  there  is 
an  authoritative  decision  on  the  latter  point,  it  is  safer  to 
apply  for  the  confirmation  of  a  composition  before  the  expira- 
tion of  such  period ;  but  the  filing  of  an  application  within  the 
period  would  suffice,  the  hearing  and  decision  being  held  after 
its  expiration. 

11  In  re  Wilson,  18  N.  B.  R.  300,  15  In  re  Wronkow,  18  N.  B.  R.  81, 
F.  C.  17785.  15  Blatch.  38,  F.  C.  18105. 

12  In  re  Scott,  15  N.  B.  R.  73,  F.         le  See  29b,  act  of  1898. 

C.  12519.  17  See    14b,    act    of   1898;    In    re 

i".  In  re  Purcell,  18  N.  B.  R.  447.     Wilson,   107   F.   R.  83,  5  A.   B.  R. 

F.   C.   11470.  849. 

14  In  re  Keller,  18  N.  B.  R.  331, 

F.  C.  7654. 


Ch.  i2  COMPOSITION— GOOD    FAITH.  211 

§312.  Good  faith.— Absolute  good  faith  is  required  of  the 
bankrupt  and  all  those  connected  with  a  composition,  and, 
if  the  bankrupt  has  made  false  statements  about  his  debts,  or 
assets,  or  other  creditors,  or  anything  which  may  have  influ- 
enced the  making  of  the  composition,  or  creditors  have  used 
improper  means  to  induce  others  to  accept  or  refrain  from 
opposing  a  composition,  it  will  not  be  confirmed.^^  As  the 
court  has  no  power  to  confirm  or  re.ject  a  composition,  except 
pursuant  to  this  section,  and  no  power  to  set  one  aside  unless 
fraud  was  practiced  in  securing  it  and  knowledge  of  such 
fraud  has  come  to  the  petitioners  since  such  confirmation. ^•' 
any  objections  consistent  with  this  section,  except  those  based 
on  after  discovered  fraud,  should  be  presented  on  the  hearing 
to  confirm  and  not  on  a  hearing  to  set  aside.  Where  there 
is  a  discrepancy  between  the  composition  and  the  apparent 
value  of  bankrupt's  property  and  other  evidence  of  fraud,  the 
composition  should  not  be  re,jected  without  notice  to  the  par- 
ties interested  and  taking  into  account  the  relations  and 
relative  number  of  creditors  favoring  the  composition  ;~^  or  if, 
without  fraudulent  intent,  assets  were  omitted,  or  non-existent 
debts  inserted  in  the  schedule,  such  errors  not  requiring  a 
change  in  the  terms  of  the  composition,  especialh^  if  the  cred- 
itors knew  of  them  when  they  accepted  the  composition  ;2i  or 
because  bankrupt  is  related  to  some  of  the  accepted  cred- 
itors.-2 

Confirmation  should  be  refused  if  lack  of  good  faith  appears ; 
as  the  giving  of  money  to  one  creditor  to  induce  him  to  sign  ;23 
on  the  iHirchase  of  claims  to  be  used  in  favor  of  a  composition 
unless  there  is  clear  proof  that  the  motive  was  proper ;  or 
improperly  inducing  the  withdrawal  of  opposition ;  or  expecta- 
tion of  an  advantage  from  accepting  without  any  positive 
promise,  or  giving  one  creditor  a  secret  benefit  or  advantage-* 

18  In  re  Sawyer,  14  N.  B.  R.  241,  21  In  re  Scott,  15  N.  B.  R.  73,  F. 

2  Lowell,  475,  F.  C.  12395;     In  re  C.  12519;  In  re  Reiman,  11  N.  B. 

Whitney,  14  N.  B.  R.  1.  2  Lowell,  R.  21,  7  Ben.  455,  F.  C.  11673,  s.  c. 

455,  F.  C.  17580;  Bean  v.  Amsinck.  13  N.  B.  R.  128,  12  Blatch.  562,  F. 

8  N.  B.  R.  228,  10  Blatch.  361,  F.  C.  11675. 

C.  1167;   Bean  v.  Brookmire,  7  N.  22  in  re  Rider.  1  N.  B.  N.  483,  3 

B.  R.  568,  2  Dill.  108,  F.  C.  1170.  A.  B.  R.  178,  96  F.  R.  808. 

•    19  Sec.  13,  act  of  1898.  23  Daiiglish  v.  Tennent.  L.  R.  2 

20  In  re  Weber  Fiirn.  Co..  13  N.  Q.  B.  49. 

B.  R.  529,  F.  C.  17330.  24  in    re    Sawyer,    supra;    In    re 


212  THE    NATIONAL    BANKRUPTCY    LAW.  Cu.  I'i 

or  secret  preference  ;^^  or  promise  to  settle,  accepting  creditors' 
claims  at  expense  of  others;-''  or  agreeing  through  sympathy 
or  friendship  for  the  bankrupt  to  take  that  which  would  not 
be  for  the  interest  of  all  the  creditors.^''' 

§  313. Frauds  and  omission  preventing  confirmation.— 

The  court,  on  application  to  confirm  should  correct  mistakes 
and  expose  and  punish  fraud  and  improper  practices,-'^  as 
where  a  creditor  after  receiving  payment  in  full  signs  an  agree- 
ment with  other  creditors  to  take  seventy  cents  in  the  future ; 
or  where  one  creditor  exacts  an  advantage  not  known  or  en- 
joyed by  the  others  for  uniting  in  the  composition;-*'  or  where 
an  agent  in  composition  obtains  the  same  by  false  representa- 
tions ;^''  or  if  a  partner  after  composition,  procures  assignment 
of  claims  to  a  relative  and  then  institutes  proceedings  to  set 
aside  composition  and  put  the  firm  in  bankruptcy  ;^^  but  a 
preferred  creditor  is  liable  for  amount  of  the  advantage  over 
others;  and,  if  he  pays,  his  original  claim  can  be  proved.^^ 

§  314. Fraud  in  creation  of  debt.— A  composition  in- 
cludes and  binds  debts  creato^d  by  fraud,^-''  and  a  debt  so 
created  is  discharged  by  a  composition  in  which  the  creditor 
participates.-^^ 

§  315.  Certified  copy  as  evidence.— A  certified  copy  of  an 
order  confirming  a  composition  is  evidence  of  the  jurisdiction 
of  the  court,  the  regularity  of  the  proceedings  and  the  fact  that 
the  order  was  made,^-'^  and  constitutes  evidence  of  the  revesting 
of  the  title  of  his  property  in  the  bankrupt,  and,  if  recorded, 
will  impart  the  same  notice  that  a  deed  from  the  trustee  to 
the  bankrupt,  if  recorded,  would  impart.^^ 

Morris,  12  N.  B.  R.  170;  See  In  re  2  Sawy.  94,  F.  C.  4342. 

Chaplin,  115  F.  R.  162,  8  A.  B.  R.  -i  In  re  Hamlin,  16  N.  B,  R.  522, 

121.  8  Biss.  122,  F.  C.  5994. 

■■^■<  In  re  Jacobs,  18  N.   B.  R.  48,  ^t^  Brookmier  v.   Bean,   12   N.  B. 

F.  C.  7159;    In  re  Knox,  98  F.  R.  R.  217,  3  Dill.  136,  F.  C.  1942;  See 

585.  In  re  Chaplin,  115  F.  R.  162,  8  A. 

26  In   re   Vetterlein,    6    N.    B.   R.  B.  R.  121. 

518.  5  Ben.  571,  F.  C.  16928.  33  in  re  Shafer,  17  N.  B.  R.  116, 

27  Ex  p.  Williams,  L.  R.  10,  Eq.     F.   C.  12695. 

55.  •''*  Wells  V.  Lamprey,  16  N.  B.  R. 

2s  In  re  Spencer,  18  N.  B.  R.  199.  205. 

F.  C.  13229.  "■■■  Sec.  21f,  act  of  1898. 

2flBean  v.  Brookmire,  7  N.  B.  R.  "c  Sec.  21g,  act  of  1898;    2  Low- 

568.  2  Dill.  108,  F.  C.  1170.  ell,    505.    F.    C.    14133;    Drake    v, 

30  Elfeldt  V.  Snow,  6  N.  B.  R.  57.  McQuade,  66  N.  H.  303. 


Ch.  12  EFFECT    OF    COMPOSITION.  213 

§316.     'e.    Distribution  of  consideration  on  confirmation.— 

'  Upon  the  confirmation  of  a  composition,  the  consideration 
'shall  be  distributed  as  the  judge  shall  direct,  and  the  case  dis- 
'  missed.  Whenever  a  composition  is  not  confirmed,  the  estate 
'shall  be  administered  in  bankruptcy  as  herein  provided.' 

§317.  Distribution  of  consideration.— The  Act  provides 
that  the  consideration  shall  be  distributed  as  the  judge  shall 
direct.  As  the  amount  is  fixed  by  the  composition  and  as  it 
must  be  paid  to  all  the  creditors  pro  rata,-"^^  this  provision  can 
only  mean  that,  upon  the  confirmation  of  the  composition,  the 
judge  shall  direct  or  order  the  distribution  of  the  deposit,  in- 
eluding  debts  having  priority  and  costs,  to  be  made  and,  in 
case  no  trustee  has  been  appointed,  by  whom  it  shall  be  made. 
In  Form  63  the  Clerk  is  ordered  to  do  it  but  there  is  nothing 
in  the  Act  which  would  prevent  the  judge  selecting  some  one 
I'lse,  or  appointing  a  person  specially  for  the  purpose,^^  al- 
though in  view  of  the  small  fees  provided  by  the  Act  such  ap- 
pointments might  be  deemed  the  perquisites  of  the  Clerk. 

§  318.  Dismissal  of  the  proceedings.— After  the  confirmation 
of  the  composition  and  the  distribution  of  the  consideration, 
the  case  is  to  be  dismissed.  Before  dismissal  the  necessary 
orders  should  be  made  to  authorize  the  proper  disposition  of 
any  property  held  subject  to  the  court's  orders  as  money 
belonging  to  the  estate  held  by  the  sheriff  which,  without  a 
proper  order  of  the  court,  would  not  be  at  bankrupt's  dis- 
posals^ When  the  order  of  dismissal  is  made,  all  proceedings 
are  then  at  an  end  unless  subsequent  steps  should  be  taken 
to  set  aside  the  composition.^^ 

§319.    Effect  of  composition.— On  the  bankrupt's  debts.—- 

The  confirmation  of  a  composition  discharges  a  bankrupt  from 
his  debts  other  than  those  agreed  to  be  paid  by  its  terms  and 
those  not  affected  by  a  discharge.^i  Debts  are  released  by 
the  confirmation  although  they  may  be  incorrectly  stated  in 
the  schedules,  unless  such  errors  were  substantial  or  inten- 
tional,^- and  the  same  is  true  of  a  claim  which  is  not  proven, 

3T  In  re  Trafton,  14  N.  B.  R.  507.         ^o  Sec.  13,  act  of  1898. 

3s  Ex  p.  Hamlin,  16  N.  B.  R.  320,         4i  Sees.  14c.  17,  act  of  1898. 
323,  2  Lowell,  571,  F.  C.  5993.  *-'  In  re  Trafton,  14  N.  B.  R.  507, 

39  In  re  Mickel,  19  N.  B.  R.  374.     2  Lowell.  505.  F.  C.  14133. 
F.  C.  9529. 


214  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  12 

the  creditor  failing  or  refusing  to  .participate  with  the  other 
creditors  when  the  composition  is  offered."*^ 

§320. As  a  discharge.— The  order  of  the  confirmation 

serves  as  a  discharge  by  operation  of  law^*  and  no  further  dis- 
charge is  required.^*^  The  fact  that  a  discharge  has  been  re- 
fused is  not  an  absolute  bar  to  coniposition.^c 

§  321. As  to  its  terms. — A  composition  must  be  carried 

out  according  to  its  terms  and  can  not  be  added  to  by  demand- 
ing a  discontinuance  and  surrender  of  property  before  the  per 
cent  is  paid  ;^"  nor  will  the  mere  delivery  of  the  notes  provided 
for  in  it  cancel  the  debt:^^  and  if  the  debts  are  not  paid  ac- 
cording to  the  terms  of  the  composition  they  are  payable  in 
their  original  amount  ;*'-*  but  the  tender  of  money  according 
to  the  terms  of  the  composition  is  equivalent  to  payment.^" 

§  322. On  after  litigation.— Creditors  have  a  right  to 

receive  their  quota  under  the  composition  and  its  payment  to 
them  can  not  be  suspended  by  injunction  unless  there  is  a  lien 
upon  the  fimd  f^  nor  will  an  injunction  be  allowed  because  the 
debtor  fails  to  plead  the  composition.^^  j^  creditor,  seeking  to 
liquidate  his  claim  in  a  replevin  suit  in  a  state  court,  has  no 
standing  to  ask  that  other  creditors  wait  for  their  dividends 
under  a  composition  until  he  can  get  judgment,  when  the  bank- 
ruptcy court  finds  the  evidence  does  not  sustain  the  charge  of 
fraud  on  which  the  replevin  suit  is  based  ;^3  but,  where  a  com- 
position has  been  complied  with,  an  injunction  restraining  a 
suit  in  a  state  court  is  proper.^-* 

§323. On  bankrupt's  co-debtors.— The  present  Act  ex- 
pressly provides  that  the  liability  of  a  person  who  is  a  co- 

43  Glover  Grocery  Co.  v.  Dome,  49  In  re  Leipziger,  18  N.  B.  R. 
8  A.  B.  R.  702.  264;    In    re    Hurst,    supra;    In    re 

44  In  re  Merriman,  18  N.  B.  R.  Reiman,  supra,  s.  c.  11  N.  B.  R.  21. 
411,  F.  C.  9479.  7  Ben.  455,  F.  C.  11673. 

45  In  re  Becket,  12  N.  B.  R.  201,  5o  in  re  Hinsdale,  16  N.  B.  R. 
2  Woods,  173,  F.  C.  1210.  550,  9  Ben.  91,  F.  C.  6526. 

40  In  re  Odell,  16  N.  B.  R.  501,  9  si  in   re   Kohlsaat,   18   N.  B.   K. 

Ben.  247.  F.  C.  10427.  570,  F.  C.  7918. 

47  In  re  McKeon,  11  N.  B.  R.  182.  v.-  in  re  Tooker,  14  N.  B.  R.  35,  8 

7  Ben.  513,  F.  C.  8858.  Ben.  390,  F.  C.  14096. 

4s  In  re  Reiman,  13  N.  B.  R.  128,  5.3  in  re  Heinsfurter,  1  N.  B.  N. 

12   Blatch.   562,   F.    C.   11675;     see  510,  3  A.  B.  R.  9. 

also  In  re  Hurst,  13  N.  B.  R.  455,  1  54  in  re  Shafer,  17  N.  B.  R.  116, 

Flip.  462,  F.  C.  6925.  F.  C.  12695. 


Ch.  12  EFFECT    OF    COMPOSITION.  215 

debtor  with,  or  guarantor  or  in  any  manner  surety  for,  a 
bankrupt  shall  not  be  altered  by  the  discharge  of  such  bank- 
rupt.^"'' A  composition  is  a  substitute  for  a  discharge  and  the 
bankrupt's  discharge  from  his  debts  under  a  composition  is  a 
discharge  by  operation  of  law  which  does  not  release  his  part- 
ners, sureties  or  guarantors ;  though  the  usual  rule  is  that  a 
creditor  releasing  the  principal  debtor  on  a  composition  re- 
leases the  surety .^^  , 

§324. On  attachments.— An  attachment  made  within 

four  months  of  the  commencement  of  proceedings  will  be  dis- 
solved bj'  a  composition  ■,^'^  but  not  by  a  prematurely  initiated 
composition;^^  nor  can  confirmation  give  validity  to  such 
illegal  composition.^^ 

§325. On  bankrupt's  property.— The  confirmation  of 

the  composition  revests  the  title  to  the  property  in  the  bank- 
rupt,^^  The  creditors  cease  to  have  any  interest  in  it  and  any 
money  on  hand  should  be  paid  to  the  bankrupt,*^^  who  is  at 
liberty  to  deal  with  it  as  he  wishes  if  no  fraud  has  been  prac- 
ticed.®2  jf  there  is  no  provision  for  the  dispossession  of  prop- 
erty, the  bankrupt  retains  the  same  subject  to  the  summary 
order  of  the  court,^**  and  where  the  composition  gives  his 
property  and  books  back  to  the  bankrupt,  the  creditors  will 
not  be  permitted  to  undo  what  they  consented  to.^-*  The  bank- 
rupt's receiver  has  no  claim  on  the  rents  and  profits  of  the 
bankrupt's  land,  it  being  after  acquired  property  under  the 
composition.^'^ 

§  326.  Must  be  pleaded.— The  composition  is  a  defense  that 
may  be  waived  and,  if  a  suit  is  brought  on  a  debt  after  confir- 
mation, it  must  be  pleaded  or  it  is  deemed  to  be  waived  and  the 
court  will  not  thereafter  relieve  the  party  from  the  result  of 
his  laches.^^ 

55  Sec.  16,  act  of  1898.  ei  in  re  August,  19  N.  B.  R.  161, 

56  See   Mason    &   Hamlin   Organ     F.  C.  645. 

Co.  V.  Bancroft,  1  Abb.  N.  C.  415;  «2  in  re  Shaw,  9  N.  B.  R.  495,  F. 

Ex  p.  Jacobs,  44  L.  J.  34.  C.  12716. 

57  Smith  V.  Engle,  14  N.  B.  R.  63  in  re  Reiman,  11  N.  B.  R.  21, 
481.  7  Ben.  455,  F.  C.  11673. 

58  In  re  Clapp,  14  N.  B.  R.  191,  2  64  in  re  Rodger,  18  N.  B.  R.  381, 
Lowell,  468,  F.  C.  2785.  F.  C.  11992. 

59  In  re  Hyman,  18  N.  B.  R.  299,  er,  Conover  v.  Dumahaut,  17  N. 
F.  C.  6985.  B.  R.  558. 

60  Sec.  70f,  act  of  1808.  «6  in  re  Tooker.  14  N.  B.  R.  35, 


216  THE    NATIONAL    BANKRUPTCY    LAW.  ClI.  12 

§327.  Refusal  to  receive  share.— The  court  has  no  power 
to  imprison  a  creditor  for  refusing-  to  receive  money  on  finality 
of  a  composition,""  nor  will  such  refusal  in  any  way  affect  the 
validity  of  the  proceedings. 

§328.  Conclusiveness.— If  the  court  had  jurisdiction  of  the 
subject  matter  and  the  persons,  and  jurisdiction  is  shown  to 
have  attached,  all  the  subsequent  proceedings  are  presumed 
to  be  regular  and  its  decision  upon  every  question  properly 
arising  in  the  proceeding  is  binding  on  all  courts  till  reversed 
on  appeal.  The  order  of  confirmation  is  conclusive  that  the 
proper  number  of  consents  have  been  obtained ;  that  proper 
and  sufficient  notice  was  given;  that  the  consideration 
deposited  is  valid ;  that  the  papers  are  properly  executed ;  that 
every  act  required  by  the  law  w^as  duly  and  properly  done;*^^ 
and  that  the  court  had  jurisdiction  and  the  proceedings  were 
regular.^9 

§  329.  Appeal.— The  act  gives  the  effect  of  a  discharge  to  an 
order  confirming  a  composition  and  thus  makes  it  the  equiva- 
lent to  an  order  granting  a  discharge,  so  either  the  bankrupt 
or  a  creditor,  if  aggrieved  by  the  granting  or  refusing  of  an 
order  confirming  a  composition,  may  appeal  to  the  Circuit 
Court  of  Appeals.'^*^ 

8  Ben.  390,  F.  C.  14096;  Dimock  v  to  Sec.  25a,  act  of  1898;    U.  S.  ex 

Revere  Copper  Co.,  117  U.  S.  559.  reL  Adler  v.  Hammond,  3  N.  B.  R. 

67  In  re  Hinsdale.  16  N.  B.  R.  58.  104  F.  R.  862,  rev'g  3  N.  B.  N. 
550,  6  Ben.  91,  F.  C.  6526.  R.   15,   103   F.   R.   444,   4  A.   B.  R. 

68  Smith  V.  Engle.  14  N.  B.  R.  583;  see  City  Nat.  Bank  of  Dallas 
481.  V.  Doolittle,  107  F.  R.  236,  5  A.  B. 

69  Sec.  21f,  act  of  1898.  R.  736. 


CHAPTER  XIII. 

WHEN    COMPOSITIONS    SET    ASIDE. 


330. 

(13a)    Compositions - 

-When 

335. 

Parties  in  interest. 

set  aside. 

336. 

Notice. 

331. 

Comparison  of  acts. 

337. 

Jury  trial. 

332. 

Jurisdiction. 

338. 

Pending  application. 

333. 

Power  over. 

339. 

Effect  of  setting  aside 

334. 

Ground  for. 

340. 

Order  setting  aside. 

§  330.     '  (Sec.     13a)     When    compositions    set    aside.— The 

'judge  may,  upon  the  application  of  parties  in  interest  filed  at 
'any  time  within  six  months  after  a  composition  has  been  con- 
'  firmed,  set  the  same  aside  and  reinstate  the  case  if  it  shall  be 
'made  to  appear  upon  a  trial  that  fraud  was  practiced  in  the 
'procuring  of  such  composition,  and  that  the  knowledge  thereof 
'has  come  to  the  petitioners  since  the  confirmation  of  such 
'composition.' 

§  331.  Comparison  of  Acts.— There  was  no  analogous  pro- 
vision in  the  Act  of  1867,  but  by  the  amendment  of  1874^  it 
was  provided  that  "If  it  shall  at  any  time  appear  to  the  court, 
on  notice,  satisfactory  evidence  and  hearing,  that  a  composi- 
tion, under  this  section,  can  not,  in  consequence  of  legal  diffi- 
culties, or  for  any  sufficient  cause,  proceed  without  injustice 
or  undue  delay  to  the  creditors  or  to  the  debtor,  the  court 
may  *  *  *  set  it  aside."  The  difference  in  the  provisions 
of  the  two  Acts  is  accordingly  great.  Under  the  former,  if  at 
any  time  the  court  found  the  composition  could  not  proceed 
"without  injustice  or  delay,"  it  might  be  set  aside.  Under  the 
Act  of  1898,  a  composition  can  only  be  set  aside  upon  an  appli- 
cation filed  within  six  months  after  confirmation  and  for  fraud 
in  procuring  it,  which  the  applicants— who  need  only  be  "par- 
ties in  interest"— must  have  been  ignorant  at  the  time  of  the 
confirmation. 2 


1  18  U.  S.  Stat.  184. 

2  The  difference  in  the  two  acts 
renders  many  of  the  decisions  un- 
der the  earlier  act  inapplicable  to 
the  present,  as  for  instance,  that 
the  court  might,   two  years   after 


the  final  order,  set  aside  a  compo- 
sition, though  in  that  case  it  did 
not  on  account  of  laches  (In  re 
Herman,  17  N.  B.  R.  440,  8  Ben. 
436.  F.  C.  6405);  that  it  could  be 
set  aside  if  not  of  benefit  to  cred- 


217 


218  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  13 

The  provisions  for  the  setting  aside  of  a  composition  and 
of  a  discharge"'  arc  alike  and  hence  what  is  said  as  to  the  latter 
should  be  considered  as  also  Section  12  of  the  act.  The  burden 
rests  upon  the  creditor  seeking  to  have  a  composition  set 
aside,  to  show  by  proper  averments  and  evidence,  sufficient 
grounds  why  this  should  be  done.^ 

§  332.  Jurisdiction.— A  composition  can  only  be  attacked 
in  the  bankruptcy  court  and  there  only  within  six  months  after 
the  order  of  confirmation.  After  that,  and  elsewhere  at  all 
times,  it  is  unimpeachable. 

§  333.  Power  over. — The  court  of  bankruptcy  has  no  power 
to  set  aside  a  composition  except  as  given  in  section  13,  which 
limits  section  2  (9)  of  the  act.^ 

§334.  Ground  for.— The  sole  ground  for  setting  aside  a 
composition  is  fraud,  and  it  must  have  been  unknown  to  the 
applicants  at  the  time  of  confirmation.  The  want  of  knowl- 
edge must  not  only  be  actual  but  legal.  If  on  proper  inquiry 
they  might  have  known  or  if  facts  existed  which  would  have 
caused  a  reasonable  man  to  make  such  inquiry  they  will  be 
charged  with  knowledge.  A  fraudulently  procured  composi- 
tion will  be  set  aside,*^  but  the  voluntary  payment  in  full  of 
other  debts  after  bankrupt's  release  by  composition  does  not 
render  fraudulent  a  promise  to  a  creditor  to  induce  him  to 
sign  composition  "that  no  other  creditor  should  receive  better 
terms,  "^  nor  is  the  failure  of  a  creditor  to  get  notice  because 
his  address  was  misstated  in  the  schedule  through  mistake 
sufficient.^ 

§335.     Parties  in  interest.— See  definition  of,  ante,  §  305. 

itors  as  well  as  bankrupt   (In  re  *  City    Nat.    Bank    of    Dallas   v. 

Allen,  17  N.  B.  R.  157,  F.  C.  210)  ;  Doolittle,  107  F.  R.  236,  5  A.  B.  R. 

that  creditors  who  have  not  proved  736. 

their  debts  can  not  take  part   (In  sin  re  Rudnick,  1  N.  B.  N.  531, 

re  Bryce,   19    N.   B.   R.   287.  F.   C.  93  F.  R.  787.  2  A.  B.  R.  114;   City 

2069);    and  that  creditors  who  ac-  Nat.   Bank  of  Dallas  v.   Doolittle, 

cepted    the    compromise    can    not  supra. 

vote  for  assignee   (Ex  p.  Hamlin,  e  Elfeldt  v.  Snow,  6  N.  B.  R.  57, 

16  N.  B.  R.  320,  2  Lowell,  571,  F.  2  Sawy.  94,  F.  C.  4352. 

C.   5993;   In  re  Herman,  17  N.  B.  Tin  re  Sturgls,  16  N.  B.  R.  304, 

R.  440.  9  Ben.  436,  F.  C.  6405).  8  Biss.  79,  F.  C.  13565. 

3  Sec.  15,  act  of  1898.  8  in  re  Rudnick,  supra. 


Cir.  13  AS    TO    SETTING    ASIDE    COMPOSITIONS.  219 

§  336.  Notice. — Though  no  provision  is  expressly  made  for 
notice  of  the  hearing  on  the  application  to  set  a  composition 
aside  the  better  practice  is  to  give  notice  to  the  parties  inter- 
ested,"^' especially  to  any  creditor  charged  with  being  a  party 
to  the  fraud. 

^337.  Jury  trial.— Section  13  provides  that  "if  it  shall  be 
made  to  appear  upon  a  trial,"  thus  clearly  distinguishing  the 
mode  to  be  adopted  here  from  that  in  section  12,  which  pro- 
vides (par.  c)  for  a  "hearing"  and  (par.  d)  that  the  "judge" 
should  be  satisfied.  The  question  of  fraud  is  to  be  tried  by  a 
jury.    For  further  discussion  of  this  point  see  post  §§  500-510. 

j^  338.  Pending  application.— If  a  note  given  to  applicant 
under  a  composition  falls  due  while  his  application  to  set  such 
composition  aside  is  pending,  the  amount  thereof  should  be 
paid  into  court  by  the  bankrupt  ;^^  but,  if  the  applicant  in  such 
circumstances  does  not  appear  to  receive  payment  after  notice, 
he  is  entitled,  upon  subsequent  refusal,  to  a  summary  order. 

§339.  Effect  of  setting  aside.— Whilfe  a  composition  in- 
duced by  fraud  may  be  set  aside,  the  property  acquired  by  the 
bankruj)t,  in  addition  to  his  estate  at  the  time  the  composition 
was  confirmed,  must  be  applied  to  the  payment  in  full  of  claims 
of  creditors  for  property  sold  to  him  on  credit  in  good  faith 
while  such  composition  was  in  force,  and  the  residue,  if  any, 
added  to  his  estate  in  bankruptcy^  ^  to  be  applied  to  the  pay- 
ment of  debts  arising  at  the  time  of  adjudication.  Whenever 
a  composition  is  set  aside  the  court  must  reinstate  the  case^^ 
and  the  trustee,  upon  his  appointment  and  qualification,  is 
vested  with  the  title  to  all  of  the  bankrupt's  property  as  of 
the  date  of  the  final  decree  setting  aside  the  composition.^^ 
It  has  been  held  that  where  payments  have  been  made  under 
a  composition  which  is  afterwards  set  aside,  such  payments  are 
not  affected.^"* 

§340.  Order  setting  aside.— A  certified  copy  of  the  order 
setting  a  composition  aside,  not  revoked,  is  evidence  of  the 
jurisdiction  of  the  court,  the  regularity  of  the  proceedings  and 
of  the  fact  that  the  order  was  made.^^ 

9  Ex  p.  Hamlin,  16  N.  B.  R.  320,         12  Sec.  2  (9),  act  of  1898. 
F.  C.  5993 ;  Re  Dunn,  53  F.  R.  341.         is  Sec.  70d,  act  of  1898. 

10  In  re  Reynolds,  16  N.  B.  R.  i*  Ex  p.  Hamlin,  16  N.  B.  R.  320, 
176,  P.  C.  11725.  2  Lowell,  571,  F.  C.  5993. 

"  Sec.  64c,  act  of  1898.  15  Sec.  21f,  act  of  1898. 


CHAPTER  XIV. 


WHEN    DISCHARGE    GRANTED. 


§341.  (14a)     Application    for    dis-       369. 
charge.  370. 

342.  Discharge,  who  is  entitled  to. 

343.  Form  of  application.  371. 

344.  Time  for  applying. 

345.  Adjournment  of  hearing.  372. 

346.  (b)  Hearing  and  grounds  for       373. 

refusing  discharge.  374. 

347.  Who  may  oppose  a  discharge.       375. 

348.  Specification  of  objections. 

349.  Time  of  filing.  376. 

350.  Bankrupt  need  not  plead 

to.  377. 

351.  Burden  of  proof.  378. 

352.  Referee  to  rule   on  evi-       379. 

dence.  380. 

353.  Fraudulent     conveyance 

as  showing  concealment  of       381. 
assets. 

354.  When    evidence    admis-       382. 

sible.  383. 

355.  Buying    off    opposition,       384. 

to  discharge.  385. 

356.  Grounds     for     refusing     dis-       386. 

charge.  387. 

357.  Must  have  arisen  since 

enactment  of  law.  388. 

358.  Transfer,  destruction  or 

concealment  of  assets.  389. 

359.  On  advice  of  counsel. 

360.  Omission     of     non-dis-       390. 

chargeable   debts.  391. 

361.  False  oath.  392. 

362.  Schedules.  393. 

363.  Books  of  account. 

364.  Failure  to  keep. 

365.  Intent  to  conceal  finan-       394. 

cial  condition  necessary. 

366.  Concealment  of,  etc.  395, 

367.  Proper  books  of  account. 

368.  Improper  books  of  account. 


Impeachment  of  a  discharge. 

Obtaining  property  on  credit, 
when  a  bar. 

A  former  discharge,  when  a 
bar. 

Contumacy,  when  a  bar. 

Partnership,  discharge  of. 

of  member  of  firm. 

Court  will  not  look  for  fraud 
or  irregularity. 

Discharge    not    refused    for 
failure  to  pay  costs. 

Acts  not  barring  a  discharge. 

Fraudulent    conveyance. 

General  assignment. 

Failure  to  oppose  after  notice 
equivalent  to  consent. 

Discharge,  refusal  of  not  dis- 
cretionary. 

How  proved. 

Must  be  pleaded. 

Not  pleaded. 

Replication  to  plea  of. 

Effect  of  discharge. 

On     collateral     proceed- 
ings. 

Of   husband's   discharge 

on   wife's  debts. 

Time  and  place  to  determine 
effect. 

Discharge  is  personal. 

New  promise  to  pay  debt. 

Application   for  rehearing, 
(c)  Confirmation  of  composi- 
tion    operates    as     a     dis- 
charge. 

Composition,    time    of    offer- 
ing, etc. 

Discharge   through   cpmposi- 
tion. 


§  341.     '  (Sec.  14a)    Application  for  discharge.— Any  person 
'may,  after  the  expiration  of  one  month  and  within  the  next 

220 


Ch.  14  GROUNDS    FOR    REFUSING    DISCHARGE.  331 

'twelve  months  subsequent  to  being  adjudged  a  bankrupt,  file 
'an  application  for  a  discharge  in  the  court  of  bankruptcy  in 
'which  the  proceedings  are  pending;  if  it  shall  be  made  to 
'appear  to  the  judge  that  the  bankrupt  was  unavoidably  pre- 
'  vented  from  filing  it  within  such  time,  it  may  be  filed  within 
'but  not  after  the  expiration  of  the  next  six  months.'^ 

§  342.  Who  is  entitled  to  discharge.— This  is  the  correlative 
of  "Who  may  be  a  bankrupt,"-  for  the  law  does  not  offer  a 
meaningless  and  useless  proceeding,  but  says  that  certain  per- 
sons may  become  bankrupt  through  voluntary  or  involuntary 
proceedings  and  to  such  gives  the  discharge  provided  for  in 
this  section  as  of  right,  unless  the  bankrupt  is  guilty  of  one  of 
the  offenses  prescribed  in  the  act.  The  fact  that  a  bankrupt 
is  a  non-resident  of  the  district  does  not  affect  his  right  to  a 
discharge.^  A  corporation  or  partnership  which  has  been  ad- 
judged bankrupt  is  entitled  to  a  discharge  in  all  respects  as  an 
individual  would  be  ;^  and  a  bankrupt  who  was  refused  a  dis- 
charge under  the  act  of  1867  is  not  estopped  from  applying 
for  a  discharge  under  the  present  act  for  the  same  debts  and 
on  the  same  facts.^ 

§343.  Form  of  application  for  discharge.— The  application 
for  a  discharge  should  be  substantially  in  the  prescribed  form,<* 
and  as  soon  as  it  is  filed  an  order  of  notice  thereon'^  issues,  com- 
pliance with  which  is  shown  by  the  certificate  of  the  clerk  and 
the  affidavit  of  the  newspaper  publisher  or  other  person  cog- 
nizable of  the  fact.  Personal  notice  of  the  application  is  not 
essential  to  the  binding  force  of  the  decree  granting  a  dis- 
charge.^ 

§  344.     Time  for  making  application.— After  the  expiration 

1  Analogous  provision  of  Act  of  -  See  Sec.  4,  act  of  1898,  ante. 

1867.      "Sec.   29.     .     .     .     That    at  a  In  re  Goodale.  109  F.  R.  783,  6 

any  time  after  the  expiration    of  A.  B.  R.  493. 

six  months  from  the  adjudication  •*  In  re  Marshall  Paper  Co.,  2  N. 

of  bankruptcy,  or  if  no  debts  have  B.  N.  R.  1053,  102  F.  R.  872,  4  A, 

been  proved  against  the  bankrupt,  B.  R.  468. 

or  if  no  assets   have  come  to  the  ■>  In  re  Herrman,  2  N.  B.  N.  R. 

hands  of  the  assignee,  at  any  time  905,  102  F.  R.  753,  4  A.  B.  R.  139. 

after  the  expiration  of  sixty  days,  i>  Form  57. 

and  within  one  year  from  the  ad-  '  Form  57. 

judication  of  bankruptcy,  the  bank-  »  National  Bank  v.  Moyses,   186 

rupt  may  apply  to  the  court  for  a  U.  S.  181,  8  A.  B.  R.  1. 
discharge  from  his  debts.     .     .     ." 


233  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

of  one  month  and  within  twelve  months  of  his  adjudication,  a 
bankrupt  has  an  absolute  right  to  apply  for  a  discharge,  and 
after  that,  and  within  the  next  six  months,  it  may  be  filed  by 
leave  of  court,*'  if  it  shall  be  made  to  appear  to  the  judge  that 
he  was  unavoidably  prevented  from  making  his  application 
within  the  year.  Where  the  application  is  filed  more  than 
twelve  months  after  an  adjudication,  but  without  leave  and 
without  a  showing  of  unavoidable  delay,  leave  will  not  be 
granted  nunc  pro  tune,  if  prayed  for  after  the  expiration  of 
the  period  of  eighteen  months  fixed  by  law.^^  The  refusal  of 
an  application  for  discharge  on  the  ground  that  it  is  not  made 
Avithin  this  prescribed  period  is  not  a  bar  to  the  filing  of  a 
new  petition,^  ^  and  the  filing  of  a  new  petition  under  such 
circumstances  constitutes  an  abandonment  of  the  first  petition, 
so  that  the  court  will  have  jiu'isdiction,  which  is  also  conferred 
where  the  first  petition  is  withdrawn.^-  Under  the  act  of 
1867  it  was  held  that  whatever  be  the  showing  of  unavoid- 
able delay  in  the  filing  of  the  application  for  discharge,  it 
had  to  be  made  before  the  administration  of  the  estate  was 
completed  and  the  trustee  discharged,^ ^  though  in  view  of 
the  clear  terms  of  the  present  statute  that  would  not  now  be 
true.  The  provisions  of  this  clause  apply  both  to  involuntary 
and  voluntary  bankrupts.^-* 

§  345.  Adjournment  of  hearing.— The  proceedings  upon  the 
order  to  show  cause  why  the  discharge  shall  not  be  granted 
can,  on  the  return  day  of  the  order,  be  postponed  by  reason  of 
the  adjournment  of  the  examination  of  the  bankrupt,  or  for 
other  good  reason, ^^  but  should  not  be  adjourned  to  await  the 
result  of  protracted  litigation,  a  speedy  hearing  and  decision 
being  desirable. 

!'  In  re  Fahy,  8  A.  B.  R.  354,  116  i3  In  re  Brightman,  15  N.  B.  R. 

F.  R.  239.  213,  14  Blatch.  130,  F.  C.  1878;   In 

10  In  re  Wolff,  100  F.  R.  430,  4  re  Cross,  16  N.  B.  R.  294,  F.  C. 
A.  B.  R.  74.  3427. 

11  In  re  Wolff,  supra;  In  re  Far-  n  In  re  Clark,  3  N.  B.  R.  3,  2 
rell,  5  N.  B.  R.  125,  F.  C.  4680;  In  Biss.  73,  F.  C.  2800;  In  re  Bunster. 
re  Royal,  113  F.  R.  140,  7  A.  B.  R.  5  N.  B.  R.  82,  5  Ben.  242,  F.  C. 
636.  2136. 

12  In  re  White,  18  N.  B.  R.  106,  i"  In  re  Mawson,  1  N.  B.  R.  41, 
F.  C.  17,  533;  In  re  Svenson.  19  F.  C.  9320;  In  re  Thompson,  1  N. 
N.  B.  R.  229,  9  Biss.  69,  F.  C.  13.  B.  N.  65,  2  Ben.  166,  F.  C.  13,  935. 
659. 


Ch.  14  WHO    MAY    OPPOSE    DISCHARGE.  223 

§346.     'b.    Hearing  and  grounds  for  refusing  discharge.— 

'The  judge  shall  hear  the  application  for  a  discharge,  and  such 
'proofs  and  pleas  as  may  be  made  in  opposition  thereto  by 
'parties  in  interest,  at  such  time  as  will  give  parties  in  interest 
'a  reasonable  opportunity  to  be  fully  heard,  and  investigate 
'the  merits  of  the  application  and  discharge  the  applicant 
'unless  he  has 

'  (1)  Committed  an  offense  punishable  by  imprisonment  as 
'herein  provided;  or 

'  (2)  With  intent  to  conceal  his  financial  condition,  de- 
'stroj^ed,  concealed,  or  failed  to  keep  books  of  account  or 
'records  from  which  such  condition  might  be  ascertained;  or 

'  (3)  Obtained  property  on  credit  from  any  person  upon  a 
'materially  false  statement  in  writing  made  to  such  person 
'for  the  purpose  of  obtaining  such  property  on  credit;  or 

'  (4)  At  any  time  subsequent  to  the  first  day  of  the  four 
'months  immediately  preceding  the  filing  of  the  petition  trans- 
'f erred,  removed,  destroyed,  or  concealed,  or  permitted  to  be 
'removed,  destroyed,  or  concealed  any  of  his  property  with 
'intent  to  hinder,  delay,  or  defraud  his  creditors;  or 

'  (5)  In  voluntary  proceedings  been  granted  a  discharge 
in  bankruptcy  within  six  years;  or 

'  (6)  In  the  course  of  the  proceedings  in  bankruptcy  re- 
'  fused  to  obey  any  lawful  order  of  or  to  answer  any  material 
'question  approved  by  the  court.^^ 

16  Prior  to  the  act  of  February  'keep  books  of  account  or  records 

5,   1903,   subdivision  "b"  provided  'from    which    his    true    condition 

as   follows:      'b.    The   judge   shall  'might  be  ascertained.' 

'hear    the    application    for   a    dis-  Analogous   provision   of   Act   of 

'charge,  and  such  proofs  and  pleas  1867.     "Sec.  29.     .     .     .     the  court 

'as    may    be    made    in    opposition  shall  thereupon  order  notice  to  be 

'thereto  by  parties  in  interest,  at  given  by  mail  to  all  creditors  who 

'such  time  as  will  give  parties  in  have   proved   their   debts,   and   by 

'interest  a  reasonable  opportunity  publication,     ...     to  appear  on 

'to  be  fully  heard,  and  investigate  a  day  appointed  for  that  purpose, 

'the  merits  of  the  application  and  and  show  cause  why  a  discharge 

'discharge  the  applicant  unless  he  should  not  be  granted  to  the  bank- 

'has     (1)     committed    an    offense  rupt.       No     discharge     shall     be 

'punishable    by    imprisonment    as  granted,   or,   if  granted,   be  valid, 

'herein    provided;      or     (2)     with  if  the  bankrupt  has  wilfully  sworn 

'fraudulent  intent  to   conceal   his  falsely  in  his  affidavit  annexed  to 

'true    financial    condition    and    in  his  petition,  schedule,  or  inventory, 

'contemplation  of  bankruptcy,  de-  or  upon   any  examination    in   the 

'stroyed,    concealed,    or    failed    to  course  of  the  proceedings  in  bank- 


224: 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch.  14 


ruptcy,  in  relation  to  any  material 
fact  concerning  his  estate  or  his 
debts,  or  to  any  other  material 
fact;  or  if  he  has  concealed  any 
part  of  his  estate  or  effects,  or  any 
books  or  writing  relating  thereto, 
or  if  he  has  been  guilty  of  any 
fraud  or  negligence  in  the  care, 
custody,  or  delivery  to  the  assignee 
of  the  property  belonging  to  him 
at  the  time  of  the  presentation 
of  his  petition  and  inventory,  ex- 
cepting such  property  as  he  is  per- 
mitted to  retain  under  the  provis- 
ions of  this  act,  or  if  he  has 
caused,  permitted,  or  suffered  any 
loss,  waste,  or  destruction  thereof; 
or  if,  within  four  months  before 
the  commencement  of  such  pro- 
ceedings, he  has  procured  his 
lands,  goods,  money,  or  chattels  to 
be  attached,  sequestered,  or  seized 
on  execution;  or  if,  since  the  pas- 
sage of  this  act,  he  has  destroyed, 
mutilated,  altered,  or  falsified  any 
of  his  books,  documents,  papers, 
writings,  or  securities,  or  has 
made  or  been  privy  to  the  making 
of  any  false  or  fraudulent  entry 
in  any  book  of  account  or  other 
document,  with  intent  to  defraud 
his  creditors;  or  has  removed  or 
caused  to  be  removed  any  part  of 
his  property  from  the  district, 
with  intent  to  defraud  his  cred- 
itors; or  if  he  has  given  any 
fraudulent  preference  contrary  to 
the  provisions  of  this  act,  or  made 
any  fraudulent  payment,  gift, 
transfer,  conveyance,  or  assign- 
ment of  any  part  of  his  property, 
or  has  lost  any  part  thereof  in 
gaming,  or  has  admitted  a  false  or 
fictitious  debt  against  his  estate; 
or  if.  having  acknowledged  that 
any  person  has  proved  such  false 
and  fictitious  debt,  he  has  not  dis- 
closed the  same  to  his  assignee 
within  one  month  after  such 
knowledge;     or    if,    being   a   mer- 


chant or  tradesman,  he  has  not. 
subsequently  to  the  passage  of  this 
act,  kept  proper  books  of  account, 
or  if  he,  or  any  person  in  his 
behalf,  has  procured  the  assent  of 
any  creditor  to  the  discharge,  or 
influenced  the  action  of  any  cred- 
itor at  any  stage  of  the  proceed- 
ings by  any  pecuniary  considera- 
tion or  obligation;  or  if  he  has, 
in  contemplation  of  becoming 
bankrupt,  made  any  pledge,  pay- 
ment, transfer,  assignment  or  con- 
veyance of  any  part  of  his 
property,  directly  or  indirectly, 
absolutely  or  conditionally,  for  the 
purpose  of  preferring  any  creditor 
or  person  having  a  claim  against 
him,  or  who  is  or  may  be  under 
liability  for  him,  or  for  the  pur- 
pose of  preventing  the  property 
from  coming  into  the  hands  of  the 
assignee,  or  of  being  distributed 
under  this  act  in  satisfaction  of 
his  debts;  or  if  he  has  been  con- 
victed of  any  misdemeanor  under 
this  act,  or  has  been  guilty  of  any 
fraud  whatever  contrary  to  the 
true  intent  of  this  act. 

"Sec.  30.  .  .  .  That  no  per- 
son who  shall  have  been  discharged 
under  this  act,  and  shall  after- 
wards become  bankrupt,  on  his 
own  application  shall  be  again  en- 
titled to  a  discharge  whose  estate 
is  insufficient  to  pay  seventy  per 
centum  of  the  debts  proved  against 
it,  unless  the  assent  in  writing  of 
three-fourths  in  value  of  his  cred- 
itors who  have  proved  their  claims 
is  filed  at  or  before  the  time  of 
application  for  discharge;  but  a 
bankrupt  who  shall  prove  to  the 
satisfaction  of  the  court  that  he 
has  paid  all  the  debts  owing  by 
him  at  the  time  of  any  previous 
bankruptcy,  or  who  has  been  vol- 
untarily released  therefrom  by  his 
creditors,  shall  be  entitled  to  a  dis- 
charge  in   the   same   manner  and 


Ch.  14 


OBJECTIONS    TO    DISCHARGE. 


235 


§  347.  Who  may  oppose  a  discharge.— "Parties  in  interest," 
which  would  include  creditors  scheduled  by  the  bankrupt, 
without  regard  to  whether,  or  not,  they  had  proved  their 
claims,  may  oppose  a  discharge.^ ^  This  is  unlike  the  Act  of 
1867,  under  which  it  was  a  disputed  point  whether  a  creditor 
who  had  not  proved  his  debt  could  be  heard  in  opposition  to 
the  discharge  of  the  bankrupt,^ ^  but  is  in  accord  with  the  Act 
of  1841,  which  was,  in  this  respect,  worded  similarly  to  that 
of  the  Act  of  1898,  since  it  referred  to  "other  parties  in  inter- 
est," and  under  which  it  was  held  that  creditors  who  had  not 
proved  their  debts  might  oppose  the  discharge,-^  and  even 
persons  having  contingent  claims  incapable  of  proof.  It  would 
seem  that  if  such  party  in  interest  neglected  to  prove  his  ob- 
jections, other  creditors  might  do  so.^i  An  objection  that  a 
creditor  is  not  entitled  to  oppose  bankrupt's  discharge  because 
of  acquiescence  is  immaterial,  if  the  facts  sustain  such  ground.22 
An  attorney  at  law  admitted  to  practice  in  the  United  States 
District  Court  who  enters  his  appearance  and  files  objections 


with  the  same  effect  as  if  he  had 
not  previously  been  bankrupt. 

"Sec.  31.  .  .  .  That  any  cred- 
itor opposing  the  discharge  of  any 
bankrupt  may  file  a  specification 
in  writing  of  the  grounds  of  his 
opposition,  and  the  court  may  in 
its  discretion  order  any  question 
of  fact  so  presented  to  be  tried 
at  a  stated  session  of  the  district 
court. 

"Sec.  32.  .  .  .  That  if  it  shall 
appear  to  the  court  that  the  bank- 
rupt has  in  all  things  conformed  to 
his  duty  under  this  act,  and  that 
he  is  entitled,  under  the  provisions 
thereof,  to  receive  a  discharge,  the 
court  shall  grant  him  a  discharge 
from  all  his  debts  except  as  here- 
inafter provided,  and  shall  give 
him  a  certificate  thereof  under  the 
seal  of  the  court  [here  follows  cer- 
tificate]. 

"Sec.  33.  .  .  .  And  in  all 
proceedings  in  bankruptcy  .  .  . 
no  discharge  shall  be  granted  to  a 
debtor    whose    assets    do   not    pay 


fifty  per  centum  of  the  claims 
against  his  estate,  unless  the  as- 
sent in  writing  of  a  majority  in 
number  and  value  of  his  creditors 
who  have  proved  their  claims  is 
filed  in  the  case  at  or  before  the 
time  of  application  for  discharge." 

18  In  re  Frice,  1  N.  B.  N.  432, 
2  A.  B.  R.  674,  96  F.  R.  611. 

19  In  re  Murdock,  3  N.  B.  R.  36, 

I  Lowell,  362,  F.  C.  9939;  In  re 
Sheppard,  1  N.  B.  R.  115,  F.  C.  12, 
753;  In  re  Boutelle,  2  N.  B.  R.  51, 
F.  C.  1705;  In  re  Stansfield,  16  N. 
B.  R.  268,  4  Sawy.  334,  F.  C.  13294; 
In  re  Burk,  3  N.  B.  R.  76,  Deady, 
425,  F.  C.  2156;  In  re  Palmer,  3  N. 

B.  R.  77,  F.  C.  10,  682;  In  re  Borst, 

II  N.  B.  R.  96,  F.  C.  1666. 

20  In  re  Book.  3  McLean,  317.  F. 

C.  1637. 

21  In  re  Houghton,  10  N.  B.  R. 
337,  2  Lowell,  328.  F.  C.  6730;  con- 
tra. In  re  McDonald,  14  N.  B.  R. 
477,  F.   C.  4753. 

22  In  re  Hoffman,  2  N.  B.  N.  R. 
969,  102  F.  R.  979,  4  A.  B.  R.  331. 


226  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

to  the  discharge,  on  behalf  of  a  creditor,  must  be  presumed  to 
have  authority  to  do  so  without  any  special  written  power  of 
attorney  to  take  such  action.^^ 

§  348.  Specification  of  objections.— Whenever  the  objections 
to  the  granting  of  a  discharge  rest  on  facts,  there  must  be  a 
specification  in  order  that  the  bankrupt  may  be  advised  of 
what  he  is  accused,  the  judge  or  referee  know  to  what  the 
testimony  is  to  be  directed  and  a  trial  of  the  fact  be  had.^* 
Such  specification  must  contain  a  distinct,  specific  and  un- 
equivocal allegation  that  the  offense  complained  of  has  been 
committed  by  the  bankrupt  knowingly  and  with  fraudulent 
intent,-^  in  or  subsequent  to  the  verification  of  the  petition  or 
schedules,  and  also  a  full  statement  of  the  essential  facts,  as 
distinguished  from  conclusions  of  law,^^  necessary  to  establish 
the  commission  of  the  offense,  though  not  necessarily  with  the 
technical  certainty  required  in  an  indictment,  and  should  be 
verified  like  any  other  pleading.  If  signed  by  counsel  the 
reason  should  be  stated.^^  The  right  to  object  to  a  defective 
specification  is  waived  if  the  objection  is  not  raised  at  the 
proper  time.^^  The  bankrupt  may  file  exceptions  to  insuffi- 
cient specifications,  or  he  may  demur,  or  he  may  rely  upon 
his  defence  at  the  time  of  hearing,  for  vague  and  general 
specifications  will  be  disregarded.^^  While  the  allegation  need 
not  be  in  the  phraseology  or  words  of  the  statute,  it  must  be 
in  such  equivalent  language  as  conveys  the  full  sense  of  the 
statute,  and  leaves  nothing  to  inference  or  construction,  for 
each  specification  must  be  complete  in  itself  and  independent 
of  support  from  any  other  source.^*^     A  specification  in  vague, 

23  In  re  Gasser,  5  A.   B.  R.  32;         26  in  re  Goodale,  109  F.  R.  783, 
but   see   Creditors    v.    Williams,    4     6  A.  B.  R.  493. 

N.   B.  R.  187,   F.  C.  3379,  Contra;  27  in    re    Baerncopf,    117    F.    R. 

In  re  Glass,  119  F.  R.  509.  975,  9  A.  B.  R.  133. 

24  In  re  White,  18  N.  B.  R.  106,  2s  in  re  Osborne,  115  F.  R.  1,   8 
F.  C.   17533.  A.  B.  R.  165. 

25  In  re  Beebe,  116  F.  R.  48;   8  29  in  re  Crist,  9  A.  B.  R.  1,  116 
A.  B.  R.  597;    In  re  Mudd,  105  F.  F.  R.  1007. 

R.  348,  5  A.  B.  R.  242;  In  re  Bla-  »<>  in  re  Mudd,  2  N.  B.  N.  R. 
lock,  118  F.  R.  679;  In  re  Crist,  9  1112;  In  re  Pierce.  102  F.  R.  977, 
A.  B.  R.  1;  In  re  Bemis,  5  A.  B.  4  A.  B.  R.  489;  In  re  Hunter, 
R.  36;  In  re  Pierce,  103  F.  R.  64,  2  N.  B.  N.  R.  490;  In  re  Marsh, 
4  A.  B.  R.  554.  2  N.  B.  N.  R.  649;     In  re  Kaiser. 

Id.   123.  99  F.  R.   689.  3  A.  B.  R. 


Ch.  14 


DISCHARGE— BURDEN    OF    PROOF. 


327 


indtliuite  or  general  terms  is  insufficient,"^ ^  as  that  the  baniv- 
rupt  has  olfered  to  surrender  all  his  property  and  that  he  is 
withholding  property  from  his  creditors  f-  or  that  he  has  con- 
cealed part  of  his  effects  from  the  court,  or  has  in  contempla- 
tion of  bankruptcy  made  payments,  transfers  and  assignments 
preferring  a  creditor  ;3^  or  that  he  has  omitted  property  from 
his  schedule  willfully,^-'  or  with  fraudulent  intent  ;^'^  or  that 
he  swore  falsely  that  he  was  indebted  to  a  creditor  named  in 
his  schedule  and  did  not  disclose  to  his  trustee  that  the  claim 
was  false  and  fictitious,  without  alleging  that  he  knew  the 
claim  was  false  ;^*^  or  charging  concealment  of  assets  and  con- 
cealment, removal,  alteration  and  destruction  of  books  and 
papers  without  averring  fraudulent  intent -^'^  or  that  the  bank- 
rupt swore  that  the  schedules  contained  a  full  and  true  list  of 
the  creditors  and  assets  and  that  it  appears  bankrupt  did  not 
know  whether  the  schedule  was  complete  or  not.^*  If  the  ob- 
jections to  the  specification  be  insufficient  in  law,  they  will 
be  overruled.3^ 


767;  In  re  Headley,  2  N.  B.  N. 
R.  684;  In  re  Peacock,  2  N.  B. 
N.  R.  758,  101  F.  R.  560,  4  A.  B.  R. 
136;  In  re  Hirsch,  96  F.  R.  468,  2 

A.  B.  R.  715;   In  re  Holman,  1  N, 

B.  N.  552,  1  A.  B.  R.  600,  92  F.  R. 
512;  In  re  McGurn,  2  N.  B.  N.  R. 
877,  4  A.  B.  R.  459,  102  F.  R.  743; 
In  re  Thomas,  1  N.  B.  N.  329,  1  A. 
B.  R.  515,  92  F.  R.  912;  In  re  Pola- 
koff,  1  N.  B.  N.  232,  1  A.  B.  R.  358; 
In  re  Butterfield,  14  N.  B.  R.  147, 
5  Biss.  120,  F.  C.  2247;  In  re  Hill, 
1  N.  B.  R.  42,  2  Ben.  136,  F.  C. 
6482;  In  re  Freeman,  4  N.  B.  R.  17, 
4  Ben.  245,  F.  C.  5082;  In  re 
Graves,  24  F.  R.  550;  In  re  Hixon. 
1  N.  B.  N.  326,  566.  93  F.  R.  440,  1 

A.  B.  R.  610;  In  re  Rathbone,  1  N. 

B.  R.  50.  2  Ben.  138,  F.  C.  11580; 
In  re  Eidom,  3  N.  B.  R.  27,  F.  C. 
4314. 

31  In  re  Shepherd,  2  N.  B.  N.  R. 
1020;  In  re  Holman.  1  N.  B.  N. 
552,  1  A.  B.  R.  600,  92  F.  R.  512; 
In  re  Hixon.  1  N.  B.  N.  326,  556,  1 
A.  B.  R.  610,  93  F.  R.  440;  In  re 
Tyrrel,  2  N.  B.  R.  73,  F.  C.  14314; 


In  re  Hill,  1  N.  B.  R.  42,  2  Ben. 
136,  F.  C.  6482;  In  re  Beardsley,  1 
N.  B.  R.  52,  F.  C.  1183;  In  re  Han- 
sen. 2  N.  B.  R.  75,  F.  C.  6039;  In  re 
Dreyer,  2  N.  B.  R.  76,  F.  C.  4082; 
In  re  McVey,  2  N.  B.  R.  85,  F.  C. 
8932;  In  re  Rosenfield,  1  N.  B.  R. 
161,  F.  C.  12058;  In  re  Smith,  5 
N.  B,  R.  20,  F.  C.  12985;  In  re 
Blalock.  118  F.  R.  679;  In  re  Crist, 
3  06  F.  R.  1007,  9  A.  B.  R.  1. 

32  In  re  Hirsch,  supra. 

33  In  re  Butterfield,  supra;  In  re 
Hill,  supra;  In  re  Freeman,  supra; 
In  re  Graves,  supra;  In  re  Hixon, 
supra. 

34  In  re  Keefer,  4  N.  B.  R.  126,  F. 
C.  7636;  In  re  Hummitsch,  2  N.  B. 
R.  3,  F.  C.  6866. 

35  In  re  Adams,  2  N.  B.  N.  R. 
1034,  104  F.  R.  72. 

36  In  re  Blumenthal,  18  N.  B.  R. 
575,  F.  C.  1576. 

37  In  re  Condict,  19  N.  B.  R.  142, 
F.  C.  3094. 

3s  In  re  White,  1  N.  B.  N.  202. 
39  In   re  Howell,  105  F.  R.  594; 
In  re  Crist,  9  A.  B.  R.  1. 


228  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

If  the  specification  be  insufficient  they  may  be  amended,*" 
provided  there  be  no  laches,"*!  notwithstanding  that  the 
time  for  original  filing  specifications  has  expired  ;^2  though 
not  after  the  evidence  has  been  taken  to  include  a  new 
charge,^^  nor  unless  the  party  can  specify  facts,  and  his  failure 
to  be  specific  is  excusable.*^  The  application  for  leave  to 
amend  must  be  made  to  the  judge  and  not  to  the  referee,"*^ 
and  its  grant  rests  in  his  sound  discretion.^"  The  w^ant  of 
verification  being  a  mere  irregularity  may  be  supplied  nunc 
pro  tunc,^^  and  cannot  be  objected  to  after  the  testimony  has 
been  taken.^^  Until  the  bankrupt  has  made  a  full  and  suffi- 
cient disclosure,  the  trustee  or  creditors  cannot  be  required  to 
specify  objections  or  definitely  abide  by  objections  which  have 
been  specified.^^ 

§349.  Time  of  filing  specification  of  objections.— A  cred- 
itor opposing  the  discharge  of  a  bankrupt  must  enter  his 
appearance  on  the  return  day  of  the  order  to  show  cause,  and 
file  his  specifications  of  objections  within  ten  days  there- 
after,^*^  though  the  court  may,  in  its  discretion  and  in  a  proper 
case,  relieve  a  jjerson  from  default  if  no  laches  appear,^*  or 
permit  amended'^-  specifications  to  be  pleaded  after  the  expi- 
ration of  that  time.^3  On  motion,  specifications  will  be 
stricken  out,  if  no  appearance  is  made  on  the  order  to  show 

40  In  re  Pierce,  supra;  In  re  46  in  re  Mudd,  105  F.  R.  348,  5 
Quackenbush,  2  N.  B.  N.  R.  964,  4     A.  B.  R.  242. 

A.  B.  R.  274,  102  F.  R.  282;   In  re         *7  in    re    Wolf  stein,    1   N.   B.    N. 
Hirsch,  96,  F.  R.  468,  2  A.  B.  R.     202. 

715;    In  re  Kaiser,  2  N.  B.  N.  R.  48  in  re  Baerncopf,  117  F.  R.  975, 

123,  99  F.  R.  689;  In  re  Glass,  119  9  A.  B.  R.  133. 

F.  R.  509;   In  re  Mclntire,  1  N.  B.  *»  in  re  Long,  3  N.  B.  R.  66,  F. 

R.  115,  2  Ben.  345,  F.  C.  8823,  3  A.  C.  8477. 

B.  R.  767.  50  G.  O.  XXXII;     In  re  Marsh.  2 

41  Patten  v.  Carley,  117  F.  R.  N.  B.  N.  R.  649 ;  In  re  Albrecht,  3 
130,  8  A.  B.  R.  720;  In  re  Mudd,  N.  B.  N.  R.  335,  5  A.  B.  R.  223; 
105  F.  R.  348,  5  A.  B.  R.  242.  In  re  McVey,  2  N.  B.  R.  85,  F.  C. 

42  In  re   Morgan,   2  N.  B.  N.  R.  8932. 

846    101  F.  R.  982,  4  A.  B.  R.  402.  si  In  re  Frice,  1  N.  B.  N.  432,  2 

43  In  re  Pierce,  supra.  A.  B.  R.  674,  96  F.  R.  611. 

44  In  re  Hixon,  1  N.  B.  N.  326,  52  in  re  Mudd,  2  N.  B.  N.  R. 
556,  1  A.  B.  R.  610,  93  F.  R.  440.  1112,  5  A.  B.  R.  242.  105  F.  R.  348; 

45  In  re  Headley,  2  N.  B.  N.  R.  In  re  Osborne,  115  F.  R.  1,  8  A.  B. 
684;   In  re  Kaiser,   2  N.  B.  N.  R.  R.  165. 

123,  99  F.  R.  689;  In  re  Leszynsky,         ss  in  re  Morgan,   2   N.  B.  N.   R. 
2  N.  B.  N.  R,  738,  3  A.  B.  R.  767.     846,  101  F.  R.  982,  4  A.  B.  R.  402. 


Ch.  14  GROUNDS    FOR    REFUSING    DISCHARGE.  229 

cause,^^  or  if  filed  or  amended^-^  after  the  prescribed  time 
without  leave  of  court,  or  no  valid  excuse  is  given  for  the 
delay.^^  The  failure  to  file  the  specification  within  ten  days 
after  the  return  day  of  the  order  to  show  cause  would  prob- 
ably be  cured  by  filing  the  same  nunc  pro  tunc,  provided 
notice  of  opposition  to  the  discharge  had  been  duly  filed,^"^  or 
even  where  it  has  not  been,^^  especially  in  view  of  the  power 
of  the  court  to  enlarge  the  time ;  and,  if  proceedings  in  oppo- 
sition to  discharge  are  adjourned,  this  would  seem  to  give  other 
creditors  the  right  to  file  specifications  during  the  period  of 
adjournment.^^  Additional  time  in  which  to  oppose  a  dis- 
charge may  be  procured  by  creditors,  when  specifications  of 
another  creditor  have  been  overruled  on  grounds  applying  to 
him  alone.^*^  A  creditor  cannot,  as  of  right,  appear  and  oppose 
a  discharge  after  the  return  day,  though  there  be  an  adjourn- 
ment for  some  other  purpose,  but  the  court  may  permit 
opposition  at  any  time  prior  to  discharge  ;^^  nor  can  a  creditor 
who  has  without  fraud  assented  in  writing  to  the  discharge  of 
a  bankrupt,  and  thereby  influenced  others  to  assent,  withdraw 
such  assent,  especially  upon  the  day  fixed  for  the  hearing.^^ 

§350.  Bankrupt  need  not  plead  to  specification.— No 
pleading  by  the  bankrupt  is  necessary  when  specifications  in 
opposition  to  his  discharge  are  filed,  the  specifications  not  being 
confessed  by  failure  to  answer''^  but  requiring  to  be  proved.^^ 
If  there  is  reason  to  do  so,  the  bankrupt  may  demur,  seek  by 
motion  or  exception  the  relief  desired,  or  answer .^^ 

§  351.  Burden  of  proof. — The  filing  of  specifications  in  op- 
position to  a  bankrupt's  application  for  discharge  does  not 
make  out  a  prima  facie  case  against  the  bankrupt  which  he  is 
bound  to  disprove,  but  the  burden  of  proof  is  upon  the  cred- 

54  In  re  Smith,  5  N.  B.  R.  20,  F.  6o  in    re   Antisdel,    18    N.    B.    R. 

C.  12985.  289,   F.   C.   490. 

■>•'  In  re  Clothier,  108  P.  R.  199,  ei  in  re  Houghton,   10   N.  B.  R. 

6  A.  B.  R.  203.  337,  F.  C.  6730;   In  re  Olmstead,  4 

56  In  re  Albrecht,  104  F.  R.  974.  N.  B.  R.  71,  F.  C.  10505. 

57  In  re  Marsh,  2  N.  B.  N.  R.  62  in  re  Brent,  8  N.  B.  R.  444,  2 
649;  In  re  Frice,  1  N.  B.  N.  432,  2  Dill.  129,  F.  C.  1832. 

A.  B.  R.  674;   In  re  Grefe.  2  N.  B.         es  in  re  Crist,  116  F.  R.  1007,  9 

R.  106,  F.  C.  5794.  A.  B.  R.  1. 

58  In  re  Levin,  14  N.  B.  R.  385,  7  64  in  re  Logan.  102  F.  R.  876,  2 
Biss.  231,  F.  C.  8291.  N.  B.  N.  R.  1056,  4  A.  B.  R.  525. 

5!'  In  re  Tallman,  1  N.  B.  R.  145,  65  in  re  Marsh,  2  N.  B.  N.  R. 
2  Ben.  404,  F.  C.  13740.  649;   In  re  McNamara,  1  N.  B.  N. 

326,  2  A.  B.  R.  576. 


230 


THE    NATIONAL    BANKRUPTCY    LAW. 


Cn.  U 


itors®^  and  if  the  specifications  are  not  sustained  by  proper 
proof,  they  will  be  dismissed.""  The  testimony  of  witnesses 
other  than  the  bankrupt  taken  at  the  first  meeting  of  creditors 
under  Section  21,  is  inadmissible  in  support  of  the  specifica- 
tions in  opposition."^  To  prove  concealment  of  property  from 
the  trustee,  it  is  not  sufficient  to  show  merely  bankrupt's 
former  ownership  of  certain  goods  and  that  he  is  not  now 
able  to  account  for  them,  but  there  must  be  evidence  of  his 
present  possession  or  control  of  such  property,  or  of  a  secret 
trust  for  his  benefit  in  such  property."^  If  the  evidence  leaves 
in  doubt  the  existence  of  a  fraudulent  mtent,"*^  it  is  not  to 
be  presumed,  but  must  be  proved,  not  necessarily  by  direct 
testimony,  but  it  may  be  proved  convincingly  by  circumstan- 
tial evidence.'''- 

If  the  creditors  have  shown  the  existence  of  assets  and 
their  disappearance  or  large  shrinkage  within  a  short  time 
before  the  bankruptcy,  the  burden'^^  is  then  on  the  bankrupt 


c6  In  re  Corn,  106  F.   R.  143,   5 

A.  B.  R.  478;  In  re  Conn,  108  F. 
R.  525,  6  A.  B.  R.  217. 

6T  In  re  Fitchard,  103  F.  R.  742, 
2  N.  B.  N.  R.  1075,  4  A.  B.  R.  609; 
In  re  Penny,  2  N.  B.  N.  R.  1001;  In 
re  McGurn,  2  N.  B.  N.  R.  877,  4  A. 

B.  R.  459,  102  F.  R.  743;  In  re 
Finan,  2  N.  B.  N.  R.  872;  In  re 
Marsh,  Id.  649;  In  re  Phillips,  Id. 
424,  98  F.  R.  844,  3  A.  B.  R.  542; 
In  re  Berner,  2  N.  B.  N.  R.  268,  3 

A.  B.  R.  325;   In  re  Wetmore,  2  A. 

B.  R.  700,  99  F.  R.  703;  In  re  Id- 
zall,  96  F.  R.  314,  2  A.  B.  R.  741; 
In  re  Okell,  2  N.  B.  R.  35,  F.  C. 
10475;  In  re  Herdic,  19  N.  B.  R. 
385,  1  F.  R.  242,  F.  C.  6403;  In  re 
May,  2  N.  B.  N.  R.  93;  In  re  Hol- 
man,  1  N.  B.  N.  552,  1  A.  B.  R.  600, 
92  F.  R.  512;  In  re  Schreck,  1  Id. 
334,  1  A.  B.  R.  366;  In  re  Hixon, 
1  Id.  326,  556,  1  A.  B.  R.  610,  93  F. 
R.  440;  In  re  Polakoff,  1  N.  B.  N. 
232,  1  A.  B.  R.  358;  In  re  Boasberg, 
1  N.  B.  N.  133,  1  A.  B.  R.  353;  In 
re  Baerneopf,  117  F.  R.  975. 

fis  In  re  Wilcox,  109  F.  R.  628.  6 
A.  B.  R.  362. 


ea  In  re  Hoffman,  2  N.  B.  N.  R. 
969,  102  F.  R.  979,  4  A.  B.  R.  331; 
In  re  Penny,  2  N.  B.  N.  R.  1001;  In 
re  Berher,  2  N.  B.  N.  R.  268,  3  A. 
B.  R.  325;  In  re  Cornell,  97  F.  R. 
29,  3  A.  B.  R.  172;  In  re  Idzall,  96 
F.  R.  314,  2  A.  B.  R.  741;  In  re 
Crist,  9  A.  B.  R.  1;  Hudson  v.  Mer- 
cantile Nat.  Bank  of  Pueblo,  Colo., 
119  F.  R.  346. 

70  In  re  Pierce,  103  F.   R.  64,  4 

A.  B.  R.  554;    In  re  McGurn,  2  N. 

B.  N.  R.  877,  102  F.  R.  743,  4  A.  B. 
R.  493;  In  re  Wetmore,  A.  B.  R. 
700,  99  F.  R.  703;  In  re  Schreck,  1 
N.  B.  N.  334,  1  A.  B.  R.  366  ;  In  re 
Sidle,  2  N.  B.  R.  77,  F.  C.  12844; 
In  re  Plager,  2  N.  B.  R.  10;  In  re 
Hill,  1  N.  B.  R.  42,  2  Ben.  136,  F. 

C.  6482;  In  re  Orcutt,  4  N.  B.  R. 
176,  5  Ben.  19,  F.  C.  10550;  In  re 
Herdic,  1  F.  R.  242,  F.  C.  6403. 

71  In  re  Finkelstein,  101  F.  R. 
418,  2  N.  B.  N.  R.  839,  3  A.  B.  R. 
800;   In  re  Leslie,  119  F.  R.  406. 

72  In  re  Slekter,  2  N.  B.  N.  R. 
951. 


Ch.  14  GROUNDS    FOR    REFUSING    DISCHARGE.  231 

to  account  for  the  diminution  of  his  estate;  and  a  fraudulent 
concealment  may  be  inferred,  if  the  bankrupt  does  not  sat- 
isfactorily explainj^  The  burden  of  proof  does  not  shift 
merely  because  creditors  show  that,  as  between  themselves  and 
the  bankrupt,  there  is  property  not  scheduled."^  The  degree 
of  proof  required  to  establish  objections  which  would  prevent 
the  granting-  of  a  discharge  need  not  be  beyond  a  reasonable 
doubt,'^^  but  there  should  be  a  fair  preponderance  of  the 
credible  evidence,'^^  and  sufficient  to  establish  each  element  by 
clear  and  satisfying  evidence  to  a  high  degree  of  certainty .'^'^ 
§352.  Referee  to  rule  on  evidence.— In  matters  arising  on 
an  application  for  discharge,  the  judge  only  has  power  to 
determine  them  finally,  but  he  may  refer  the  application,  or 
any  issue  thereon,  on  his  own  motion  or  upon  the  petition  of 
the  bankrupt,  trustee,  or  creditors,'**  to  the  referee  to  ascer- 
tain and  report  the  facts,  and  state  his  conclusions  of  law,''^ 
and  before  doing  so,  should  dispose  of  any  technical  objections. 
A  referee  is  authorized  to  rule  upon  the  sufficiency  of  the 
specifications  of  objections  and  will  not  take  evidence  upon 
such  as  are  clearly  insufficient;  but  the  application  for  dis- 
charge must  be  heard  and  finally  determined  by  the  court  of 
bankruptcy ,'^*^  which  will  not  set  aside  a  referee's  report  unless 
it  be  clearly  erroneous.^^  If  exceptions  thereto  be  filed,  the 
errors  must  be  specifically  pointed  out.^-  If  no  objections  are 
filed  to  the  referee's  finding  as  to  facts,  and  the  court  refuses 

73  In  re  Slekter,  2  N.  B.  N.  R.  7  A.  B.  R.  771;  In  re  Miner,  117 
951;  In  re  Cashman,  2  N.  B.  N.  R.  F.  R.  953,  8  A.  B.  R.  248;  In  re 
980,  103  F.  R.  67,  4  A.  B.  R.  326;  Gaylord,  112  F.  R.  668,  7  A.  B.  R. 
In  re  Meyers,  1  N.  B.  N.  515,  2  A.  1,  affirming  106  F.  R.  833,  5  A.  B. 
B.    R.    707,    96    F.    R.    408;    In    re  R.   410. 

Wood,  98  F.  R.  972,  3  A.  B.  R.  572;  ts  in  re  Sykes,  106  F.  R.  669,  6 

In  re  Mendelsohn,  102  F.  R.  119;  A.  B.  R.  264. 

In  re  Morgan,  101  F.  R.  982,  2  N.  t9  in  re  Steed,  107  F.  R.  682,  6 

B.  N.  R.  846,  4  A.  B.  R.  402.  A.  B.  R.  73. 

74  In  re  Boasberg,  1  N.  B.  N.  133,  so  Jn   re  Kaiser,    2   N.   B.   N.   R. 

1  A.  B.  R.  353.  123,  99  F.  R.  689,  3  A.  B.  R.  767; 
--'  In  re  Finan,  2  N.  B.  N.  R.  872;      Fellows  v.  Freudenthal,  102  F.  R. 

In  re  Schreck,  1  N.  B.  N.  334,  1  A.  731,  4  A.  B.  R.  490;   In  re  Liszyn- 

B.  R.  366;  In  re  Greenberg,  114  F.  sky,  2  N.  B.  N.  R.  738;  In  re  Mc- 

R.  773,  8  A.  B.  R.  94;  In  re  Marsh,  Duff,  1  A.  B.  R.  110,  101  F.  R.  241. 

2  N.  B.  N.  R.  593;  In  re  Slingluff,  si  In  re  Lafleche,  109  F.  R.  307, 
2  id.  1115,  105  F.  R.  833.  6  A.  B.  R.   483;    In  re  Covington, 

76  In  re  Leslie,  119  F.  R.  406.         110  F.  R.  143,  6  A.  B.  R.  143. 
"  In   re   Berner,   2  N.   B.   N.  R.         S2  in  re  Covington,  supra. 
268;   In  re  Salsbury.  113  F.  R.  833, 


232  THE    NATIONAL    BANKRUPTCY    LAW.  ClI.  14 

a  discharge,  it  will  not  grant  a  rehearing."'-^  Although  ques- 
tions may  arise  upon  the  consideration  of  the  application  for 
discharge  which  are  beyond  the  jurisdiction  of  the  referee,  he 
may  issue  an  order  fixing  the  time  when  creditors  should 
appear  before  the  court  to  show  cause  why  a  discharge  should 
not  be  granted;  and,  if  the  objections  to  a  discharge  are 
frivolous  and  vexatious,  the  costs  may  be  taxed  against  the 
objecting  creditor.^^  If  the  discharge  be  refused,  the  fees  of 
the  referee  may  be  taxed  to  the  bankrupt.^^ 

§353.  Fraudulent  conveyance  as  showing  concealment  of 
assets. — A  judgment  by  a  state  court  in  a  suit  to  which  the 
bankrupt,  his  wife  and  the  trustee  were  parties,  finding  that 
a  conveyance  of  property  by  the  bankrupt  to  the  wife  was 
fraudulent  as  to  creditors,  is  conclusive  evidence,  on  the  bank- 
rupt's subsequent  application  for  discharge  which  is  opposed 
by  creditors  upon  the  ground  of  concealment  of  property .^^ 
A  decision  by  a  bankruptcy  court  upon  an  application  for 
discharge  will  not  be  stayed  to  await  the  result  of  a  pending 
action  in  a  state  court  by  which  creditors  seek  to  set  aside  as 
fraudulent  a  transfer  made  before  the  adjudication  of  bank- 
ruptcy, although  the  same  plaintiffs  oppose  the  bankrupt's 
discharge  on  the  same  ground,  since  the  decree  of  the  state 
court  would  not  necessarily  determine  the  right  of  the  bank- 
rupt to  be  discharged.^'^  While  the  right  of  creditors  to 
oppose  a  bankrupt's  discharge  on  the  ground  of  an  alleged 
fraudulent  transaction  does  not  depend  on  their  having 
taken  legal  action  to  recover  the  property  affected,  if  the 
evidence,  on  the  application  for  discharge,  is  conflicting,  the 
fact  that  no  such  effort  has  been  made  may  be  taken  into 
consideration,  and  if  the  proof  is  evenly  balanced,  will  warrant 
a  decision  in  favor  of  the  bankrupt.^^  The  fraudulent  nature 
of  the  conveyance  must  be  affirmatively  shown,^^  but  when  it 
exists  it  defeats  his  right  to  a  discharge.^*^ 

83  In  re  Royal,  113  F.  R.  140,  7  "  in  re  Cornell,  97  F.  R.   29,  3 

A.  B    R.  636.  A.  B.  R.  172. 

Si  In  re  Wolpert,  1  N.  B.  N.  238,  ss  in  re  Hirsch,  96  F.  R.  468,  2  A. 

1  A.  B.  R.   436.  B.  R.  715. 

85  Bragassa  v.  St.  Louis  Cycle,  so  in  re  Ferris,  105  F.  R.  356,  5 
107  F.  R.  77,  5  A.  B.  R.  700.  A.  B.  R.  246. 

86  In  re  Skinner,  3  A.  B.  R.  163,  9o  in  re  Wilcox,  109  F.  R.  628,  6 
97  F.  R.  190;  In  re  McGurn,  2  N.  B.  A.  B.  R.  362;  In  re  Schenck,  116 
N.  R.  877,  4  A.  B.  R.  459,  102  F.  R.  F.  R.  554. 

743. 


Ch.  14  GROUNDS    FOR    REFUSING    DISCHARGE.  233 

§  354.  When  evidence  admissible.— Evidence  cannot  be  in- 
troduced by  objecting  creditors  without  first  having  filed  a 
specification  of  objections  as  required  by  law.^^  If  filed,  the 
referee  should  not  disregard  a  specification,  but  should  con- 
fine the  evidence  to  the  material  facts  alleged  in  them.'*^  -phe 
testimony  of  the  bankrupt  given  in  his  examination  under 
section  21  of  the  statute,  is  admissible  in  support  of  the 
specifications  in  opposition  to  the  discharge,  but  that  of  other 
witnesses  is  not,  since  as  a  rule  no  issues  have  been  framed 
and  it  cannot  always  be  perceived  what  inferences  may  be 
drawn  from  the  testimony  and  therefore  will  not  produce 
rebutting  facts.^^  Such  evidence  may  be  admitted,  however, 
where  there  is  an  express  stipulation  in  writing  signed  by  the 
parties.^^ 

§  355.     Buying  off  opposition  to  discharge.— Under  the  act 

of  1867,  it  was  held  that  if  the  opposition  of  a  creditor  to  the 
discharge  of  a  bankrupt  was  bought  off  through  the  procure- 
ment or  privity  of  the  bankrupt,  it  was  such  fraud  upon  the 
law  as  would  warrant  the  setting  aside  of  the  discharge,  the 
fact  itself  being  prima  facie  evidence  that  the  bankrupt  was 
not  entitled  to  it,^^  though  if  the  negotiations  for  the  with- 
drawal of  opposition  were  consummated  without  the  actual  or 
constructive  knowledge  of  the  bankrupt,  it  would  not  vitiate 
the  discharge,^^  it  being  held  that  the  suppression  of  such 
opposition  should  be  condemned  as  at  variance  with  the  policy 
of  a  bankruptcy  law,  whether  expressly  prohibited  or  not.^'^ 
Under  the  law  now  m  force  the  buying  off  of  opposition  not 
being  one  of  the  grounds  for  opposing  a  discharge,  the  rule 
prevailing  imder  the  act  of  1867  would  not  now  be  a  valid 
objection. 

91  In  re  Adams,  2  N.  B.  N.  R.  Guardener,  2  N.  B.  N.  R.  924;  In 
1034,  104  F.  R.  72.  re  Steindler,  3  N.  B.  N.  R.  81,  5  A. 

92  In  re  Kaiser,  2  N.  B.  N.  R.  B.  R.  63;  In  re  Mawson,  1  N.  B. 
123,  99  F.  R.  689.  R.  115,  2  Ben.  332,  F.  C.  9318;  Tuz- 

93  In  re  Wilcox,  109  F.  R.  628,  6  bury  v.  Miller,  19  John,  311;  In  re 
A.  B.  R.  362;  In  re  Penny,  2  N.  B.  Douglass,  14  F.  R.  403,  406;  In  re 
N.  R.  1001;  In  re  Krueger,  2  Low-  Palmer,  14  N.  B.  R.  437;  Blasdel 
ell,  182;  In  re  Gaylord,  112  F.  R.  v.  Fowle,  120  Mass.  447;  Bell  v. 
668,  7  A.  B.  R.  1;  In  re  Cooke,  109  Leggett,  7  N.  Y.  176. 

F.  R.  631,  5  A.  B.  R.  434.  96  In    re    Dletz,    supra;      Ex    p. 

94  In  re  Penny,  supra.  Driggs,  2  Low.  389. 

95  In  re  Dietz,  2  N.  B.  N.  R.  125,  «7  Smith  v.  Bromley,  Doug.  Rep. 
3  A.  B.  R.  316,  97  F.  R.  563  •  In  re  696. 


234  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

§  356.  Grounds  for  refusing  discharge.— The  Supreme  Court 
has  held-'^  that  Congress  may  prescribe  any  regulations  con- 
cerning discharges  in  bankruptcy  that  are  not  so  grossly  un- 
reasonable as  to  be  incompatible  with  fundamental  laws,  and 
that  there  is  nothing  in  the  Act  of  1898  on  that  subject  that 
would  justify  an  overthrow  of  its  action.  A  discharge  will  be 
refused  the  bankrupt,  if,  upon  examination,  it  appears  that 
the  requirements  of  the  law  entitling  him  thereto  have  not 
been  complied  with,  or  he  has  failed  to  do  what  he  was  re- 
quired to  do  ;^  or  has  committed  an  offense  punishable  by 
imprisonment,  that  is,  with  unlawful  intent,-  has  knowingly 
and  fraudulently  concealed,  while  a  bankrupt,  or  after  his 
discharge,  from  his  trustee  any  of  the  property  belonging  to 
his  estate  in  bankruptcy,  or  made  a  false  oath  or  account  in, 
or  in  relation  to,  any  proceeding  in  bankruptcy;  or  if  he  has, 
with  intent  to  conceal  his  true  financial  condition,  destroyed, 
concealed,  or  failed  to  keep  books  of  account,  or  records  from 
Avhich  his  true  condition  might  be  ascertained,^  obtained  prop- 
erty on  false  representations,  concealed  or  removed  property 
with  intent  to  prefer,  been  granted  a  discharge  in  voluntary 
proceedings  within  six  years,  or  refused  to  obey  a  lawful  order 
of  the  court  or  answer  a  material  question.  The  decision  of 
a  court  refusing  a  discharge  on  an  issue  of  fraud,  being 
essentially  one  of  fact,  will  not  be  reversed  on  appeal  unless 
manifest  error  appears.^ 

§  357. Must  have  arisen  subsequent  to  enactment  of 

law. — To  constitute  a  valid  objection  to  a  discharge,  the  acts 
complained  of  lAust  have  taken  place  after  the  passage  of  the 
law  and  within  the  period  prescribed  by  it,  and  the  same 
princif)le  applies  to  alleged  dishonest  disposition  of  assets;-'' 
or  of  a  fraudulent  conveyance  or  preference.^ 

9«  National  Bank  v.  Moyses,  186  289,  3  A.  B.  R.  386,  98  F.  R.  404;  In 
U.  S.  181,  8  A.  B.  R.  1.  re  Lieber,  2  N.  B.  N.  R.  21,  3  A.  B. 

1  In  re  Palmer,  14  N.  B.  R.  437,     R.  217;    In  re  Moore,  1  Hask.  134, 

2  Hughes,  177,  F.  C.  10678.  F.  C.  9751;    In  re  Quackenbush,  2 

2  In  re  Smith  v.  Keegan,  111  F.  N.  B.  N.  R.  964,  102  F.  R.  282,  4  A. 
R.  157,  7  A.  B.  R.  4.  B.  R.  274;  In  re  Shorer,  1  N.  B.  N. 

3  Sees.  14b  and  29b,  act  of  1898;  331,  2  A.  B.  R.  165,  96  F.  R.  90;  In 
Strause  et  al.  v.  Hooper  et  al.,  105  re  Stark,  1  N.  B.  N.  232,  1  A.  B.  R. 
F.  R.  590.  5  A.  B.  R.  225.  180;  In  re  Holtz,  1  N.  B.  N.  204. 

*  Osborne  v.   Perkins.   112  F.  R.  e  In    re    House,    2    N.    B.    N.    R. 

127,  7  A.  B.  R.   250.  1099,  103  F.  R.  616,  4  A.  B.  R.  603; 

5  In  re  Webb,  2  N.  B.  N.  R.  11,  In  re  Fitchard,  2  N.  B.  N.  R.  1075. 

3  A.  B.  R.  204,  s.  c.  2  N.  B.  N.  R.  103  F,  R.  742.  4  A.  B.  R.  609;  In  re 


Ch.  14  GROUNDS    FOR    REFUSING    DISCHARGE.  235 

§  358.  Transfer,  destruction  or  concealment  of  assets.— 
By  the  amendment  of  February  5,  1903,  Congress  has  definitely 
enacted  that  a  discharge  will  be  refused  if  the  banlcrupt  has 
"at  any  time  subsequent  to  the  first  day  of  the  four  months 
immediately  preceding  the  filing  of  the  petition  transferred, 
removed,  destroyed,  or  concealed,  or  permitted  to  be  removed, 
destroyed,  or  concealed,  any  of  his  property  with  intent  to 
hinder,  delay,  or  defraud  his  creditors."  Prior  to  this  amend- 
ment a  concealment  of  assets  has  been  held  to  be  a  sufficient 
ground  for  refusing  a  discharge.  What  amounts  to  a  conceal- 
ment of  assets  has  been  frequently  jiassed  upon  by  the  courts 
to  the  following  effect,  and  is  held  to  include  a  transfer  with 
intent  to  defraud  creditors.  The  separation  of  some  tangible 
thing,  money  or  chose  in  action,  from  the  body  of  an  insolvent 
debtor's  estate  and  its  secretion  from  those  who  have  a  right 
to  seize  upon  it  for  the  payment  of  their  debts,  is,  within  the 
law,  a  concealment  and  continues  such  as  long  as  the  secre- 
tion remains.  In  such  a  case  the  property  opened  to  creditors 
is  decreased  by  just  the  amount  thus  secreted.  On  every  oc- 
casion when  it  is  properly  the  bankrupt's  duty  to  disclose  his 
assets,  a  failure  knowingly  to  do  so  will  be  a  concealment  of 
them,'''  and  this  would  be  true  whether  the  property  was  con- 
veyed prior  to  the  passage  of  the  law  or  subsequent,  if  the 
bankrupt  still  retained  a  beneficial  interest  therein  at  the  time 
of  filing  his  petition,  the  concealment  of  title  to  property  being 
as  much  a  concealment  of  assets  under  the  law  as  would  be 
the  actual  hiding  of  the  same.^ 

The  concealment  of  property  may  occur  by  leaving  out  of 
the  schedule  that  which  was  conveyed  in  fraud  of  creditors, 
the  act  of  concealment  being  committed  at  the  time  of  omis- 
sion.^ A  fraudulent  omission  and  concealment  may  consist  of 
the  failure  to  include  as  assets  the  stock  of  goods,  fixtures 
and  materials  in  a  store,  or  money  derived  from  an  accident 
insurance  policy,  or  money  received  from  cash  sales  and  un- 
accounted for,  or  money  withdrawn  from  the  business  just 
previous  to  bankruptcy,  or  a  valuable  estate  in  remainder 
Rosenfield,  1  N.  B.  R.  161,  F.  C.  A.;  In  re  Berner,  2  N.  B.  N.  R. 
12058.  268;    In    re    Quackenbush,    supra; 

'  In  re  Lesser,  108  F.  R.  205,  5  In  re  Fitchard,  2  N.  B.  N.  R.  1075, 
A.  B.  R.  331.  103  F.  R.   742.  4  A.   B.  R.  609. 

8  Citizens  Bank  of  Salem  v.  De  »  In  re  Steed,  107  F.  R.  682,  6  A. 
Paw  Co.,  3  N.  B.  N.  R.  244,  C.  C.     B.  R.  73. 


236  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

under  a  will,  or  assets  concealed  by  the  mode  of  accounting- 
adopted,  or  real  and  personal  property  transferred  within  four 
months  prior  to  the  liling  of  the  petition,  without  consideration 
and  with  intent  to  defraud  creditors,  or  property  conveyed 
reserving  a  secret  trust  to  bankrupt  ;^*^  or  if  bankrupt,  after 
failing,  organized  a  corporation,  and  then  filed  an  individual 
petition,  the  court  may  be  justified  in  treating  the  corporation 
as  a  fiction,  and  the  sums  due  to  it  as  the  assets  of  the  bank- 
rupt j^^  and,  if  there  is  a  disappearance  of  substantial  assets, 
which  are  unlisted  and  unaccounted  for,  the  burden  of  proof 
devolves  upon  the  bankrupt  to  account  for  their  disappear- 
ance ;i  2  a  discharge  will  be  refused,  if  the  bankrupt  puts  into 
his  schedule  as  due  a  debt  which  is  false  or  fictitious.^  ^ 

An  honest,  unintentional  mistake  of  a  bankrupt  in  failing 
to  schedule  certain  creditors  and  debts  will  not  preclude  his 
discharge  against  scheduled  creditors  and  debts,^^  but  will 
preclude  his  discharge  against  the  omitted  ones;^^  or  mere 
omissions  and  inaccuracies,  which  may  be  corrected  b^  amend- 
ment;^'^ or  if  the  omission  or  inaccuracy  is  not  caused  by  a 
fraudulent  intent  to  conceal  the  property  from  his  trustee,  but 
is  the  result  of  a  mistake  of  law  or  of  fact,^'^  or  of  an  honest, 

10  In   re  Penny,    2   N.   B.   N.  R.  In  re  Becker,  106  F.  R.  54,  5  A.  B. 

1001;   In  re  Bernes,  3  N.  B.  N.  R.  R.  438;   In  re  Holstein,  114  F.  R. 

49,    104    F.   R.   672;    In   re   Lowen-  794,  8  A.  B.  R.  147;    In  re  DeGot- 

stein,  1  N.   B.   N.  329,   2  A.  B.  R.  tardi,  114  F.  R.  328;   In  re  Gross- 

193;    In  re  Roy,  1  N.  B.  N.  526,  3  man.  111  F.  R.  507,  6  A.  B.  R.  510; 

A.  B.   R.   37,  96  F.  R.   400;    In  re  In  re  Otto,  115  F.  R.  860,  8  A.  B. 

O'Gara,   97   F.   R.  932,   3   A.   B.  R.  R.  305;   In  re  Otto,  8  A.  B.  R.  305, 

349;  In  re  Mendelsohn,  1  N.  B.  N.  753;    In  re  Bullwinkle,  111  F.   R. 

391;   In  re  Woods,  98  F.  R.  972,  3  364,    6   A.    B.    R.   756;    Osborne   v. 

A.  B.  R.  572;    In  re  McNamara,   1  Perkins,  112  F.  R.  127,  7  A.  B.  R. 

N.  B.  N.  326,  1  A.  B.  R.  566;  In  re  250;  In  re  Schenck,  8  A.  B.  R.  727; 

Dews,  2  N.  B.  N.  R.  437,  101  F.  R.  In  re  Leslie.  Ill  F.  R.  406. 

549,  3  A.  B.  R.  691;  In  re  Skinner,  n  In  re  Horgan.  2  N.  B.  N.  R.  53, 

97  F.  R.  190,  3  A.  B.  R.  163;   In  re  97  F.  R.  319. 

Welch,  1  N.  B.  N.  533,  3  A.  B.  R.  12  In    re   Finkelstein,    101    F.    R. 

93,  100  F.  R.   65;    In  re  Berner,  2  418,  2  N.  B.  N.  R.  839,  3  A.  B.  R. 

N.  B.  N.  R.  268;    In  re  Connell,  3  800. 

N.   B.    R.    113,    F.    C.    3110;    In   re  13  In  re  Heyman,  104  F.  R.  677, 

Rathbone,    1    N.    B.    R.    145,   F.    C.  4  A.  B.  R.   735. 

11583;   In  re  Hussman,  2  N.  B.  R.  i*  In  re  Slingluff,  105  F.  R.  502, 

140,    F.    C.    6951 ;    In    re   Quacken-  2  N.  B.  N.  R.  1115. 

bush,  102  F.  R.  282,  2  N.  B.  N.  R.  i'  in  re  Huber,  1  N.  B.  N.  431. 

964,  4  A.  B.  R.  274;   In  re  Lowen-  in  In  re  Slingluff,  supra, 

stein,  106  F.  R.  51,  7  A.  B.  R.  193;  i'  In  re  Blalock,  118  F.  R.  679; 

In  re  Conn,  108  F.  R.  525.  6  A.  B. 


Ch.  14  GROUNDS    FOR    REFUSING    DISCHARGE.  237 

though  erroneous,  belief  that  he  had  no  available  interest  in 
the  property  ;^'^  or  unless  bankrupt's  contention  that  the  prop- 
erty omitted  was  not  his  is  proven  false  and  that  he  knew  it 
was  false,^^  and  this  is  true  of  an  omission  to  include  an 
advance  of  a  sum  of  money  by  a  bankrupt  to  his  wife,  when 
enjoying-  good  credit,  and  the  return  of  which  he  never 
exacted.2t> 

It  is  no  ground  for  refusing  a  discharge  if  it  appear  that  the 
omission  complained  of  is  of  property  not  belonging  to  the 
bankrupt  ;2^  or  a  pledge  turned  over  to  the  creditor,  holding 
it,  long  before  the  bankruptcy  in  payment  of  his  debt;^^  or  a 
gift  to  one's  wife  made  years  before ;^^  or  property  purchased 
with  money  obtained  by  surrendering  insurance  policies  pay- 
able to  one's  wifer*  or  property  transferred  to  his  wife  long 
before  the  act  and  purchased  largely  on  credit  and  paid  for 
with  the  proceeds  of  a  business  conducted  as  his  wife's  agent. --^ 
Whether  stock  purchased  in  the  wife's  name  with  money 
borrowed  on  the  joint  note  of  husband  and  wife  is  an  asset  of 
the  bankrupt  husband's  estate  can  only  be  determined  by  a 
direct  proceeding  between  the  proper  parties,  and  its  omission 
from  the  schedules  will  not  bar  a  discharge  f^  nor  is  the  omis- 
sion of  money  borrowed  to  pay  the  fees  and  costs  of  filing  the 
petition  ;2'  nor  of  a  trust  fund  in  which  it  is  doubtful  if,  at 
the  time  of  filing  the  petition,  the    bankrupt    had  a  vested 

R.  217;  In  re  Lesser,  114  F.  R.  83,  F.  R.   742,   4  A.   B.  R.   609;    In  re 

8  A.  B.  R.  15;   In  re  Miner,  114  F.  Freund,  2  N.  B.  N.  R.  236,  98  F.  R. 

R.  998.  81,  3  A.  B.  R.  418;    In  re  Hirsch, 

IS  In  re  Finan,  2  N.  B.  N.  R.  872;  2  N.  B.  N.  R.  137,  97  F.  R.  571,  3 

In  re  Morrow,  97  F.  R.  574,  3  A.  B.  A.  B.  R.  344. 

R.  263;  In  re  Crenshaw,  2  A.  B.  R.  22  in  re  Webb.  2  N.  B.  N.  R.  289, 

623,  95  F.  R.  632;  In  re  Hirsch,  96  98  F.  R.  404,  3  A.  B.  R.  386,  s.  c.  2 

F.  R.   468,    2  A.  B.  R.  715;    In  re  N.  B.  N.  R.  11,  3  A.  B.  R.  204. 

Bryant,  2  N.  B.  N.  R.  1061;  In  re  sain  re  Fitchard,   supra;    In  re 

Marsh,  109  F.  R.   602,  6  A.  B.  R.  Freund,  supra;   In  re  House,  2  N. 

537.  B.  N.  R.  1099,  103  F.  R.  616,  4  A.  B. 

19  In  re  Shepherd,  2  N.  B.  N.  R.  R.  603. 

1070.  24  In  re  Dews.  1  N.  B.  N.  411,  96 

20  Sellers  v.  Bell,   94  F.  R.   801,     F.  R.  181.  2  A.  B.  R.  483. 

2  A.  B.  R.  529.  25  in    re    Locks,    supra;      In    re 

21  In  re  Locks,  104  F.  R.  783;  In     Fitchard,  supra. 

re  Bryant,  104  F.  R.  282,  2  N.  B.         26  Fellows  v.  Freudenthal,  102  F. 

N.  R.  1061 ;  In  re  Adams,  2  N.  B.  R.  731,  4  A.  B.  R.  490. 
N.  R.   1034,    104   F.   R.    72 ;    In   re         27  Sellers  v.  Bell,  94  F.  R.  801,  2 

Fitchard,  2  N.  B.  N.   R.  1075,  103  A.  B.  R.  529. 


238  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

interest  ;^'^  but  the  contrary  would  be  true  if  it  was  a  vested 
interest  ;2'^  nor  of  a  lease,  concerning  which  there  is  no  evi- 
dence to  show  that  the  premises  are  worth  more  than  the 
rent;^*^  nor  a  watch  and  chain  of  *small  value,  omitted  by 
attorney's  advice,  and  worn  openly  during  the  proceedings ;2^ 
nor  of  an  attorney's  contingent  fee  contract^^  (though  this 
would  seem  questionable)  ;  or  of  property  transferred  more 
than  a  year  before  the  bankruptcy  ;^3  nor  is  it  a  good  objec- 
tion that  the  bankrupt  alleged  certain  assets  scheduled  to  be 
worthless,  for  such  statement  does  not  affect  their  real  value, 
and  bankrupt's  discharge  would  not  prevent  his  trustee  re- 
covering such  assets.^'* 

The  omission  from  the  schedule  of  a  complete  statement  of 
the  property  owned  by  the  bankrupt  is  not  in  itself  ground 
for  refusing  a  discharge  ;^^  nor  is  the  omission  of  names  of 
creditors  with  their  knowledge  and  consent  ;^^  nor  the  name 
of  a  creditor,^^  unless  the  omission  is  wilful  and  fraudulent  ;^^ 
and  if  the  grounds  are  false  swearing,  attempting  to  conceal 
property,  and  transferring  a  portion  with  intent  to  prefer,  a 
discharge  will  be  granted  if  the  bankrupt  had  no  interest 
therein  and  the  transfer  was  without  fraud.^^  Where  there 
has  been  concealment  of  assets,  the  discharge  may  be  made 
conditional  upon  the  bankrupt  using  all  reasonable  means  to 
discover  the  concealed  assets,^*^  and  a  discharge  will  not  be 
granted  where  bankrupt  acted  as  administratrix  of  her  hus- 
band and  mingled  his  property  with  hers,  until  she  has  prop- 

28  In  re  Wetmore,  102  F.  R.  290,  't^  In  re  Mudd,  2  N.  B.  N.  R.  1112, 

3  N.  B.  N.  R.  143,  4  A.  B.  R.  335,  105  F.  R.  348,  5  A.  B.  R.  242. 

s.  c.  99,  F.  R.  703,  3  A.  B.  R.  700;  as  in  re  Smith,  13  N.  B.  R.  256,  1 

In  re  Hoadley,  2  N.  B.  N.  R.  704,  Woods,    478,    F.    C.    12995;    In    re 

101  F.  R.  233,  3  A.  B.  R.  780.  Blalock,  118  F.  R.  679;  In  re  Sling- 

^9  In  re  Wood,  98  F.  R.  972,  3  N.  luff,   105   F.   R.   502;    In   re   Miner, 

B.  N.  R.  141,  3  A.  B.  R.  572;  In  re  114  F.  R.  998. 

St.  John,  3  N.  B.  N.  R.  114.  an  in  re  Needham,  2  N.  B.  R.  124, 

30  In  re  Hirsch,  supra.  1  Lowell,  309,  F.  C.  10081. 

31  In  re  Bryant,  2  N.  B.  N.  R.  37  in  re  Blalock,  118  F.  R.  679. 
1061,  104  F.  R.  789.  38  Payne  v.  Able,  4  N.  B.  R.  67, 

32  In  re  McAdam,  2  N.  B.  N.  R.  F.   C.  10854. 

256,  98  F.  R.  409,  3  A.  B.  R.  417.         39  in  re  Penn,  5  N.  B.  R.  288,  P. 

33  In  re  Bushnell,  1  N.  B.  N.  528;  C.  10929;  In  re  Smith,  13  N.  B.  R. 
In  re  Webb,  2  N.  B.  N.  R.  11,  3  A.     256,  1  Woods,  478,  F.  C.  12995. 

B.  R.  204;    Fields  v.  Harter,  8  A.         ^o  in  re  Hyman,  97  F.  R.  195,  3 
B.  R.   351;    In  re  Goodale,   109   F.     A.  B.  R.  169. 
R.  783,  6  A.  B.  R.  493;  In  re  Haw- 
ell,  105  F.  R.  594. 


C;h.  14  GROUNDS    FOR    REFUSING    DISCHARGE.  239 

erly  accounted  for  hers  ;^^  or  where  trustee  accepts  a  homestead 
allotment  made  years  before  and  the  property  has  enhanced 
in  value  in  excess  of  the  amount  allowed,  until  there  is  a 
re-allotment  ;'*2  but  a  wife  will  not  be  refused  a  discharge 
because  her  husband,  to  whom  she  left  the  entire  conduct  of 
the  business,  has  committed  one  of  the  acts  preventing  his 
discharge.*^ 

§  359. On    advice   of    counsel.— If   a   bankrupt 

fairly  presents  a  matter  to  his  attorney  relative  to  the  sched- 
uling of  property  and  is  advised  that  it  is  not  such  property 
as  should  properly  be  scheduled  in  bankruptcy,  such  advice, 
where  honestly  given,  however  erroneous,  tends  to  deprive  the 
false  oath  of  its  element  of  wilfulness  and  fraud,  and  the 
conviction  of  the  bankrupt  of  the  crime  of  perjury  under  such 
circumstances,  could  not  be  maintained.*^  Hence  unless  it  is 
shown  that  bankrupt  knowingly  made  a  false  oath,  the  dis- 
charge will  not  be  denied. 

§  360. Omission  of  non-dischargeable  debts.— The  fact 

that  a  debt  which  is  not  released  by  a  discharge  is  not  sched- 
uled, would  not  operate  as  a  bar  to  a  discharge,  as  the  right 
to  a  discharge  and  its  effect  when  granted  are  different 
things.'*^ 

41  In  re  Walther,  2  A.  B.  R.  702,  re  Hussman,  2  N.  B.  R.  140,  F.  C. 
95  F.  R.  941.  6951;    In  re  Rathbone,  1  N.  B.  R. 

42  In  re  McBryde,  3  A.  B.  R.  729,  145,  F.  C.  11583;  In  re  Goodfellow, 
2  N.  B.  N.  R.  345,  99  F.  R.  686.  3  N.  B.  R.  114,  1  Lowell,  510,  F.  C. 

43  In  re  Hyman,  97  F.  R.  195;  In  5336;  In  re  Rainsford,  5  N.  B.  R. 
re  Meyers,  3  N.  B.  N.  R.  120;  In  381,  1  N.  B.  R.  114,  2  Ben.  349, 
re  Meyers,  105  F.  R.  353,  5  A.  B.  R.  contra;  In  re  Stoddard,  114  F.  R. 
4;    see   "Concealment  of   Assets,"  486,  7  A.  B.  R.  762. 

§  637.  4-.  In  re  Carmichael,  96  F.  R.  594, 

44  In  re  Headley,  2  N.  B.  N.  R.  2  A.  B.  R.  815;  In  re  Lieber,  2  N. 
684;  In  re  Shenberger,  2  N.  B.  N.  B.  N.  R.  31,  3  A.  B.  R.  217;  In  re 
R.  783,  102  F.  R.  978,  4  A.  B.  R.  Thomas,  1  N.  B.  N.  329,  1  A.  B.  R. 
489;  In  re  Berner,  2  N.  B.  N.  R.  515,  92  F.  R.  912;  In  re  Black,  97 
268;  U.  S.  V.  Connor,  3  McLean,  F.  R.  493,  4  A.  B.  R.  471  in  note; 
573;  In  re  Hirsch,  96  F.  R.  468,  2  In  re  Peacock,  2  N.  B.  N.  R.  758, 
A.  B.  R.  715;  In  re  Cohn,  1  N.  B.  N.  4  A.  B.  R.  136,  101  F.  R.  560;  In  re 
330,  1  A.  B.  R.  655;  In  re  De-  Bashford,  2  N.  B.  R.  26,  F.  C.  1090; 
Leeuw,  2  N.  B.  N.  R.  267,  3  A.  B.  In  re  Rosenfield,  1  N.  B.  R.  161,  F. 
R.  418,  98  F.  R.  408;  In  re  Bush-  C.  12058;  In  re  Clark,  2  N.  B.  R. 
nell,  1  N.  B.  N.  528;  In  re  Schreck,  44,  F.  C.  2844;  In  re  Elliott,  2  N. 
1  N.  B.  N.  334,  1  A.  B.  R.  366;  In  B.  R.  44,  F.  C.  4391;  In  re  Wright. 
re  Bryant,  2  N.  B.  N.  R.  1061;    In  2   N.   B.   R.   57,   2  Ben.   509,  F.   C. 


240  THE    NATIONAL    BANKRUPTCY    LAW.  Cll.  14 

§361. False    oath.  —  Unless   there    is    a    specification 

charging  the  making  of  a  false  oath,  that  question  will  not 
be  considered-^**  To  sustain  an  objection  to  a  discharge  on 
that  ground,  the  test  is  whether  or  not  an  indictment  for  per- 
jury could  be  sustained  on  the  alleged  facts,  which  requires 
the  false  oath  to  be  on  a  material  matter-*'^  pertinent  to  the 
question  pending,^^  as  bankrupt's  swearing  falsely  as  to  his 
inability  to  pay  the  court  fees,"*''  or  of  the  submission  of  an 
intentionally  fraudulent  "statement  of  expenditures,""'"  or 
that  all  his  property  had  gone  into  the  possession  of  a  state 
receiver,  when  it  had  not;^^  or  that  he  was  indebted  to  a 
creditor  when  he  was  not;^-  but  if  it  consists  in  swearing  to 
a  schedule  from  which  it  is  alleged  assets  were  omitted  and 
the  omission  is  not  proved,  there  is  no  false  oath.^^  The  false 
oath  may  be  given  at  any  time  during  the  proceedings,  and 
must  be  wilfully  and  knowingly  false,^^  and  this  fact  should 
be  established  clearly  and  to  a  high  degree  of  certainty ,^^  but 
it  is  not  necessary  that  it  be  proved  beyond  a  reasonable 
doubt.^^  If  the  bankrupt  just  before  his  bankruptcy  makes  a 
voluntary  conveyance  of  property  and  fails  to  include  it  in 
his  schedule,  he  does  not  make  a  false  oath,  even  though  such 
conveyance  may  be  void  as  to  creditors  •,^'^  or  includes  in  his 

18065;   In  re  Doody,  2  N.  B.  R.  74,  s"  In  re  Dews,  2  N.  B.  N.  R.  437, 

F.  C.  3995;  In  re  Stokes,  2  N.  B.  R.  3  A.  B.  R.  691,  101  F.  R.  549. 

76,  F.  C.  13476;   In  re  Tracy,  2  N.  -^-i  In  re  Lesser,  108  F.  R.  205,  5 

B.  R.  98,  F.  C.  14124;   In  re  Rhu-  A.  B.  R.  331. 

tassel,  1  N.  B.  N.  572,  2  A.  B.  R.  -'2  in  re  Blumenthal,  18  N.  B.  R, 

697,  96  F.  R.  597;  In  re  Tinker,  2  555,  F.  C.  1576. 

N.  B.  N.  R.  391,  99  F.  R.  79,  3  A.  as  in   re   Penny,   2    N.    B.   N.   R. 

B.  R.  580.  1001. 

■46  In  re   Adams,   2   N.   B.    N.   R.  ^,4  in  re  Slingluff,  105  F.  R.  502. 

1034,  104  F.  R.  72.  ■>^>  In  re  Salsbury,  113  F.  R.  833, 

47  In  re  Miner,  114  F.  R.  998;  7  A.  B.  R.  771;  In  re  Gaylord,  106 
Bauman  v.  Feist,  107  F.  R.  83,  5  F.  R.  833;  In  re  Miner,  117  F.  R. 
A.  B.  R.  703.  953. 

48  In  re  Lewin,  103  F.  R.  852;  In  •'^g  In  re  Marsh,  2  N.  B.  N.  R. 
re  Freund,  2  N.  B.  N.  R.  236,  98  593 ;  In  re  Slingluff,  2  N.  B.  N.  R. 
F.  R.  81,  3  A.  B.  R.  418;  In  re  1115,  105  F.  R.  502;  see  ante,  § 
Strouse,   2  N.  B.  N.  R.   64;    In  re  351. 

Bullwinkle,  111  F.  R.  364,  6  A.  B.  ■"  in  re  Schreck,  1  N.  B.  N.  334, 

R.  756;  In  re  Wilcox,  109  F.  R.  628,  1  A.  B.  R.  366;  In  re  Crenshaw,  2 

6  A.  B.  R.  362.  A.  B.  R.  623,  95  F.  R.   632;    In  re 

49  In  re  Williams,  2  N.  B.  N.  R.  McCarthy.  F.  C.  8684 ;  In  re  Rob- 
206.  ertson,  F.  C.  11921;  Contra,  In  re 


^'n.  14  DISCHARGE— BOOKS  OF  ACCOUNT.  241 

schedule  property  by  advice  of  counsel  which  he  afterwards 
swears  was  not  his,  and  says  that,  though  in  his  name,  he 
considers  it  his  wife's,  who  advanced  the  money  for  it  and 
receives  the  profits,  he  having-  been  her  agent  ;^^  or  if  it  does 
not  clearly  appear  that  the  oath  to  schedules  containing  prop- 
erty not  his  was  wilfully  and  fraudulently  false  ;^»  or  omits 
stock  in  his  wife's  name,  purchased  with  money  borrowed  on 
their  joint  note,*''^  or  omits  property  transferred  by  the  bank- 
rupt, and  to  which  a  receiver  was  appointed  by  a  state  court 
before  the  petition  was  filed.*^i  The  making  of  a  false  oath 
by  a  bankrupt  in  a  proceeding  in  bankruptcy,  not  against  him, 
but  against  the  corporation  with  which  he  was  connected,  is 
not  ground  for  refusing  his  discharge.*^-  The  provision's  that 
no  testimony  given  by  bankrupt  on  his  examination  shall  be 
offered  in  evidence  against  him  in  any  criminal  proceeding^'* 
does  not  prevent  his  being  denied  a  discharge  for  making  a 
false  oath  on  such  examination.'^  Where  a  bankrupt  makes 
a  statement  not  under  oath,  and  afterwards  contradicts  that 
statement  under  oath,  his  statement  under  oath  is  not  proved 
to  be  false  by  proof  that  he  made  the  contradictory  statement 
not  under  oath.'' 

§  362.  Schedules.— See  duties  of  bankrupts,  ante,  §§  214- 
221. 

§  363.  Books  of  account.— This  section  prior  to  the  amend- 
ment of  February  5,  1903,  provided  that  a  discharge  should 
be  refused  any  bankrupt  who  (1),  with  fraudulent  intent  to 
conceal  his  true  financial  condition,  and  (2)  in  contemplation 
of  bankruptcy,  destroyed,  concealed,  or  failed  to  keep  books 
of  account  or  records  from  which  his  true  condition  might  be 
ascertained.'^     Prior  to  said  amendment  it  was  necessary  to 

Gammon,  109  P.  R.  312,  6  A.  B.  R.  C4  in  re  Marx,  102  P.  R.  676,  4  A. 

482.  B.  R.  521;   but  see  In  re  McGuire, 

5s  In  re  Pinan,  2  N.  B.  N.  R.  872.  1  N.  B.  N.  279. 

59  In  re  Bushnell,  1  N.  B.  N.  528;  65  See  "Palse  Oath,"  post,  §  638. 
In  re  Bryant,  2  N.  B.  N.  R.  1061.  ee  Bauman    v.    Peist,    107    P.    R. 

60  Fellows  V.  Preudenthal,  102  F.  83,  5  A.  B.  R.  703. 

R.  231,  4  A.  B.  R.  490.  67  Jn  re  Shepherd.  2  N.  B.  N.  R. 

61  In  re  Freeman,  4  N.  B.  R.  17,  1070;  In  re  Bemls,  3  N.  B.  N.  R. 
F.  C.  5082.  49,  104  P.  R.  672;  In  re  Shertzer,  2 

62  In  re  Blalock,  118  P.  R.  679,  9  N.  B.  N.  R.  520,  99  P.  R.  706,  3  A. 
A.  B.  R.  266.  B.    R.   699;    In  re  Idzall,   96  P.   R. 

63  Sec.  7,  act  of  1898.  314,  2  A.  B.  R.  741;   In  re  Hirsch, 
i6 


242  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

prove  both  the  intent  and  contemplation  of  bankruptcy.  By 
the  amendment  the  words  "in  contemplation  of  bankruptcy" 
were  omitted.  The  effect  of  this  is  that  the  only  point  now 
to  be  passed  upon  by  the  court  is  whether  the  books  were 
destroyed  or  concealed  or  were  not  kept  'Svith  intent  to  con- 
ceal his  financial  condition."  This  avoids  any  possible  ques- 
tion as  to  Avhether  the  term  "in  contemplation  of  bankruptcy" 
included  involuntary  proceedings  and  generally  renders  this 
regulation  more  easy  of  construction.  The  omission  of  the 
word  "fraudulent"  as  qualifying  the  word  "intent"  does  not 
vary  the  force  of  this  regulation,  since  the  destruction  or 
concealment  of  books  to  conceal  the  financial  condition  exhib- 
ited by  them,  must  of  necessity  be  fraudulent.  It  is  immaterial 
that  the  bankrupt  is  or  is  not  a  m.erchant  or  trader,  but  a 
man's  occupation  and  condition  are  to  be  considered  in  deter- 
mining whether  his  failure  to  keep  books  should  bar  a  dis- 
charge,^^ as  his  being  a  farmer.*^^  Since  such  books  or  records 
must  be  kept  as  will  give  a  true  condition  of  the  bankrupt's 
affairs,  a  false  entry  or  wilful  omission  with  intent  to  conceal 
will  bar  a  discharge.'^**  The  fact  that  loans  made  to  a  bank- 
rupt and  not  entered  in  his  regular  account  book,  were  made 
before  the  bankrupt  act  was  passed,  did  not  excuse  his  failure 
to  enter  them  as  required  by  the  act.'''^  The  provisions  of  this 
section  do  not  include  false  and  fraudulent  reports  to  com- 
mercial agencies.'^- 

96  F.  R.  468,  2  A.  B.  R.  715;  In  re  N.  B.  R.  99,  3  Ben.  20,  F,  C.  10175), 
Cohn,  1  N.  B.  N.  330,  1  A.  B.  R.  and  (2)  to  all  debtors  who  de- 
655.  This  provision  differs  from  stroyed,  mutilated,  altered  or  falsi- 
the  Act  of  1867,  which  refused  a  fied  books  of  account  with  intent  to 
discharge  to  (1)  a  merchant  or  defraud  creditors.  Under  this  first 
tradesman  who  failed  to  keep  provision  the  lack  of  intent  is  im- 
proper books  of  account,  regard-  material  and  under  the  second  pro- 
less  of  his  intent  (In  re  Bound,  vision  the  act  need  not  have  been 
4  N.  B.  R.  164,  F.  C.  1697;  In  re  in  contemplation  of  bankruptcy. 
Odell,  17  N.  B.  R.  73,  9  Ben.  209,  es  in  re  Corn,  106  F.  R.  143,  5  A. 
F.  C.  10426;  In  re  O'Bannon,  2  N.  B.  R.  478. 

B.  R.  6,  F.  C.  10394 ;   In  re  Tyler.  69  in    re   Marsh.    2   N.    B.    N.   R. 

4  N.  B.  R.  27,  F.  C.   14305;    In  re  593. 

Moss,  19  N.  B.  R.  132.  F.  C.  9877 ;  to  in  re  Greenberg,  114  F.  R.  773, 

In    re    Cote,    14    N.    B.    R.    503,    2  8  A.   B.  R.   94;    In  re  McBachron, 

Lowell,  374,  F.  C.  3267;   In  re  Ar-  116  F.  R.  783. 

chenbrown,  12  N.  B.  R.   17.  F.  C.  ti  in  re  Feldstein,  115  F.  R.  259. 

505 ;    In    re    Solomon,    2   N.   B.    R.  72  in  re  Steed,  107  F.  R.  682,  6 

94,  F.  C.  13167;   In  re  Newman,  2  A.  B.  R.  73. 


Ch.  14  DISCHARGE— BOOKS  OF  ACCOUNT.  243 

§  364. Failure  to  keep  after  passage  of  act.— The  tenu 

''in  coutemplation  of  bankruptcy"  used  in  this  section  prior 
to  the  amendment  meant  either  in  contemplation  of  a  voluntary 
application  or  of  the  commission  of  an  act  upon  which  an 
adjudication  of  the  bankrupt  in  involuntary  proceedings  might 
be  had;  in  other  words,  it  meant  in  contemplation  of  proceed- 
ings in  bankruptcy,  and  did  not  apply  to  something  done  long 
prior  to  the  passage  of  a  law  not  in  existence,  or  to  a  condition 
of  insolvency .''■^  Consequently,  if  prior  to  the  passage  of  the 
act  of  1898,  a  bankrupt,  with  fraudulent  intent  to  conceal  his 
financial  condition,  destroyed,  concealed  or  failed  to  keep 
books  of  account,  his  discharge  could  not  be  refused,'^*  but  if 
continued  subsequent  to  its  passage,  it  would  bar  a  discharge'^^ 
and  it  had  to  be  so  alleged^*'  Where  for  a  year  prior  to  his 
failure  his  condition  was  one  of  hopeless  insolvency,  his  failure 
to  keep  requisite  books  of  account  will  be  deemed  to  have 
been  in  contemplation  of  bankruptcy.'^^  In  view  of  the 
amendment,  whether  the  failure  to  keep  books  was  in  con- 
templation of  bankruptcy,  is  immaterial,  so  far  as  cases  insti- 
tuted since  such  amendment  are  concerned. 

§  365. Intent  to  conceal  financial  condition  necessary. 

—Prior  to  the  amendment  of  February  5,  1903,  the  Bankruptc_y 
Law  specified  that  the  act  in  question  must  be  done  with 
fraudulent  intenf^^  and  if  this  were  not  established  the  dis- 

73  In  re  McGurn,  2  N.  B.  N.  R.  600,  92  F.  R.  512 ;  In  re  Holtz,  1  Id. 

877,  102  F.  R.  743,  4  A.  B.  R.  459;  204;  In  re  Shorer,  1  Id.  331,  2  A. 

In  re  Marx,  102  F.  R.  676,  4  A.  B.  B.  R.  165,  96  F.  R.  90;   In  re  Pola- 

R.  521;  In  re  Brice,  102  F.  R.  114,  4  koff,  1  Id.  232,  1  A.  B.  R.  358;  In  re 

A.  B.  R.  355;  In  re  Hirsch,  96  F.  Boasberg,  1  N.  B.  N.  133,  1  A.  B.  R. 
R.  468,  2  A.  B.  R.  715;  In  re  Stark,  353. 

1  N.  B.  N.  232,  1  A.  B.  R.  180,  96  F.  t4  in  re  Stark,  1  N.  B.  N.  232,  1 
R.  88;  In  re  Carmichael,  96  F.  R.  A.  B.  R.  180,  96  F.  R.  88;  In  re 
594,  2  A.  B.  R.  815;  In  re  Bam-  Holtz,  1  N.  B.  N.  204;  In  re  Shorer, 
berger,  2  N.  B.  N.  R.  95;  In  re  1  N.  B.  N.  331,  96  F.  R.  90,  2  A.  B. 
Shertzer,  2  N.  B.  N.  R.  520,  99  F.  R.  165;  In  re  Sellers  v.  Bell,  94  F. 
R.  706,  3  A.  B.  R.  699;  In  re  Lieber,  R.  801,  2  A.  B.  R.  529. 

2  N.  B.  N.  R.  21,  3  A.  B.  R.  217;  In  75  in  re  Bragassa,  2  N.  B.  N.  R. 
re  Kamsler,  2  N.  B.  N.  R.  97,  97  F.  837,  103  F.  R.  936,  4  A.  B.  R.  519; 
R.  194;  Buckingham  v.  McLain,  13  In  re  Holstein,  8  A.  B.  R.  147. 
How.  151;  In  re  Craft,  2  N.  B.  R.  76  in  re  Holtz,  1  N.  B.  N.  204. 
44,  6  Blatch.  177,  F.  C.  3217;  In  re  77  in  re  Feldstein,  115  F.  R.  259, 
Goldschmidt,  3  N.  B.  R.  41,  3  Ben.  8  A.  B.  R.  160. 

379,  F.  C.  5520;  In  re  Lieber,  2  N.         vs  in  re  Blalock,  118  F.  R.  679; 

B.  N.  R.  21,  3  A.  B.  R.  217;  In  re  In  re  Corn,  106  F.  R.  143,  5  A.  B. 
Holman,  1  N.  B.  N.  552,  1  A.  B.  R. 


24-1  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

charge  would  be  granted."^*^  The  fraudulent  intent  must  have 
been  that  of  the  bankrupt,  so  that,  where  the  business  of  a 
married  woman  was  conducted  wholly  by  her  husband  and  he, 
without  her  knowledge,  failed  to  keep  true  books  of  account, 
with  fraudulent  intent,  her  discharge  was  not  barred;^"  nor 
is  the  discharge  of  a  member  of  a  firm  barred,  if  the  failure  to 
keep  true  books  of  account  be  entirely  the  fault  of  his  part- 
ner;*^ and,  on  the  same  principle,  such  an  act  by  an  agent 
would  not  bar  a  principal's  discharge,  since  such  act  of  the 
agent  is  in  excess  of  his  authority.  The  fraudulent  intent 
will  be  inferred,  if  it  appear  that  the  bankrupt  knew  that  he 
was  insolvent  and  yet  failed  to  keep  books  of  account.^^  As 
already  stated  the  word  "fraudulent"  has  been  omitted  from 
before  the  word  "intent,"  though  the  scope  of  the  section 
does  not  seem  to  be  thereby  varied.  If,  therefore,  the  failure 
to  keep  books  was  with  the  intent  to  conceal  his  condition,  the 
discharge  will  be  refused. 

§  366. Concealment,  etc.,  of    books.— Concealment  of 

books  of  account,  as  an  objection  to  discharge,  required  three 
things  to  be  proven  prior  to  the  amendment  of  1903;  (1)  con- 
cealment of  the  books,  (2)  fraudulent  intent  to  conceal  bank- 
rupt's condition,  and  (3)  that  the  concealment  was  in  con- 
templation of  an  act  of  bankruptcy  or  a  voluntary  application 
in  bankruptcy,  and  not  merely  a  state  of  insolvency.  Since 
the  passage  of  said  amendment,  it  is  not  necessary  to  show 
fraudulent  intent,  nor  that  the  concealment  was  committed  in 

R.  478;  Bauman  v.  Feist,  107  F.  R.  12844;  In  re  Plager,  2  N.  B.  R.  10; 

83,  5  A.  B.  R.  703.  In  re  Hill,  1  N.  B.  R.  42,   2  Ben. 

T9  In  re  Spear,  103  F.  R.  779.  4  A.  136,  F.  C.  6482;   In  re  Orcutt,  4  N. 

B.  R,  617;   In  re  Cashman,  2  N.  B.  B.  R.  176,  5  Ben,  19,  F.  C.  10550; 

N.  R.  980,  103  F.  R.  67,  4  A.  B.  R.  In   re  Herdic,   1    F.   R.    242,   F.   C. 

326;   In  re  Mendelsohn.  102  F.  R.  6403;  In  re  Lafleche,  109  F.  R.  307, 

119,  4  A.  B.  R.  103;   In  re  Morgan,  6  A.  B.  R.  483. 

101  F.  R.  982,  4  A.  B.  R.  402,  2  N.  >  so  in  re  Hyman,  97  F.  R.  195,  3 

B.  N.  R.  846;  In  re  Brice,  102  F.  R.  A.  B.  R.  169;  In  re  Meyers,  105  F. 

114;   In  re  Marx,  102  F.  R.  676,  4  R.  353,  5  A.  B.  R.  4. 
A.  B.  R.  521,  4  A.  B.  R.  355;  In  re         si  In  re  Schultz,  107  F.  R.  264,  6 

Wetmore,  3  A.  B.  R.  700,  99  F.  R.  A.  B.  R.  91. 

703;  In  re  Schreck,  1  N.  B.  N.  334.         S2  in  re  Feldstein,  108  F.  R.  794, 

1  A.  B.  R.  366;  In  re  DeLeeuw,  2  6  A.  B.  R.  458;  In  re  Feldstein,  115 

N.  B.  N.  R.  267,  3  A.  B.  R.  418,  98  F.  R.   259;    Bragassa  v.    St.  Louis 

F.  R.  408;  In  re  Freund,  2  N.  B.  N.  Cycle,  107  F.  R.  77,  5  A.  B.  R.  (00; 

R.  236,  3  A.  B.  R.  418,  98  F.  R.  81;  In  re  Kenyon,  112  F.  R.  658.  7  A. 

In  re  Sidle,  2  N.  B.  R.  77,  F.   C.  B.  R.  527. 


Ch.  14  IMPEACHMENT    OF    A    DISCHARGE.  245 

contemplation  of  an  act  of  bankruptcy.  The  burden  of  proof 
is  upon  the  attacking  creditor,  and  he  must  make  out  a  prima 
facie  case  before  the  burden  shifts  to  the  bankrupt.*^^ 

An  intent  exists  and  a  discharge  will  be  refused  where  a 
bankrupt  destroys  vouchers  while  the  papers  in  bankruptcy 
are  being  prepared,  so  that  the  disposition  of  his  funds  in 
bank  cannot  be  shown,  especially  if  no  books  of  account  are 
kept;^^  or  if  an  original  book  be  concealed  and  a  copy  is 
substituted  from  which  certain  entries  are  omitted  ;^^  or  if 
books  were  kept  prior  to  the  passage  of  the  act,  and  were 
concealed  or  destroyed  after  its  passage  ;^^  or  where  he  swears 
falsely  that  the  books  are  correct,  or  that  he  does  not  know 
where  they  are.^'^ 

A  fraudulent  failure  to  keep  books  with  intent  to  conceal 
his  true  condition  would  not  exist  when  he  is  not  a  business 
man  and  is  willing  to  give  evidence  as  to  the  unrecorded 
transactions  f^  or  where  he  had  no  business  transactions  f'^ 
or  as  to  property  of  his  wife  ;9'^  or  if  there  is  a  discrepancy  or 
.even  a  contradiction  between  his  testimony  and  the  facts  as 
shown  on  the  books  where  he  alludes  to  them  in  his  testimony 
and  expresses  a  willingness  to  produce  them.^^  No  person 
is  required  to  keep  or  have  kept  books  of  account,  and  the 
omission  to  do  so  will  not  prevent  a  discharge,  unless  done 
subsequent  to  the  Act  to  conceal  his  true  condition  ■,'^-  nor  will 
it  if  the  books  were  partially  destroyed  by  fire  without  the 
bankrupt's  fault  or  connivance ;^3  q^  if  his  ledger  is  mutilated, 
if  not  done  by  him  or  with  his  knowledge,  and  the  entries  on 
the  missing  pages  are  to  be  found  repeated  in  other  parts  of 
the  book.94 

83  In  re  Boasberg,  1  N.  B.  N.  133,  87  in  re  McGuire,  1  N.  B.  N.  279; 
1  A.  B.  R.  353;  In  re  Carmichael,  In  re  Kamsler,  2  N.  B.  N.  R.  97,  97 
96  F.  R.  594,  2  A.  B.  R.  815;  In  re     F.  R.  194. 

Ablowich,  2  N.  B.  N.  R.  386.  99  F.  ss  in  re  Marsh,  2  N.  B.  N.  R.  593. 

R.  81,  3  A.  B.  R.  586.  89  in  re   Penny,    2    N.   B.    N.    R. 

84  In  re  Schlesinger,  2  N.  B.  N.  1001 ;  Sellers  v.  Bell,  2  A.  B.  R. 
R.  169,  3  A.  B.  R.  342,  97  F.  R.  930;  529.   94  F.  R.   801. 

In  re  Salkey,  11  N.  B.  R.  423.  so  In  re  Dews,  1  N.  B.  N.  411,  2 

85  In  re  McBachron,   8  A.  B.  R.     A.  B.  R.  483,  96  F.  R.  181. 

732.  91  In   re  Strouse,  2  N.  B.  N.  R.  64. 

86  In  re  Hirsch,  96  F.  R.  468,  2  A.  92  in  re  Finan,  2  N.  B.  N.  R.  872. 
B.  R.  715;  In  re  Slekter,  2  N.  B.  N.  93  in  re  Guardineer.  2  N.  B.  N. 
R.  951;    Ablowich   et  al.  v.   Sturs-  R.  924. 

burg  et  al.,  105  F.  R.  751,  5  A.  B.  R.         94  in  re  Brice,  102  F.  R.  114,  4  A. 
403.  B.  R.  355. 


246  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

To  sustain  a  charge  of  concealment  of  books,  it  must  appear 
that  the  bankrupt,  at  or  about  the  time  of  the  filing  of  the 
petition,  knew  or  might  have  ascertained  where  the  old  books 
were,  and  that  he  was,  therefore,  privy  to  their  non-production, 
and  the  burden  of  proof  falls  upon  the  creditors.'-*^  The 
failure  of  a  bankrupt  to  deliver  his  books  to  the  trustee,  make 
return  of  them  in  his  schedules,  or  otherwise  account  for  them, 
creates  the  presumption  that  he  has  them  and  is  guilty  of 
concealing  them.^^ 

The  right  of  the  court  to  compel  the  production  of  the  books 
of  third  persons  involves  the  exercise  of  a  wide  discretion  and 
will  not  be  interfered  with  by  an  appellate  court,  except  when 
there  has  been  manifest  abuse.^'^ 

It  is  not  a  valid  objection  to  the  production  of  books  of 
account  that  their  inspection  may  disclose  concealed  assets  or 
supply  evidence  to  enable  the  trustee  to  maintain  a  civil  action 
to  recover  the  value.^^ 

§  367.  Proper  books  of  account.— Books  of  account  must  be 
such  as  w^ll,  at  all  times,  exhibit  the  condition  of  the  debtor, 
so  that  when  placed  before  creditors  for  investigation  they 
may  at  once  ascertain  his  standing  and  property,  and  the  result 
of  his  business,  and  whether  everything  has  been  fair  and 
honest  on  his  part,^  but  may  be  of  any  form,  provided  a  true 
condition  of  the  bankrupt's  affairs  can  be  gathered  from  them, 
that  is,  they  must  show  receipts,  payments,  assets,  liabilities 
and  the  stock  on  hand.-  It  is  sufficient  if  a  stock  book,  day 
book  and  ledger  were  kept,^  or  if  the  invoices  were  kept  care- 
fully together,  without  an  invoice  book,  the  other  customary 
books  being  kept;*  or  if  bank  books  were  kept  showing  the 
amount  received  and  books  showing  amounts  and  to  whom 
paid,  but  no  cash  book  ;^  or  if  a  chattel  mortgage  or  a  promis- 

95  In  re  Phillips,  2  N.  B.  N.  R.  2  N.  B.  R.  94,  F.  C.  13167;  In  re 
424,  98  F.  R.  844,  3  A.  B.  R.  542.  Newman,  2  N.  B.  R.  99,  3  Ben.  20, 

96  In  re  Beale,  2  N.  B.  R.  178,  F.  F.  C.  10175;  In  re  Mackay,  4  N.  B. 
C.  1151.  R.  17,  F.  C.  8837;  In  re  Antisdel,  18 

97  In  re  Horgan,   2  N.   B.  N.  R.  N.  B.  R.  289,  F.  C.  490. 

233,  98  F.  R.  414,  3  A.  B.  R.  253.  3  in  re  Phinney,   2  N.   B.  N.  R. 

98  In  re  Horgan,  supra.  1001. 

1  In  re  Brockway,  7  N.  B.  R.  575,  *  In  re  Reed,  12  N.  B.  R.  390,  F. 
6  Ben.  326,  F.  C.  1917;  In  re  Gar-     C.  11639. 

rison,  7  N.  B.  R.  287,  F.  C.  5254.  s  in  re  Marsh  et  al.,  19  N.  B.  R. 

2  In  re  Bellis,  3  N.  B.  R.  124,  4     297,  F.  C.  9109. 
Ben.  53,  F.  C.  1275;  In  re  Solomon, 


Ch.  14  REFUSAL    OF    DISCHARGE,    ETC.  247 

sory  note,  or  a  real  estate  transaction  as  entered  in  a  blotter 
kept  by  a  bankrupt  as  a  trader,  fully  disclosing  his  indebted- 
ness;^ or  a  detached  check  may  be  admissible,  together  with 
the  stub-book ;'  or  a  pass  book  is  a  necessary  book  of  account,^ 
Books  of  account  in  another  business  need  not  be  kept.^ 
Neither  the  accidental  omission  of  entries  in  a  trader's  books 
of  account,^ *^  nor  the  mutilation  of  such  books,  if  satisfactorily 
explained,^^  nor  even  material  erasures  and  alterations  in  the 
books,  unless  made  with  intent  to  conceal^-  the  financial  con- 
dition, would  be  ground  for  withholding  a  discharge.  The 
books  of  account  need  not  contain  entries  of  debts  previously 
contracted  and  owed  at  the  time  the  bankrupt  went  into 
trade.^3 

§  368.  Improper  books  of  account.— In  the  following  cases, 
it  has  been  held  that  the  true  condition  of  affairs  could  not 
be  determined  by  a  competent  person,  and,  therefore,  a  proper 
keeping  of  books  of  account  did  not  exist.  Where  accounts 
are  kept  on  slips  which  are  destroyed  each  month  ;!'*  where 
neither  an  invoice  book,  cash  book,  blotter,  day  book,  journal 
or  ledger  is  kept,  but  only  books  containing  memoranda  of 
business  transactions  from  which  no  correct  estimate  of  the 
condition  can  be  made;^'^  where  no  cash  book  is  kept,^^  or 
if  kept  is  unintelligible  ;i'''  or  the  books  do  not  show  what 
moneys  were  expended  in  carrying  on  business  and  what  sums 
were  taken  out  for  family  expenses  ;^s  where  the  invoices  of 
purchases,  receipts  or  pajonents,  bank  books  and  canceled 
checks  are  kept,  but  the  cash  receipts  are  kept  on  a  slate  and 

6  In  re  Winsor,  16  N.  B.  R.  152,  is  in  re  Winsor,  16  N.  B.  R.  152, 
F.  C.  17885.  F.  C.   17885. 

7  In  re  Brockway,  7  N.  B.  R.  595,  i*  Hammond  v.  Coolidge,  3  N.  B. 
16  Ben.  326,  F.  C.  1917.  R.  71,  Lowell,  371,  F.  C.  5999. 

8  In  re  Blumenthal,  18  N.  B.  R.  is  in  re  Schumpert,  8  N.  B.  R. 
575,  F.  C.  1576.  415,  F.  C.  12491. 

9  In  re  Friedberg,  19  N.  B.  R.  le  In  re  Gay,  2  N.  B.  R.  114,  1 
302,  F.  C.  5116;  In  re  Herdic,  19  N.  Hask.  108,  F.  C.  5279;  In  re  Bellis, 

B.  R.  385,  F.  C.  6403.  3    N.   B.   R.   124.   4   Ben.    53.    F.   C. 

10  In  re  Burgess.  3  N.  B.  R.  47,  F.     1275;    In  re  Littlefield,  3  N.  B.  R. 

C.  2153.  13,  1  Lowell.  331.  F.  C.  8398. 

11  In  re  Noonan,  3  N.  B.  R.  63,  F.  it  In  re  Mackay,  4  N.  B.  R.  17, 
C.  10291.  F.  C.  8838. 

12  In  re  Antisdel,  18  N.  B.  R.  289,  is  In  re  Anketell.  19  N.  B.  R, 
F.  C.  490.  268,  F.  C.  394, 


248  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

daily  erased  ;i^  where  invoice  or  stock  books  are  not  kept;^** 
where  only  a  small  memorandum  book  of  sales  is  incompletely 
kept;-^  or  where  no  record  of  transaction  between  partners, 
but  only  with  customers  is  kept;--  where  merely  a  blotter 
and  memorandum  book  are  kept,^^  or  where  loans  made  to 
the  bankrupt  are  kept  only  in  personal  memorandum  books, 
concealed  from  every  one.-* 

§369.  The  impeachment  of  a  discharge.— Courts  of  bank- 
ruptcy are  not  deprived  of  their  usual  control  of  their  judg- 
ments by  the  provision^^  as  to  the  revocation  of  a  discharge, 
but  may  still  correct  their  records  to  make  them  conform  to 
the  facts,-*^  and  recall  a  discharge  granted  by  accident  or 
mistake,  or  obtained  by  a  fraud  in  the  court,  though  such 
relief  should  be  sought  promptly  and  before  other's  right 
intervene,^"  but  a  discharge  cannot  be  attacked  collaterally. 
See  Revocation  of  Discharge,  post,  §§  396-410. 

§370.     Obtaining  property  on  credit— when  a  bar.— By  the 

amendment  of  February  5,  1903,  Congress  provided  that  a 
discharge  shall  be  refused  where  the  bankrupt  has  "obtained 
property  on  credit  from  any  person  upon  a  materially  false 
statement  in  writing  made  to  such  person  for  the  purpose  of 
obtaining  such  property  on  credit."  While  no  specific  time 
is  fixed  by  the  statute  within  which  such  statement  must  have 
been  made,  by  analogy  to  other  provisions  of  the  law  it  is 
evident  that  Congress  intended  that  the  statement  must  have 
been  made  within  four  months  of  the  institution  of  the  bank- 
ruptcy proceedings.  The  false  statement  must  have  been 
either  to  the  creditor  from  whom  the  property  was  obtained 
or  to  his  agent  or  to  some  person  with  the  intent,  purpose  and 
expectation  of  its  communication  to  the  creditor  from  whom 
the  property  was  obtained  and  with  the  purpose  of  acquiring 
the  same.  A  statement  made  generally  where  it  was  not  ex- 
pected or  was  not  the  purpose  that  it  should  be  communicated 

19  In  re  Solomon,  2  N.  B.  R.  94,  23  in  re  Bamberger,  2  N.  B.  N.  R. 
F.  C.  13167.  95. 

20  In  re  White,  2  N.  B.  R.  179,  F.  24  in  re  Feldstein.  115  F.  R.  259. 
C.  17532.  25  Sec.  15,  act  of  1898. 

21  In  re  Newman,  2  N.  B.  R.  99,  20  in  re  Dupee,  6  N.  B.  R.  89,  2 
3  Ben.  20.  F.  C.  10175.  Lowell,  18,  F.  C.  4183. 

22  In  re  Blumenthal,  18  N.  B.  R.  27  Ex  p.  Buchstein,  17  N.  B.  R.  1, 
655,  F.  C.  1575.  9  Ben.  215,  F.  C.  2076. 


Ch.  14  OBTAINING   PROPERTY   ON   CREDIT.  249 

to  the  creditor  would  not  be  such  as  would  operate  as  to  defeat 
the  discharge.  A  statement  made  verbally  would  not  suffice, 
but  it  must  be  in  writing  and  must  be  materially  false. 

§371.  A  former  discharge— when  a  bar.— By  the  amend- 
ment of  February  5,  1903,  a  discharge  will  be  refused  if  the 
bankrupt  has  in  a  voluntary  proceeding  been  granted  a  dis- 
charge in  bankruptcy  within  six  years.  The  fact  that  a  bank- 
rupt has  been  adjudged  such  on  an  involuntary  petition  would 
not  prevent  the  bankrupt  from  subsequently  filing  a  voluntary 
petition  and  obtaining  a  discharge  within  the  six  years.  The 
fact  that  the  bankrupt  has  been  adjudged  a  voluntary  bank- 
rupt will  not  prevent  involuntary  proceedings  from  being 
instituted  at  any  time,  though  the  discharge  on  the  involun- 
tary petition  would  not  be  granted  within  the  six  years.  The 
purpose  of  the  statute  is  simply  to  prevent  the  frequent  filing 
of  voluntary  petitions.  This  six-year  period  runs  from  the 
date  of  the  discharge  in  the  voluntary  proceeding  to  the  date 
of  judicial  action  upon  the  application  for  the  next  discharge. 
There  must  accordingly  be  a  full  period  of  six  years  between 
the  granting  of  the  discharge  in  the  voluntary  proceeding  and 
the  date  of  the  second  discharge,  whether  in  a  voluntary  or 
involuntary  proceeding.  The  fact  that  the  petition  in  bank- 
ruptcy in  the  second  proceedings  has  been  filed  prior  to  the 
expiration  of  the  six  years  would  not  bar  the  granting  of  the 
discharge  if  six  years  had  elapsed  at  the  time  judicial  action 
is  taken  on  the  discharge  in  the  subsequent  proceedings. 

§372.  Contumacy— when  a  bar.— By  the  amendment  of 
February  5,  1903,  a  discharge  will  be  refused  if  "in  the  course 
of  the  proceedings  in  bankruptcy,  the  bankrupt  refuses  to 
obey  any  lawful  order  of  or  to  answer  any  material  question 
approved  by  the  court."  Section  7  defines  the  duties  of  the 
bankrupt.  The  purpose  of  this  provision  is  intended  to  effect 
a  compliance  with  the  requirements. and  duties  imposed  upon 
him,  and  where  he  has  been  guilty  of  disobedience,  a  discharge 
will  be  refused.  His  refusal  must,  however,  have  been  either 
to  obey  a  direct  order  of  the  court  or  to  answer  a  materia! 
question  approved  by  the  court;  that  is.  the  order  must 
emanate  from  the  court  and  the  materiality  of  the  question 
he  refuses  to  answer  must  have  been  passed  upon  and  ap- 
proved by  the  court.^^     This  of  course  would  apply  to  an 

2s  In  re  Levin,  113  F.  R.  498,  6  A.  B.  R,  743. 


250  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

order  of  the  referee  as  well  as  of  the  court  of  bankruptcy 
itself.  While  it  is  true  that  the  bankrupt  may  decline  to 
answer  any  lawful  question  which  may  have  a  tendency  to 
incriminate  him,  without  subjecting  himself  to  punishment. 
Congress  doubtless  intended  by  this  provision  to  provide  for 
such  contingency.  In  order,  therefore,  to  avail  himself  of 
the  privileges  of  a  discharge  as  given  by  the  statute,  the 
bankrupt  must  have  answered  any  material  question  pro- 
pounded and  if  he  claims  his  constitutional  privilege  to  decline 
to  answer  because  it  might  have  a  tendency  to  incriminate 
him,  it  would  nevertheless  operate  as  a  bar  to  his  discharge. 

§  373.  Discharge  of  a  partnership.— A  discharge  is  granted 
to  a  partnership  upon  the  same  terms  and  under  the  same 
conditions  as  to  any  other  person,  and  therefore  the  general 
discussion  of  discharges  which  is  given  with  reference  to  an 
individual  will  apply  equally  here.  The  grounds  of  opposition 
to  a  discharge  in  the  case  of  a  partnership  are  the  same  as  in 
the  case  of  individuals  and  are  confined  to  those  named  in 
the  act.29 

§  374. of  member  of  j&rm.— An  individual  seeking  a 

discharge  from  both  individual  and  partnership  liabilities 
cannot  obtain  a  discharge  from  the  latter  unless  proceedings 
are  had  on  behalf  of  the  partnership  itself,  or  unless  he  makes 
his  partners  parties  to  the  individual  proceedings.^^  Where 
the  firm  has  been  adjudicated  bankrupt  on  the  voluntary 
petition  of  the  partners  composing  the  firm,  either  partner 
without  reference  to  the  other,  may  present  his  individual 
petition  for  a  discharge,  in  which  event  the  petition  therefor 

29  See  In  re  Peacock,  101  F.  R.  Hughes,  361,  F.  C.  6827;  Corey  v. 
560,  4  A.  B.  R.  136;  In  re  Clisdell,  Perry,  17  N.  B.  R.  147;  In  re 
101  F.  R.  246,  2  N.  B.  R.  638.  Noonan.  10  N.  B.  R.,  F.  C.  10292; 

30  In  re  Elliott,  2  N.  B.  N.  R.  In  re  Wilkins,  2  N.  B.  R.  113,  F.  C. 
350;  In  re  Freund,  1  N.  B.  N.  105,  17875;  Crompton  v.  Conklin,  15  N. 
1  A.  B.  R.  25;  In  re  Laughlin,  96  F.  B.  R.  417,  F.  C.  3408;  In  re  Brick, 
R.  589,  3  A.  B.  R.  1;  In  re  McFaun,  19  N.  B.  R.   508;   Contra,  Jarecki 

■96  F.  R.  592,  3  A.  B.  R.  66;   In  re  Mfg.  Co.  v.  McElwaine,  118  F.  R. 

Meyers,  1  N.  B.  N.  575,  2  A.  B.  R.  249;   In  re  Abbe,  2  N.  B.  R.  26,  F. 

707,  96  F.  R.  408;  In  re  Meyers,  2  C.  4;  In  re  Bidwell,  F.  C.  1392;  In 

N.  B.  N.  R.  Ill,  97  F.  R.  753,  3  A.  re  Frear,   1  N.   B.  R.   201,   2  Ben. 

B.   R.  260;     Amsinck  v.   Bean,   22  467,  F.  C.  5074;    In  re  Stevens,   5 

Wall.  395,  405;    and  see  Hudgins  N.   B.   R.   112,  1  Sawy.  397,  F.  C. 

V.  Lane  et  al.,  11  N.  B.  R.  462,   2  13393. 


Ch.  14  EFFECT    OF    DISCHARGE.  .  251 

should  recite  the  adjudication  of  the  firm  and  of  the  peti- 
tioners as  a  member  of  the  firm,  and  should  pray  for  a  dis- 
charge from  both  firm  and  individual  debts,  and  the  notice  to 
creditoi''s  should  advise  them  of  the  same  facts.^i  If  the  ad- 
judication relates  solely  to  the  partnership  as  a  legal  entity, 
a  discharge  cannot  be  granted  to  the  partners  as  individuals.^- 
A  partner  is  not,  however,  prevented  from  filing  his  individual 
petition  in  bankruptcy  after  a  discharge  has  been  denied  in 
the  partnership  proceedings,  although  he  sets  forth  the  same 
debts  and  the  same  assets.-*^^ 

§  375.  Court  will  not  look  for  fraud  or  irregularity.— When 
the  objection  to  a  discharge  is  based  on  questions  of  law,  or 
arising  in  the  record,  it  has  been  held  that  no  specification  is 
necessary.  A  court  will  refuse  a  discharge  where  it  appears, 
upon  an  inspection  of  the  record,  that  the  bankrupt  is  not 
entitled  thereto,  although  there  are  no  objections  interposed 
by  creditors,^"*  but  if  all  the  modal  prerequisites  to  a  dis- 
charge have  been  complied  with,  a  court  will  not  seek  out  of 
its  own  motion  grounds  to  refuse  it.^^  If  the  entire  proceed- 
ings be  irregular  and  defective,^^  and  if  a  prima  facie  case 
of  fraud  is  made  out,  the  discharge  will  be  withheld  until  the 
prima  facie  case  is  overthrown.^'^ 

§376.    Discharge  not  refused  for  failure  to  pay  costs.— If 

a  bankrupt  files  an  affidavit  of  inability  to  make  a  deposit  on 
filing  his  petition  in  involuntary  bankruptcy,  there  is  no 
authority  for  withholding  the  discharge  until  the  fees  of  the 
clerk   and   referee  have  been  paid.^^     The   law  is  clear  and 

31  In  re  Meyers,  2  N.  B.  N.  R.  Royal,  113  F.  R.  140,  7  A.  B.  R. 
Ill,  97  F.  R.  757,  3  A.  B.  R.  260;  In     636. 

re  Gay,  98  F.   R.   870,  3  A.   B.  R.  36  in  re  Doyle,  3  N.  B.  R.  190.  F. 

529;    see  also  Wilkin  v.  Davis.  15  C.  4052. 

N.  B.  R.  60,  2  Low.  511,  F.  C.  17664.  37  Mahoney  v.  Ward,  2  N.  B.  N. 

32  In  re  Hale,  107  F.  R.  432,  6  A.  R.  538,  3  A.  B.  R.  770,  100  F.  R. 
B.  R.  35.  278. 

33  In  re  Feigenbaum,  7  A,  B.  R.  38  See  G.  O.  XXXV  (4) ;  In  re 
339.  Plimpton,  3  N.  B.  N.  R.  14,  103  F. 

34  In  re  Wilkinson,  3  N.  B.  R.  74,  R.  775,  4  A.  B.  R.  614;  In  re  Col- 
F.  C.  17667;  In  re  Sohoo,  3  N.  B.  lins,  1  N.  B.  N.  132;  In  the  matter 
R.  52,  F.  C.  13162.  of  Fees  payable  by  voluntary  bank- 

35  In  re  Hixon,  1  N.  B.  N.  556,  1  rupts,  1  N.  B.  N.  376,  95  F.  R.  120. 
A.  B.  R.  610,  93  F.  R.  440;   In  re 


252  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  11 

explicit  as  to  the  grounds  for  refusing  a  discharge  and  there 
is  no  authority  for  adding  to  their  provisions. 

§  377.  Acts  not  barring  discharge.— The  only  grounds  upon 
which  a  discharge  can  be  refused  are  those  specified  in  this 
section,^^  hence  a  discharge  cannot  be  refused  because  of  th(^ 
pendency  of  an  application  for  discharge  under  the  act  of 
1867  ;'^^  or  the  omission  of  a  debtor  to  have  himself  adjudged 
a  voluntary  bankrupt,  when  his  property  is  attached  at  the 
suit  of  a  hostile  creditor;^-  or  because  of  an  adjudication  of 
bankruptcy  suffered  by  default  ;^^  or  that  money  is  offered  cer- 
tain creditors  to  vote  for  a  composition  ;4^  or  that  the  original 
adjudication  resulted  from  collusion,  in  the  absence  of  fraud;*'' 
or  failure  to  publish  notice  of  the  trustee's  appointment ;'*" 
or  of  a  trustee  to  act  after  qualifying  ;'*'^  or  because  it  is  alleged 
that  the  court  which  made  the  adjudication  had  no  jurisdiction 
on  account  of  the  lack  of  residence,  where  the  objecting  cred- 
itor was  a  party  to  the  proceedings  at  the  time  of  adjudica- 
tion ;^^  or  because  the  bankrupt  has  an  interest  in  property 
which  can  neither  be  transferred  or  levied  upon  and  which 
would  not  pass  to  the  trustee.*^ 

§  378.  Fraudulent  conveyance  not  bar.— A  fraudulent  con- 
veyance by  a  bankrupt  is  not  in  itself  a  bar  to  his  discharge,^" 
unless  it  amounts  to  a  fraudulent  concealment  of  assets  f^  nor 
is  the  fact  that  the  bankrupt  caused  and  permitted  loss,  waste 

40  In  re  Peacock,  2  N.  B.  N.  R.  "  in  re  Pierson,  10  N.  B.  R.  107, 
758,  101  F.  R.  560.  4  A.  B.  R.  136;      F.  C.  11153. 

In  re  Clisdell,  2  N.  B.  N.  R.  638,  is  in   re   Buck,   3   N.   B.   R.    76, 

101  F.  R.  246,  4  A.  B.  R.  95.  Deady,  425,  F.  C.  2156;   In  re  Ives, 

41  In  re  Herrman,  102  F.  R.  753,  19  N.  B.  R.  97,  5  Dill.  146.  F.  C. 
2  N.  B.  N.  R.  905,  4  A.  B.  R.  139.  7115;  In  re  Clisdell.  2  N.  B.  N.  R. 

42  In  re  Belden,  2  N.  B.  R.  14,  F.  638.  4  A.  B.  R.  96,  101  F.  R.  246; 
C.  1240.  In  re  Williams,  99  F.  R.  544,  3  A. 

43  In  re  Lathrop,  3  N.  B.  R.  11,  F.  B.  R.  677. 

C.  8105.  *o  In  re  Rennle,  1  N.  B.  N.  335,  2 

44  In  re  Morris,  19  N.  B.  R.  111.     A.  B.  R.  182. 

F.  C.  9824.  50  In  re  Steed,  107  F.  R.   682,  6 

45  In  re  Ordway,  19  N.  B.  R.  171,  A.  B.  R.  73;  In  re  Crist,  9  A.  B.  R. 
F.  C.  10552.  1,  and  cases  cited. 

46  In  re  Strachen,  3  N.  B.  R.  148;  ^i  In  re  Penny,  2  N.  B.  N.  R. 
In  re  Litchfield,  3  N.  B.  R.  13,  1  1001;  In  re  Pierce,  102  F.  R.  977,  4 
Low.  331,  F.  C.  8398.  A.  B.  R.  489;  In  re  Berner,  2  N.  B. 

N.  R.  268. 


Ch.  14  REFUSAL    OF    DISCHARGE,    ETC.  253 

and  destruction  of  his  estate  and  effects,  and  misspent  and 
misused  the  same,  prior  to  filing  the  petition.^2 

§379.  General  assignment  no  bar.— A  general  assignment 
made  prior  to  proceedings  in  bankruptcy,  is  not  a  bar  to  a 
discharge.^^ 

§  380.    Failure  to  oppose  after  notice  equivalent  to  consent.— 

When  proper  notice  has  been  given  to  creditors,  they  are 
regarded  as  consenting  to  a  discharge,  if  they  make  no  oppo- 
sition. Similarly,  where  it  appears  that  the  bankrupt  has 
committed  an  act  that,  if  properly  pleaded,  will  bar  a  dis- 
charge, it  has  been  held  the  court  will  not  of  its  own  motion 
refuse  it.^'* 

§  381.  Refusal  of  discharge  not  discretionary.— A  refusal  to 
grant  a  discharge  does  not  rest  in  the  discretion  of  the  judge ; 
but  the  applicant  is  entitled  as  matter  of  right,  unless  proved 
guilty  of  one  of  the  prescribed  offenses,  the  sole  duty  of  the 
judge  being  to  decide  after  a  due  hearing  if  he  is  guilty.-''^ 

§  382.  How  discharge  proved.— A  certified  copy  of  the  order 
granting  a  discharge  is  evidence  of  the  jurisdiction  of  the 
court,  the  regularity  of  the  proceedings,  and  of  the  fact  that 
the  order  was  made.^^ 

§  383.  Discharge  must  be  pleaded.— A  discharge  must  be 
pleaded,^"  and  a  failure  so  to  do  operates  as  a  waiver  of  its 
benefits  and  renders  any  property  in  the  bankrupt's  posses- 
sion liable  to  a  judgment,  since  a  court  will  not  take  judicial 
knowledge  of  a  discharge,  whether  in  a  proceeding  by  scire 
facias  to  revive  a  judgment,  or  in  an  original  suit.^^  A  delay 
of  a  year  in  asking  for  leave  to  plead  a  discharge  in  bar  of  an 
action  commenced  prior  to  the  adjudication  is  sufficient  cause 
to  refuse  the  request,  since  the  plea  is  a  legal  and  not  an  equita- 
ble one.^^     A  widow  of  a  bankrupt  to  whom  his  property  has 

•'■>2  In  re  Rogers,  3  N.  B.  R.  139,  1         •-■«  Sec.  21f.  act  of  1898. 
Lowell,  423.  F.  C.  12001.  ■'-  In  re  Rhutassel,  1  N.  B.  N.  572, 

53  In  re  Pierce,  3  N.  B.  R.  61,  F.     2  A.  B.  R.  697,  96  F.  R.  597. 

C.  11141.  "'**  Revere  Copper  Co.  v.  Dimock, 

54  In  re  Antisdel,  18  N.  B.  R.  289,  19  N.  B.  R.  372,  Dewey,  16  N.  B.  R. 
P.  C.  490;  In  re  Clark,  19  N.  B.  R.  1;  Jenks  v.  Opp,  12  N.  B.  R.  19;  In 
301,  F.  C.  2812;  Contra,  In  re  So-  re  Wesson,  88  F.  R.  855;  Cutter  v. 
hoo,  3  N.  B.  R.  52,  F.  C.  13162.  Evans,  11  N.  B.  R.  448. 

55  In  re  Marshall  Paper  Co.,  2  N.  59  Medberg  v.  Swan,  8  N.  B.  R. 
B.  N.  R.  1053,  102  F.  R.  872,  4  A.  B.  537. 

R.  468. 


254  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

been  transferred  may  avail  herself  of  his  discharge  and  plead 
it  in  her  own  defense.^*^ 

§384.  Discharge  not  pleadable.— Contrasted  with  those 
cases,  wherein  a  failure  to  plead  a  discharge  waives  the  ben- 
efits, are  those  where  the  discharge  cannot  be  pleaded,  as  where 
it  is  obtained  pending  an  appeal,  and  the  appellate  court  will 
consider  nothing  but  the  record  ;*^^  neither  can  it  be  set  up  by 
supplemental  answer  where  an  attachment  issued  more  than 
four  months  prior  to  the  institution  of  bankruptcy  proceedings 
was  dissolved  by  filing  a  bond.^^ 

§  385.  Replication  to  plea  of  discharge.— A  special  provision 
having  been  made'^^  for  the  revocation  of  a  discharge,  the  form, 
the  mode  of  attack,  and  the  ground  of  fraud  coming  to 
petitioner's  knowledge  after  the  discharge  was  granted  and 
that  the  discharge  was  not  warranted,  are  exclusive ;  and,  on  a 
plea  of  a  discharge  in  bankruptcy  in  bar  of  an  action,  the 
replication  can  only  deny  the  existence  of  such  discharge,  or 
the  identity  of  the  person,  or  one  of  the  other  grounds  plead- 
able against  the  judgment  of  a  court  of  record. 

§  386.  Effect  of  a  discharge.— The  summary  jurisdiction  of 
the  bankrupt  court  over  the  bankrupt  continues  during  the 
pendency  of  the  proceedings,  and  during  the  year  in  which  a 
discharge  may  be  revoked,  and  he  may  be  examined,  notwith- 
standing the  discharge.''^  The  certified  copy  of  the  order 
granting  the  discharge  is  the  means  by  which  the  bankrupt 
is  to  prove  and  have  the  benefit  of  his  discharge ;  and  is  con- 
clusive evidence  of  the  jurisdiction  of  the  court,  the  regularity 
of  the  proceedings,  and  of  the  fact  that  the  order  was  made, 
but,  being  personal  to  the  bankrupt,  is  not  conclusive  evidence 
in  favor  of  other  parties  seeking  to  use  it  ;^^  but  such  certified 

60  Upshur  V.  Briscoe,  138  U.  S.  Peters,  Id.  165,  1  A.  B.  R.  248;  In 
365.  re    Heath,    7   N.    B.   R.   448,    F.   C. 

61  Serra   e   Hijo   v.    Hoffman,   17     8304. 

N.  B.  R.  124;  Knapp  v.  Anderson,         cr,  in  re  Dole,  9  N.  B.  R.  193,  11 

15  N.  B.  R.  316;  Treadwell  v.  Hoi-  Blatchf.  499,  F.  C.  3964;  Miller  v. 

loway,  12  N.  B.  R.  61.  Chandler,  17  N.  B.  R.  251;   Dewey 

62  Holyoke  v.  Adams,  13  N.  B.  R.  v.  Moyer,  18  N.  B.  R.  114 ;  In  re 
413.  Jones,  6  N.  B.  R.  386,  F.  C.  7449; 

63  Sec.  15,  act  of  1898.  In  re  Dean.  3  N.  B.  R.  188,  F.  C. 

64  In  re  Price,  1  N.  B.  N.  131,  91  3701.  Contra,  In  re  Heath,  7  N.  B, 
F.  R.   635.   1   A.  B.  R.   419;    In   re  R.  448,  F.  C.  6304. 


Ch.  14  EFFECT    OF    DISCHARGE.  255 

copy  will  not  be  issued  until  the  time  granted  for  appeal  has 
expired.^^  The  granting  of  the  discharge  does  not,  however, 
oust  the  referee  of  his  jurisdiction  of  the  cause,  it  being  a 
mere  incident  in  the  proceedings ;  and  the  cause  proceeds  before 
him  until  the  court  finally  discharges  the  trustee.^^ 

The  right  of  a  bankrupt  to  a  discharge,  and  its  effect  are 
wholly  distinct  questions,  and  the  latter  question  cannot  prop- 
erly arise  on  an  application  for  a  discharge.^^  The  bankrupt 
law  discharges  the  contract,  as  distinguished  from  insolvent 
laws,  which  only  liberate  the  person;  but,  while  it  discharges 
him  from  certain  pecuniary  liabilities,  it  does  not  assume  to 
relieve  him  of  contractual  relations  as  such.  There  is  nothing 
in  the  letter  or  policy  of  the  law  which  gives  to  an  adjudica- 
tion in  bankruptcy  the  effect  of  discharging  executory  con- 
tracts, which  have  not  resulted  in  the  creation  of  any  present 
pecuniary  liability  on  the  part  of  the  bankrupt.^^  The  bank- 
rupt's discharge  in  a  foreign  country  does  not  discharge  a 
debt  made  in  and  with  reference  to  the  laws  of  this  country .'^*^ 
The  original  cause  of  action  is  not  merged  in  the  judgment  in 
a  state  court,  so  as  to  preclude  the  plaintiff  from  showing  that 
the  original  cause  of  action  was  founded  upon  fraud  and  not 
released  by  discharge.'^^  The  operation  of  a  discharge  cannot 
be  avoided  on  the  ground  that  the  debt  due  the  creditor  was 
not  proved  in  the  bankruptcy  proceedings,  but  was  proved  in 
previous  insolvency  proceedings,  where  a  discharge  was 
refused.'^^  xhe  discharge  of  a  bankrupt  has  the  same  effect  as 
the  return  of  an  execution  wholly  or  partly  unsatisfied.'''^ 
Although  a  discharge  is  a  complete  bar  to  a  suit  on  a  claim 
provable  in  bankruptcy,  the  dismissal  of  the  suit  does  not 
prejudice  proceedings  on  it  under  the  bankrupt  law."^^  If  a 
discharge  be  refused,  and  a  second  petition  be  filed  and  a  dis- 

66  In  re  Hirsch,  96  F.  R.  468.  2  .  7i  Packer  v.  Whittier.  1  N.  B.  N. 
A.  B.  R.  715.  240,   91   F.  R.   511,   1  A.  B.  R.   621, 

67  In  re  Dole,  7  N.  B.  R.  538,  F.     overruling  81  F.  R.  335. 

C.  3965.  "2  Dean   V.   Justices,   1   N.   B.   N. 

6«  In  re  McCarty,  111  F.  R.  151,  336,  2  A.  B.  R.  163. 

7  A.  B.  R.  40.  73  In  re  Martin,  105  F.  R.  753,  5 

69  In  re  Schiermann,  2  N.  B.  N.  A.  B.  R.  423;  Shellington  v.  How- 
R.  118 :  In  re  Hufnagel,  12  N.  B.  R.  land,  53  N.  Y.  374,  and  cases  cited; 
554,  F.  C.  6837;   Deford  v.  Hewlet.  People  v.  Bartlett,  3  Hill,  570. 

18  N.  B.  R.  518.  74  Humble  v.  Carson,  6  N.  B.  R. 

70  In  re  Sheppard,  1  N.  B.  R.  115,     84. 
F.  C.  12753. 


256  THE    NATIONAL    BANKRUPTCY    LAW.  Cll.  14 

charge  thereunder  be  obtained,  the  latter  will  be  made  general, 
leaving  its  effect  as  to  debts  proved  under  the  first  petition,  but 
not  under  the  second,  to  be  determined  as  occasion  may  ariseJ^ 

§  387.  Effect  of  discharge  on  collateral  proceedings.— A  plea 
in  abatement  setting  up  a  discharge  must  be  sworn  to,  and 
must  set  forth  a  copy,  but,  if  defective,  may  be  amended ;  and, 
if  the  plea  is  in  bar,  it  is  insufficient  when  the  notes  and  bonds 
sued  upon  were  given  after  bankruptcy.""^ 

A  suit  to  collect  a  debt,  claim  or  liability  from  a  bankrupt 
may  be  restrained  until  the  application  for  a  discharge  has 
been  determined,  if  made  and  prosecuted  with  reasonable  dili- 
gence, and  where  the  discharge  would  be  a  bar  to  such  a  suit, 
the  creditor  must  go  into  the  bankruptcy  court  ^nd  oppose  the 
discharge,^^  and,  on  the  application  for  stay,  based  upon  the 
discharge,  jurisdiction  will  be  presumed,  though  the  record  is 
silent  in  this  respectJ^  A  bankrupt  defendant  may  file  a  bond 
to  dissolve  an  attachment,  though  issued  more  than  four  months 
before  bankruptcy,  and  have  the  case  continued  to  await  his 
discharge."^^  It  is  obvious,  however,  that  where  a  judgment  is 
not  such  an  one  as  is  affected  by  discharge  in  bankruptcy,  no 
satisfaction  of  the  judgment  will  be  entered  on  the  production 
of  the  discharge,  an  instance  of  this  being  an  attachment  upon 
exempt  property .'^*^  A  state  court  has  jurisdiction  to  decide 
whether  or  not  the  debt  is  released  by  the  discharge.^^ 

A  debtor  arrested  in  a  civil  action  prior  to  commencement 
of  proceedings  in  bankruptcy  is  not  entitled  to  be  released 
from  such  arrest,  upon  being  adjudged  a  bankrupt,  but  if  the 
debt  in  which  he  is  arrested  is  one  affected  by  a  discharge,  he 
is  entitled  to  a  release  from  arrest.^- 

75  In  re  Claff,  111  F.  R.  506,  7  A.  R.  41;  Todd  v.  Barton,  13  N.  B.  R. 
B.  R.  128.  197. 

76  Beeson  v.  Howard,  11  N.  B.  R.  ^a  Braley  v.  Boomer,  12  N.  B.  R. 
486;  Stoll  V.  Wilson,  14  N.  B.  R.  303;  In  re  Belden,  6  N.  B.  R.  443,  5 
571;  Contra,  see  Hayes  V.  Ford,  15  Ben.  476,  F.  C.  1239;  Wood  v. 
N.  B.  R.  569.  Hazen,  15  N.  B.  R.  491;  Dingee  v. 

T7  In  re  Archenbrown,  11  N.  B.  Becker,  9  N.  B.  R.  508,  F.  C.  3919. 

R.  149,  F.  C.  504;  In  re  Rosenberg,  "o  Robinson  v.  Wilson,  14  N.  B. 

2    N.    B.   R.   81,    3   Ben.   14,    F.    C.  R.  565. 

12054.  '^1  Stevens  v.  Brown,  11  N.  B.  R. 

78  Hayes   v.    Ford,    15    N.    B.    R.  568. 

569;   Frostman  v.  Hicks,  15  N.  B.  ^^2  Brandon  Nat.  Bk.  v.  Hatch,  16 

N.  B.  R.  468. 


C'H.  14  EFFECT    OF     DISCHARGE.  2o'i 

§388.    Effect  of  husband's  discharge  on  wife's  debts.— At 

common  law  the  wife's  antenuptial  debts  are  released  by  the 
husband's  discharge,  since  he  becomes  liable  for  them  on  mar- 
riage; but  it  has  been  suggested  that  the  remedy  is  only  sus- 
pended and  would  revive  if  the  wife  should  outlive  the  hus- 
band. Under  the  modern  legislation  making  a  married  woman 
liable  for  her  debts,  either  absolutely  or  in  certain  cases,  or 
under  the  equity  rule  subjecting  her  separate  property  to 
her  debts  under  certain  conditions,  she  remains  liable  notwith- 
standing her  husband's  discharge.  If  she  and  her  husband 
are  authorized  to  contract  directly  with  each  other  the  dis- 
charge of  either  would  release  the  debt  due  from  that  one  to 
the  other. 

i;  389.  Time  and  place  to  determine  effect.— The  proper  time 
and  place  for  the  determination  of  the  effect  of  a  discharge 
upon  a  claim  alleged  to  have  been  founded  on  fraud  of  the 
bankrupt  is  when  the  discharge  is  pleaded  or  relied  upon  as  a 
defense  to  the  enforcement  of  the  particular  claim  and  will 
not  be  heard  even  upon  the  hearing  of  the  application  for 
discharge.*^^ 

v?  390.  Discharge  is  personal.— A  discharge  is  a  personal 
privilege  given  the  bankrupt  in  consideration  of  his  surren- 
dering his  property;  a  bankruptcy  proceeding  is  a  proceeding 
in  rem  and  all  persons  interested  are  regarded  as  parties  to  the 
proceedings,  including  the  bankrupt  and  trustee,  as  well  as  the 
creditors,  secured  and  unsecured,  and  an  injunction  may  issue 
after  discharge.^"*  While  the  discharge  is  personal,  a  widow 
of  a  bankrupt  to  whom  his  property  has  been  transferred  may 
avail  herself  of  his  discharge  and  plead  it  in  her  own  defense,®-'^ 

>;391. New  promise  to  pay  debt.— Since  the  discharge 

is  personal  to  the  bankrupt  he  may  waive  it  and,  since  it  does 

-<"  In  re  Marshall  Paper  Co.,  2  N.  bon  v.  Shufelt,  181  U.  S.  188,  5  A. 

B.  N.  R.  1053,  102  F.  R.  872,  4  A.  B.  R.  623. 

B.  R.  468;   In  re  Shepherd,  2  N.  B.         ^^  Carter  v.    Hobbs,    1   N.  B.    N. 

N.  R.  1070;  In  re  White,  2  N.  B.  N.  191,  1  A.  B.  R.  215,  92  F.  R.  594; 

R.  536;  In  re  Mussey.  99  F.  R.  71,  Southern  Loan  &  Trust  Company 

2  N.  B.  N.  R.  113,  3  A.  B.  R.  592;  v.  Benbow,  1  N.  B.  N.  499,  96  F.  R. 

In  re  Tinker,  2  N.  B.  N.  R.  391,  99  514,  3  A.  B.  R.  9;    In  re  Marshall 

F.    R.   79,   3   A.   B.   R.    580;    In   re  Paper  Co.,  102  F.  R.  872,  2  N.  B.  N. 

Rhutassel,  1  N.  B.  N.  572.  2  A.  B.  R.  1053,  4  A.  B.  R.  468. 
R.  697,  96  F.  R.  597.  but  see  Audu-         85  Upshur  v.   Briscoe.  138   U.   S. 

365. 


258  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  14 

not  destroy  the  debt  but  merely  releases  him  from  liability, 
that  is,  removes  the  legal  obligation  to  pay  the  debt,  leaving 
the  moral  obligation  unaffected,  such  moral  obligation  is  a 
sufficient  consideration  to  support  a  new  promise  and,  if  the 
debtor  makes  such  promise,  it  may  be  made  the  foundation  of 
a  suit  and  the  plaintiff  should  declare  on  the  original  promise, 
or  debt,  the  new  promise  being  a  defense  to  a  plea  of  discharge ; 
otherwise,  there  would  be  no  consideration  to  support  the  new 
promise,  if  the  original  debt  was  destroyed  by  the  discharge.*® 
A  new  promise  is  said  to  revive  the  debt,*'^  though  judgments 
confessed  by  bankrupt  subsequent  to  his  discharge  for  debts 
owing  prior  to  the  discharge  have  been  held  sufficiently  sup- 
ported by  the  old  debts  not  to  revive  them  but  to  create  new 
ones.**  The  new  promise  need  not  be  in  writing  unless 
required  by  state  law,*^  but  it  must  be  clear,  distinct,  express 
and  unequivocal;^^  and  not  in  consideration  of  the  creditor's 
withdrawing  his  opposition  to  the  discharge.''^  If  the  promise 
is  based  upon  a  condition  it  must  be  shown  that  the  condition 
has  been  complied  with.^-  It  may  be  made  any  time  after 
bankruptcy  before  or  after  discharge.^^  Unlike  debts  barred 
by  the  statute  of  limitations,  debts  discharged  in  bankruptcy 
are  not  revived  by  a  new  promise  which  amounts  merely  to  an 
acknowledgment,  but  it  must  be  an  express  statement  of  inten- 
tion to  pay  f*  though  it  may  be  conditional  ;^^  and  the  following 
have  been  held  sufficient:  "I  will  pay,"  "I  will  settle;"  "1 
will  see  that  you  are  no  loser  by  me;"  "She  shall  have  her 
pay;"  "I  am  able  and  willing  to  pay."''*^      Though  the  new 

86  In  re  Shaffer,  3  N.  B.  N.  R.  54 ;         oi  Austin  v.  Markham,  10  N.  B, 
Mutual  Res.  Life  Ass'n  v.  Beatty,     R.  548. 

2  A.  B.  R.  244;  Dusenbury  v.  Hoyt,  02  Smith  v.   Stanchfield,  7  A.  B. 

10  N.  B.  R.  313;   In  re  Merriman,  R.  498,  and  cases  cited. 

18  N.  B.  R.  411,  F.  C.  9479.  os  Knapp  v.  Hoyt,  57  Iowa,  591; 

87  Clausen  v.  Schoeneman,  16  N.  but  see  Ogden  v.  Redd,  18  N.  B.  R. 
B.  R.  98.  318. 

88  Dewey  v.  Meyer,  18  N.  B.  R.  »*  Allen  v.  Ferguson,  18  Wall.  1. 
114.  "5  Randidge  v.  Lyman,  124  Mass. 

89  Mutual    Res.     Life    Ass'n    v.  361;     Yates,    Adm'r.    v.    Hollings- 
Beatty,  supra;    Henley  v.   Lanier,  worth,  5  Har.  &  J.  216. 

15  N.  B.  R.  280,  281;  Tompkins  v.         96  Cook  v.  Shearman,  103  Mass. 
Hazen,  5  A.  B.  R.  62.  21;     Stillwell  v.  Coope,    4    Denio, 

no  St.  John  V.  Stephenson,  19  N.     225;  Evans  v.  Carey,  29  Ala.  99. 
B.  R.  227;   Smith  v.  Stanchfield.  7 
A.  B.  R.  498. 


Ch.  14     DISCHARGE— APPLICATION    FOR    REHEARING.  259 

promise  be  void  a  judgment  submitted  to  pursuant  thereto  will 
not  be  set  aside  nor  a  voluntary  payment  be  recoverable;^^ 
and  as  the  new  promise  revives  the  debt  it  enures  to  the  benefit 
of  an  endorsee  as  well  as  the  payee  or  holder,  to  whom  it  was 
made.^^ 

§  392.  Application  for  rehearing.— In  view  of  the  provisions 
of  the  act^'*  for  the  revocation  of  a  discharge,  it  is  questionable 
if  any  other  attack  can  be  made  on  it,  if  once  granted ;  but,  in 
case  of  refusal  to  grant  a  discharge,  an  application  to  rehear 
may  be  made,  but,  if  no  new  questions  of  fact  or  law  be  pre- 
sented, and  it  appears  the  refusal  was  justified  by  the  showing 
of  concealment  of  assets,  the  application  will  be  denied,^  while 
a  discharge  once  granted  cannot  be  surrendered  or  vacated  by 
the  bankrupt,  he  can  revive  the  debt  by  a  new  promise,  or 
waive  the  discharge  by  failing  to  plead  it.- 

§393.  *c.  Confirmation  of  composition  operates  as  dis- 
' charge. — The  confirmation  of  a  composition  shall  discharge 
'the  bankrupt  from  his  debts,  other  than  those  agreed  to  be 
'  paid  by  the  terms  of  the  composition  and  those  not  affected  by 
'a  discharge.' 

§  394.  Composition,  time  of  offering,  etc.— After  a  bankrupt 
has  been  examined  in  open  court  or  at  a  meeting  of  his  cred- 
itors, and  filed  the  schedule  of  his  property  and  list  of  his 
creditors,  he  may  offer  terms  of  composition,-"^  which  the  judge 
may  confirm  if  satisfied  that  it  is  for  the  best  interests  of  his 
creditors,  that  it  is  made  in  good  faith,  and  that  the  bankrupt 
has  not  been  guilty  of  any  act  which  would  bar  a  discharge,'* 
when  the  consideration  must  be  distributed  as  the  judge  directs 
and  the  case  dismissed,"'  the  title  of  his  property  thereupon 
revesting  in  the  bankrupt.*^ 

§ 
ante,  ^  320 


§395.     Discharge   through   composition.— See    Composition, 


17  Sweenie  v.  Sharp,  4  Bing.  37.  -'  In  re  Shaffer.  3  N.  B.  N.  R.  54. 

08  Way  V.  Sperry,  6  Cush.  238.  ••.  Sec.  12a,  act  of  1898. 

99  Sec.  15a,  act  of  1898.  i  Sec.  12d,  act  of  1898. 

1  In  re  Quackenbush,  2  N.  B.  N.  «  Sec.  12e,  act  of  1898. 

R.  1020.  "  Sec.  70f,  act  of  1898. 


CHAPTER  XV. 

DISCHARGES,    WHEN    REVOKED. 


§396.   (15a)   Discharges,    when    re- 
voked. 

397.  Jurisdiction  to  revoke. 

398.  Not   impeachable  collat- 
erally. 

399.  Revokable  within  a  year. 

400.  Who  may  apply. 

401.  What  constitutes  undue 

laches. 

402.  Grounds  of  revocation. 


403.  Grounds  for  refusing  re- 
vocation. 

404.  How  application  made. 

405.  Reference    to    ascertain    and 

report  facts. 

406.  Notice. 

407.  Evidence. 

408.  Examination   of   bankrupt. 

409.  Effect  of  revocation. 

410.  Assets    discovered    after   the 

expiration  of  the  year. 


§396.  '(Sec.  15a)  Discharges,  when  revoked.— The  judL'e 
'may,  upon  the  application  of  parties  in  interest  who  have  not 
'been  guilty  of  undue  laches,  filed  at  any  time  within  one  year 
'after  a  discharge  shall  have  been  granted,  revoke  it  upon  a 
'trial  if  it  shall  be  made  to  appear  that  it  was  obtained  through 
'the  fraud  of  the  bankrupt,  and  that  the  knowledge  of  the 
'fraud  has  come  to  the  petitioners  since  the  granting  of  the 
'discharge,  and  that  the  actual  facts  did  not  warrant  the  dis- 
'  charge. '^ 


1  Analogous  provision  of  Act  of 
1867.  "Sec.  34.  .  .  .  That  any 
creditor  or  creditors  of  said  bank- 
rupt, whose  debt  was  proved  or 
provable  against  the  estat^  in 
bankruptcy,  who  shall  see  fit  to 
contest  the  validity  of  said  dis- 
charge on  the  ground  that  it  was 
fraudulently  obtained,  may.  at  any 
time  within  two  years  after  the 
date  thereof,  apply  to  the  court 
which  granted  it  to  set  aside  and 
annul  the  same.  Said  application 
shall  be  in  writing,  shall  specify 
which,  in  particular,  of  the  sev- 
eral acts  mentioned  in  section 
twenty-nine  it  is  intended  to  give 
evidence  of  against  the  bankrupt, 
setting  forth  the  grounds  of  avoid- 


ance, and  no.  evidence  shall  be  ad- 
mitted as  to  any  other  of  the  said 
acts;  but  said  application  shall  be 
subject  to  amendment  at  the  dis- 
cretion of  the  court.  The  court 
shall  cause  reasonable  notice  of 
said  application  to  be  given  to  said 
bankrupt,  and  order  him  to  appear 
and  answer  the  same,  within  such 
time  as  to  the  court  shall  seem  fit 
and  proper.  If,  upon  the  hearing 
of  said  parties,  the  court  shall  find 
that  the  fraudulent  acts,  or  any  of 
them,  set  forth  as  aforesaid  by 
said  creditor  or  creditors  against 
the  bankrupt,  are  proved,  and  that 
said  creditor  or  creditors  had  no 
knowledge  of  the  same  until  after 
the    granting    of    said    discharge. 


260 


Ch.  15  REVOCATION    OF    DISCHARGE— LACHES.  301 

^  397.  Jurisdiction  to  revoke  a  discharge.— The  power  to  set 
aside  a  discharge  is  limited  to  the  courts  of  bankruptcy,  and 
their  jurisdiction  in  this  respect  is  exclusive.-  The  effect  ol 
this  is  to  prevent  the  validity  of  a  discharge  being  called  into 
question  in  suits  brought  against  the  bankrupt,  causing  unnec- 
essary labor  and  offering  opportunity  for  different  decisions  on 
the  same  point.  If  the  court  overlooks  specifications  properly 
filed  and  grants  a  discharge,  a  motion  to  recall  the  discharge 
and  consider  the  specifications  may  be  made,  and,  if  denied,  a 
review  may  be  had  in  the  appellate  court  ;^  and,  if  a  creditor 
wishes  to  attack  a  discharge,  because  of  the  fraudulent  omis- 
sion of  his  claim,  he  must  do  so  on  the  ground  of  fraud  in  the 
court  of  bankruptcy.* 

§398.  Discharge  not  impeachable  collaterally.— The  judg- 
ment of  a  court  of  competent  jurisdiction  cannot  be  collaterally 
attacked,  but  is  conclusive  between  the  parties ;  so  a  discharge 
in  bankruptcy,  until  set  aside  or  reversed,  in  a  direct  proceed- 
ing, is  conclusive  upon  all  parties  to  the  proceeding,  and 
cannot  be  attacked  collaterally;^  and  cannot  therefore  be 
impeached,  if  pleaded  in  bar  in  an  action  for  a  dischargeable 
debt  in  a  state  court.''  Opportunity  is  offered  to  contest  the 
discharge,  and,  if  not  availed  of  in  the  mode  and  within  the 
time  allowed,  all  remedy  to  annul  it  is  cut  off ;'''  but  the  distinc- 
tion between  attacking  the  discharge  and  showing  that  it  does 
not  affect  the  debt  sued  on,  or  other  matter,  in  bar  of  which 

judgment  shall  be  given  in  favor  v.  Murray,  18  N.  B.  R.  469,  5  Sawy. 

of  said  creditor  or  creditors,  and  320,  F.  C.  10223;  these  cases  being 

the    discharge    of    said    bankrupt  equally  applicable  to   the   present 

shall   be   set   aside   and    annulled,  as  to  the  former  acts. 

But  if  the  court  shall  find  that  said  -^  In  re  Buchstein,  17  N.  B.  R.  1. 

fraudulent  acts   and   all  of  them,  9  Ben.  215,  F.  C.  2076. 

set    forth    as    aforesaid,    are    not  *  Lymond  v.  Barnes,  6  N.  B.  R. 

proved,  or  that  they  were  known  377;   In  re  Roosa,  119  F.  R.  542. 

to  said  creditor  or  creditors  before  •'■  Rayl   v.   Lapham,    15  N.   B.   R. 

the    granting    of    said    discharge,  508. 

then  judgment  shall  be  rendered  •"•  In  re  Witkowski,  10  N.  B.  R. 
in  favor  of  the  bankrupt  and  the  209.  F.  C.  17920;  Alston  v.  Robin- 
validity  of  his  discharge  shall  not  ett,  9  N.  B.  R.  74;  Corey  v.  Ripley, 
be   affected   by   said   proceedings."  4  N.  B.  R.  163;  Howland  v  Carson, 

2  Commercial  Bk.  of  Manchester  16  N.  B.  R.  372. 

V.  Bachner,  20  How.  108;  Corey  v.  7  Stevens  v.  Brown,  11  N.  B.  R. 

Ripley,  4  N.   B.  R.  163;    Alston  v.  568. 
Robinett,  9  N.  B.  R.  74;   Nicholas 


262  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  15 

it  is  pleaded,  luust  be  kept  iu  mind,  as  the  latter  can  always 
be  done.^ 

§  399.  Discharge  revokable  within  year.— The  court  of  bank- 
ruptcy has  power  to  recall  a  iinal  decree  granting  a  discharge 
oil  application,'-*  and  will  do  so  if  it  appears  that  an  opposing 
creditor  had  been  prevented  by  a  sudden  and  overpowering 
accident  from  attending  the  hearing  ;^  ^  \)xit  a  motion  to  vacate 
a  discharge  as  inadvertently  granted  after  the  time  allowed 
by  rule  of  court  for  such  motion,  will  be  denied.^  ^  A  discharge 
cannot  be  revoked  after  one  year,  which  year  begins  to  run 
from  the  date  of  the  discharge  and  not  from  the  discovery  of 
the  fraud  upon  which  the  revocation  is  sought,  and  it  is  imma- 
terial that  the  fraud  is  not  discovered  until  after  the  expira- 
tion of  that  period.  Furthermore,  although  the  year  has  not 
expired,  if  the  creditor  has  been  guilty  of  undue  laches,  th(' 
discharge  will  not  be  revoked.  The  court  cannot  set  aside  a 
discharge,  in  order  to  permit  an  addition  of  a  creditor  to  the 
bankrupt's  schedule,  more  than  a  year  after  the  adjudica- 
tion.^ ^  After  a  year  has  elapsed  from  the  date  of  the  dis- 
charge, a  bankrupt  cannot  be  compelled  to  submit  to  an 
examination  for  the  purpose  of  instituting  or  aiding  a  pro- 
ceeding to  vacate  it,  nor  can  the  application  be  amended  to 
add  new  grounds  or  acts.^^ 

§400.  Who  may  apply. — The  expression  "parties  in  inter- 
est" employed  in  this  section  includes  all  persons  whose  inter- 
ests are  affected  by  the  discharge.  One  who  acquires  rights 
after  the  discharge  would  not  be  included,  nor  would  a  cred- 
itor fraudulently  omitted  from  the  schedule,  since  his  debt  is 

«  In  re  Mussey,  99  F.  R.  71,  2  N.         is  In  re  Shaffer,  3  N.  B.  N.  R.  54. 

B.  N.  R.  113,  3  A.  B.  R.  592;   In  re  104    F.    R.    982,    4    A.    B.    R.    728; 

White,   2  N.   B.    N.   R.   536:    In   re  Mall.  v.  Ullrich,  37  F.  R.  653;  In  re 

Tinker,  2  N.  B.  N.  R.  391,  99  F.  R.  Buchstein,   17    N.   B.   R.   1,    9   Ben. 

79,  3  A.  B.  R.  580;  In  re  Rhutassel.  215.  F.  C.  2076;  In  re  Brown,  19  N. 

1  N.  B.  R.  572,  2  A.  B.  R.  697,  97  B.  R.  312,  F.  C.  1983;   In  re  Dole,  7 

F.  R.  597.  N.  B.  R.  538,  F.  C.  3965  ;  Pickett  v. 

sin  re  Ives,  111  F.  R.  495,  7  A.  McGavick,  14  N.  B.  R.  236;   F.  C. 

B.  R.  692.  11126;  Corey  v.  Ripley,  4  N.  B.  R. 

10  In  re  Dupre.  6  N.  B.  R.  89,  2  503;  Way  v.  Howe,  4  N.  B.  R.  677; 
Lowell,  18,  F.  C.  4183.  Alston  v.  Robinett,  9  N.  B.  R.  74; 

11  In  re  Buchstein,  17  N.  B.  R.  1,  In  re  Witkowski,  10  N.  B.  R.  209, 
9  Ben.  215,  F.  C.   2076.  F.  C.   17920;    In  re   Sims,  9  F.  R. 

12  In  re  Hawk,  114  F.  R.  916,  8  440. 
A.   B.  R.  71. 


Ch.  15  REVOCATION    OF    DISCHARGE.  263 

not  released  by  the  discharge.  It  was  held  under  the  former 
law  that  a  creditor,  who  neglected  to  file  objections  in  due 
time  and  subsequently  discovered  fraud,  might  require  bank- 
rupt to  take  his  discharge  and  then  apply  to  set  it  aside;  the 
knowledge  of  the  fraud  barring  the  right  to  make  such  appli- 
cation must  have  been  available  in  time  to  present  objections 
to  the  discharge.^'* 

§  401.  What  constitutes  undue  laches.— As  to  what  consti- 
tutes laches  depends  upon  the  circumstances  of  each  case,  and 
it  has  been  held  in  one  case  that  one  month  constituted  laches  ;^^ 
and  in  another  five  months,^^  where  the  court  overlooked 
specifications  filed  in  opposition  to  the  discharge  and  no  pro- 
ceedings for  a  review  were  taken  within  the  time  prescribed, 
the  bankrupt  having  in  the  meantime  acted  upon  his  dis- 
charge.^'^ It  must  be  made  clear  that  there  has  been  no  laches, 
and  this  cannot  be  done  by  general  fiverments.^^ 

§  402.  Grounds  of  revocation.— Notwithstanding  the  differ- 
ence in  the  phraseology  of  the  present  act  and  that  of  1867, 
the  meaning  of  the  two  are  practically  the  same  and  the 
grounds  on  which  a  discharge  will  now  be  revoked,  as  under  that 
of  1867,  are  the  same  as  would  have  originally  prevented  the 
granting  of  the  discharge  had  they  been  known  and  presented 
in  time  in  the  form  of  objections  to  its  allowance.^ ^  Thus  in 
bankrupt's  application  for  discharge  ^^  he  is  required  to  state 
that  he  has  wholly  surrendered  all  his  property  and  rights  of 
property  and  fully  complied  with  all  the  requirements  of  the 
act,  which,  if  not  true  and  there  are  grounds  for  refusing  him 
a  discharge,  constitute  a  fraud  in  obtaining  his  discharge. 

If  it  is  made  to  appear  to  the  court  of  bankruptcy  that 
testimony  of  the  bankrupt  in  subsequent  proceedings  tends  to 
show  that,  at  the  time  of  the  bankruptcy,  he  had  considerable 
property,  though  his  verified  petition  stated  no  assets  and  no 

14  In  re  Fowler.  2  Lowell,  122,  F.         is  In  re  Oleson,  110  F.  R.  796,  7 

C.   4999.  A.  B.  R.  22. 

1''  In  re  Mclntire,  1  N.  B.  R.  115,         i9  in   re   Rainsford,   5    N.   B.   R. 

2  Ben.  345,  F.  C.  8823.  381,  F.  C.  11537;  In  re  Meyers,  2  N. 

i«In   re   Murray,   14   Blatch.    43.  B.  N.  R.  669,   100  F.   R.  775,  3  A. 

F.   C.  9953.  B.  R.  772;   In  re  Dietz,  2  N.  B.  N. 

IT  In  re  Buchstein,  17  N.  B.  R.  1,  R.   125,   3   A.   B.  R.   316,   97   F.   R. 

9  Ben.  215,  F.  C.  2076;  see  also  In  563;  Ex  p.  Briggs,  2  Lowell,  389.  F. 

re   Hunter,   3   McLean,    297,   F.   C.  C.  1868. 
3902;  In  re  Beck,  31  F.  R.  554.  20  Form  57. 


204  THE    NATIONAL    BANKRUPTCY    LAW.  ClL  lo 

trustee  was  appointed,  a  hearing  should  be  had  on  the  ques- 
tion whether  the  discharge  should  not  be  revoked  ;2i  or  if  the 
opposition  of  a  creditor  was  bought  off  through  the  procure- 
ment or  privity  of  the  bankrupt ;--  or,  if  by  wilfully  and  fraud- 
ulently making  a  false  schedule  or  affidavit,  the  bankrupt  pre- 
vented notice  to  a  creditor  and  such  creditor  had  no  actual 
knowledge  of  the  proceedings  f^  or  if  credit  was  procured  on 
the  faith  of  bankrupt's  ownership  of  property,  deeds  of  which, 
through  a  third  person  to  bankrupt's  wife  without  considera- 
tion were  alleged  to  have  been  burned,  such  deeds  being  after- 
wards recorded  and  the  property  omitted  from  the  schedules.^* 

§  403.  Grounds  for  refusing  revocation.— A  discharge  will 
not  be  set  aside  on  motion  made  after  bankrupt  has  acted  on 
the  faith  of  it,  and  after  the  time  allowed  by  rule  of  court  for 
such  motion,  on  the  ground  that  the  court  had  overlooked  cer- 
tain specifications  ;2^  or  in  regard  to  a  matter  not  barred  by  the 
discharge  f^  or  if  the  requirements  of  the  act  were  honestly 
complied  with  by  the  bankrupt,  though  the  creditors  did  not 
have  actual  notice  f^  or  merely  because  the  creditors  can  pro- 
duce new  facts  as  to  matters  heard  before  the  discharge  was 
granted;  or  where  the  fraud  was  committed  years  before  the 
bankruptcy  ;2^  or  if  the  evidence  fails  to  sustain  charges  that 
the  creditor  had  no  notice,  that  the  bankrupt  fraudulently 
omitted  assets,^^  and  admitted  a  false  claim  ;3o  or  if  the 
trustee  had  knowledge  of  all  the  facts  prior  to  the  discharge, 
though  the  petitioner  for  revocation  had  not  ;^^  or  if  the  only 

21  In  re  Meyers,  supra;  In  ro  25  in  re  Buchstein,  17  N.  B.  R.  1, 
Augenstein,  16  N.  B.  R.  252.  9  Ben.  215,  F.  C.  2076. 

22  In  re  Dietz,  2  N.  B.  N.  R.  125,  26  in  re  Mansfield,  6  N.  B.  R.  388, 
3  A.  B.  R.  316,  97  F.  R.  563;  Tuz-  F.  C.  9049;    In  re  Monroe,  114  F. 
bury  V.  Miller,  19  John.  311;   In  re  R.  398,  7  A.  B.  R.  706. 
Douglas.  11  F.  R.  403,  406;    In  re  -'- Rayl  v.   Lapham,  15  N.  B.  R. 
Palmer,  14  N.  B.  R.  437,  2  Hughes,  508. 

177,  F.  C.  10678 ;  Blasdel  v.  Fowle,  28  in  re  Corwin,  19  N.  B.  R.  422. 

120  Mass.  447;  Bell  V.  Leggett.  7  N.  F.    C.    3259,    1    F.    R.    847;     In     re 

Y.  176.  Hoover,  3  N.  B.  N.  R.  327;    In  re 

2i  In   re   Roosa,   119   F.   R.   542;  Hoover,  105  F,  R.  354,  5  A.  B.  R. 

Rayl  V.  Lapham,  15  N.  B.  R.  508;  247. 

In  re  Herrick,  7  N.  B.  R.  341,  F.  C.  29  in  re  Hansen,  107  F.  R.  252. 

6419;    In  re  Carrier,   13  N.   B.   R.  fo  In  re  Stetson,  3  N.  B.  R.  179,  4 

208,  F.  C.  2443.  Ben.  147,  F.  C.  13381. 

24  In   re  Rainsford,   5   N.   B.   R.  3i  in  re  Hansen,  supra. 
381.  F.  C.  11537. 


Ch.  15  REVOCATION    OF    DISCHARGE.  265 

evidence  offered  is  incompetent  and  inadmissible,  having  been 
kno^^^l  to  the  creditor  before  the  discharge  was  granted;^-  or 
if  the  bankrupt  failed  to  schedule  a  lease  which  was  subject 
to  forfeiture  for  his  failure  to  perform  its  conditions,  subse- 
quently making  a  new  contract  with  reference  thereto,  the 
property  proving  valuable  after  his  discharge  and  being  sold 
to  third  parties ;^='  or  on  general  averments  or  after  bankrupt's 
death  to  allow  creditors  to  prove  their  claims.^^ 

§  404.  How  application  made.— If  the  application  is  ad- 
dressed to  the  court  of  bankruptcy  in  the  exercise  of  its  gen- 
eral powers  as  a  court  to  control  its  own  records  and  make 
them  conform  to  the  facts,  or  correct  anything  done  through 
inadvertence  or  mistake  or  procured  through  fraud  practiced 
on  the  court,  it  may  usually  be  by  motion,  supported,  in  case 
facts  outside  of  the  record  are  relied  on,  by  affidavits.  Such 
motion  must  be  made  within  the  time  prescribed  by  the  rules 
of  court  and  otherwise  conform'  thereto. 

If  the  application  is  made  under  this  section,  it  should  be  by 
a  verified  petition  setting  out  in  detail  the  facts  constituting 
the  alleged  fraud  and  those  showing  that  the  actual  facts  did 
not  warrant  a  discharge :  that  the  knowledge  of  such  fraud  has 
come  to  the  petitioners  since  the  discharge  was  granted  and 
that  there  has  been  no  undue  laches  on  their  part  in  presenting 
the  matter  to  the  court ;  and  such  petition  must  be  presented 
within  one  year  after  the  granting  of  the  discharge. 

§  405.  Reference  to  ascertain  and  report  facts.— If  such  peti- 
tion makes  out  a  prima  facie  case,  and  is  filed  in  due  time  by 
competent  parties,  it  should  be  referred  to  a  special  master,  the 
referee  usually,  to  ascertain  and  report  upon  the  facts,  alleged 
in  the  petition,  on  due  notice  to  the  bankrupt,  and  on  hearing 
such  evidence  as  may  be  offered  by  the  parties.^^ 

§  406.  Notice.— Notice  of  the  hearing  should  be  given  the 
bankrupt  and  any  other  persons  interested,  and  such  notice 
should  be  reasonable  though  there  is  no  definite  time  specified, 
unless  by  analogy  the  ten  days'  notice  to  creditors^**  be  a  guide. 
If  a  discharge  obtained  by  fraud   is  set  aside  and  the  case 

•'!2  In  re  Marrionneaux,  13  N.  B.  Ridenbaugh,    11    N.    B.    R.    563,    3 

R.  222,  1  Woods,  37,  F.  C.  9088.  Dill.   239,  F.  C.  18173. 

33  In  re  Oliver,  2  N.  B.  N.  R.  212.  ■'■r-  In   re   Meyers.    2  N.   B.   N.   R. 

34  In  re  Mclntire.  1  N.  B.  R.  115.  669,  100  F.  R.  775.  3  A.  B.  R.  772. 
2  Ben.  345.   F.  C.  8823;    Young  v.  ^6  Sec.  58,  act  of  1898. 


266  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  15 

referred  to  the  referee  before  whom  the  bankrupt  otters  testi- 
mony to  which  the  petitioner  excepts  and  such  exception  is 
taken  before  the  court,  which,  without  any  additional  testi- 
mony, and  without  notice  to  counsel,  passes  an  order  vacating 
the  decree  and  annulling  the  discharge,  notice  should  be  given 
to  all  persons  affected.^^ 

§  407,  Evidence.— Conveyances  made  by  a  bankrupt  and 
alleged  to  be  fraudulent,  or  any  other  acts  of  bankrupt,  can 
not  be  shown  in  evidence,  imless  charged  in  the  petition  to  ser, 
aside  the  discharge,  except  to  show  the  intent  of  certain  acts 
specified  in  such  petition.^^ 

§  408.  Examination  of  bankrupt.— The  bankrupt  may  be 
examined  after  a  discharge  and  at  any  time  within  a  year  of 
its  granting  for  the  purpose  of  discovering  if  there  is  reason  to 
apply  to  have  such  discharge  revoked  under  this  section,^-*  not 
after  the  year  has  expired.'^o 

§  409.  Effect  of  revocation.— The  object  of  this  section  is 
to  secure  the  utmost  good  faith  in  the  procuring  of  a  discharge. 
Persons  acting  on  the  faith  of  a  discharge  are  protected,  in  case 
of  its  revocation,  by  applying  the  property  acquired  by  the 
bankrupt,  in  addition  to  his  estate  at  the  time  of  adjudication, 
to  the  payment  in  full  of  the  claims  of  creditors  for  property 
sold  to  him  on  credit,  in  good  faith,  while  such  discharge  was 
in  force,  and  the  residue,  if  any,  to  the  payment  of  the  debts 
owing  at  the  time  of  adjudication.^^  A  trustee,  on  his  appoint- 
ment and  qualification  after  a  discharge  is  revoked,  is  vested 
with  the  title  to  all  of  the  bankrupt's  property  as  of  the  date  of 
the  final  decree  revoking  the  discharge.^- 

^  410.  When  assets  discovered  after  the  expiration  of  the 
year. — Where,  after  his  discharge  and  after  the  period  when  a 
petition  to  reopen  or  revoke  the  discharge  had  elapsed,  the 
bankrupt  discovered  assets  that  should  have  been  scheduled 
and  petitions  to  be  allowed  to  schedule  them,  only  creditors 
who  proved  their  claims  according  to  the  act  can  participate  in 
such  assets.^3 

"  In  re  Augenstein,  16  N.  B.  R.         ^o  in  re  Dole,  7  N.  B.  R.  538,  F. 

252.  C.  3965. 

•i^  Tenny  v.  Collins,   4   N.   B.   R.         +1  Sec.  64c,  act  of  1898. 
156,  F.  C.  13833.  42  Sec.  70d,  act  of  1898. 

^■9  In  re  Peters,  1  N.  B.  N.  165,  1         43  in  re  Shaffer,  3  N.  B.  N.  R.  54, 

A.  B.  R.  248;  In  re  Heath,  7  N.  B.  104  F.  R.  982,  4  A.  B.  R.  728. 
R.   448,  F.  C.  6304. 


CHAPTER  X\^. 

CO-DEBTORS  OF  BANKRUPTS. 

§411.  (16a)   Liability  of  co-debtors.  416.  On  bonds  of  public  offi- 

412.  Effect  of  discharge.  cers. 

413.  Endorsers.  417.  Discharge  of  corporation,  di- 

414.  Partners.  rector's  liability. 

415.  Sureties. 

§  411.     '  (Sec.  16a)     Liability  of  co-debtors  of  bankrupt.— 

'  The  liability  of  a  person  who  is  a  co-debtor  with,  or  guarantor 
'or  in  any  manner  a  surety  for,  a  bankrupt  shall  not  be  altered 
'by  the  discharge  of  such  bankrupt.'^ 

§  412.  Effect  of  discharge.— This  section  is  merely  declara- 
tory of  existing  law,  it  being  a  general  rule  that,  w^hile  a  vol- 
untary release  of  one  co-debtor  releases  the  other,  a  release  by 
operation  of  law  does  not  do  so. 

A  discharge  in  bankruptcy  releases  the  bankrupt  but  does 
not  release,  discharge  or  affect  any  person  liable  for  the  same 
debt,  or  with  the  bankrupt,  as  partner,  joint  contractor, 
indorser,  surety  or  otherwise ;-  but  the  bankrupt  continues  to 
be  a  necessary  party  in  legal  proceedings  to  enforce  the  liability 
of  such  others,  because,  unless  he  pleads  the  discharge,  judg- 
ment can  be  taken  against  him.-''  The  bankrupt's  wife  can  not 
plead  it  in  an  action  for  her  half  of  community  debts,  where 
she  has  accepted  the  community  ;"^  nor  his  grantee  in  a  judg- 
ment creditor's  suit  to  set  aside  a  conveyance.^""  A  creditor  is 
not  required  to  collect  what  he  can  from  bankrupt's  estate,  nor 
urge  objections  to  discharge,  although  he  may  not  assent  to  it.^ 

1  Analogous  provision  of  Act  of  Ben.  169,  F.  C.  8297;  Abendroth  v. 

1867.      "Sec.    33.     .     .     .     and    no  Van  Dolsen,  131  U.  S.  66. 

discharge   granted   under   this   act  'i  Fellows  v.  Hall.  3  McLean,  281, 

shall    release,   discharge,   or   affect  F.  C.  4722;   Doggett  v.  Emerson,  1 

any  person  liable  for  the  same  debt  Woodb.  &  M.  195,  F.  C.  3962;  Good- 

for   or  with   the   bankrupt,    either  rich  v.  Hunton,  2  Woods,  137,  F.  C. 

as    partner,    joint    contractor,     in-  5544;   In  re  Ferguson,  16  N.  B.  R. 

dorser,   surety  or  otherwise."  530,  2  Hughs.  286,  F.  C.  4738. 

^  In  re  DeLong,  1  N.  B.  N.  26,  1  *  Ludeling  v.  Felton,  17  N.  B.  R. 

A.  B.  R.  66;   The  Home,  18  N.  B.  310. 

R.  557,  F.  C.  6657;    In  re  Stevens,  s  Moyer  v.  Dewey,  103  U.  S.  301. 

5  N.  B.  R.  112,  1  Sawy.  397,  F.  C.  e  In   re  McDonald.    14    N.    B.    R. 

13393;  In  re  Levy,  1  N.  B.  N.  66,  2  477,  F.  C.  8753. 

267 


268  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  10 

The  liability  of  such  co-debtor,  surety  or  guarantor,  while  it  is 
not  released  by  the  discharge  of  the  principal,  will  be  released 
in  proceedings  in  bankruptcy  instituted  by  such  co-debtor, 
surety  or  guarantor. 

For  general  subject  of  discharges,  see  ante,  §§  341-395. 

§  413.  Endorsers.— An  endorser  is  not  affected  by  the  dis- 
charge, even  if  the  holder  of  the  note  has  proved  his  debt  in 
bankruptcy  against  the  maker  for  the  full  amount  as  an  unse- 
cured claim,  though  the  holder,  by  so  doing,  releases  all  his 
right  to  a  mortgage  indemnifying  the  endorser ;'''  or  if  the  holder 
of  an  accommodation  note,  knowing  it  to  be  such,  signs  a  com- 
position ;^  or  if  the  holder  fails  to  prove  the  note  of  his  own 
motion  f  but  the  endorser  is  released  if  the  holder  of  a  note 
gives  an  extension  of  time  to  the  principal  for  a  valuable  con- 
sideration without  the  endorser's  assent  ;^o  or  if  a  demand  note 
is  not  presented  for  payment  for  several  years.^^ 

§  414.  Partners. — This  provision  evidently  contemplates  the 
discharge  of  one  partner  without  the  others,  in  other  words, 
the  separate  discharge  of  one  partner  from  partnership  debts. 
But  notwithstanding  this,  it  seems  that  a  partner  may  pro- 
ceed on  his  individual  petition  for  his  own  adjudication  and 
discharge  without  reference  to  the  other  partners  only  in  case 
all  are  insolvent  and  there  are  no  partnership  assets  what- 
ever ;^2  otherwise  the  petition  should  aver  individual  indebted- 
ness, if  any,  and  also  firm  indebtedness,  naming  the  firm  and 

7  Merchants'  Nat.  Bk.  of  Syra-  re  Marks,  F.  C.  9094 ;  Crompton 
cuse  V.  Comstock,  11  N.  B.  R.  235.  v.  Conkling,  15  N.  B.  R.  417,  F.  C. 

8  Guild  V.  Butler,  16  N.  B.  R.  347.  3408,  s.  c.  F.  C.  3407;    In  re  Win- 

9  Nat.  Bank  of  So.  Reading  v.  kens,  2  N.  B.  R.  113,  F.  C.  17875; 
Sawyer,  3  N.  B.  N.  R.  266;  Water-  In  re  Downing,  3  N.  B.  R.  182,  1 
town  Bank  v.  Simmons,  131  Mass.  Dill.  33,  F.  C.  4044;  In  re  Laugh- 
85.  lin.  96  F.  R.  589,  3  A.  B.  R.  1;  Wil- 

10  Valley  Nat.  Bk.  v.  Meyers  Ass.  kins  v.  Davis,  15  N.  B.  R.  60,  2 
17  N.  B.  R.  257,  F.  C.  5549.  Lowell,  511,  F.  C.  17664;  West  Phil. 

11  In  re  Crawford,  5  N.  B.  R.  301,  Bk.  v.  Gerry,  106  N.  Y.  467;  In  re 
F.  C.  3364.  Bidwell,  2  N.  B.  R.  78,  F.  C.  1392; 

12  In  re  Hirsch,  2  N.  B.  N.  R.  In  re  Leland,  5  N.  B.  R.  222.  5  Ben. 
137,  3  A.  B.  R.  344,  97  F.  R.  571 ;  In  168,  F.  C.  8228;  In  re  Frear,  1  N. 
re  Meyers,  1  N.  B.  N.  515,  96  F.  R.  B.  R.  201,  2  Ben.  467,  F.  C.  5074; 
408,  2  A.  B.  R.  707;  In  re  Altman,  but  see  Jerecki  Mfg.  Co,  v.  Mc- 
1  N.  B.  N.  358,  1  A.  B.  R.  689 ;  In  Elwaine,  107  F.  R.  249,  5  A.  B.  R. 
re  Abbe,  1  N.  B.  R.  26,  F.  C.  4;    In  751. 


Ch.  l(i  CO-DEBTORS    OF    BANKRUPT.  269 

the  several  partners,  aud  siDecifically  pray  for  discharge  from 
firm  as  well  as  individual  debts ;  and  be  accompanied  by  sched- 
ules setting  forth  the  firm  debts,  firm  property  and  all  other 
matters,  required  in  partnership  proceedings,  as  well  as  sched- 
ules of  the  individual  property  and  debts.  The  notices  of  the 
first  meeting  in  such  case  should  state  that  firm,  as  well  as  in- 
dividual creditors  are  notified  because  a  discharge  is  sought 
from  both  classes  of  claims.  Notice  of  the  filing  of  the  petition 
and  of  the  creditors'  meetings  should  be  given  the  nonjoining 
partners.^  ^ 

§  415.     Sureties  on  appeal,  attachment  and  other  bonds.— A 

surety  who  discharges  the  principal's  debt,  does  not  thereby 
relieve  the  principal  from  liability  to  pay  it,  but  he  thereby 
becomes  subrogated  to  the  rights  of  the  former  owner  of  the 
claim.i^  A  discharge  in  bankruptcy  of  the  principal  does  not 
release,  discharge  or  affect  a  surety,^ ^  unless  it  prevents  the 
happening  of  the  event  on  which  the  surety's  liability  depends, 
in  which  case  he  would  never  become  liable  rather  than  be 
released ;  as  in  bonds  in  attachment  suits  begun  within  four 
months  of  the  bankruptcy  ;i^  but  if  the  attachment  was  begun 
more  than  four  months  prior  to  bankruptcy,  suit  may  be  prose- 
cuted to  a  special  judgment  to  charge  the  sureties.^ '  A  surety 
on  an  appeal  bond  will  be  released  if  the  bankrupt's  discharge 
can  be  brought  to  the  attention  of  the  appellate  court  and  pre- 
vent judgment,^  ^  but  not  after  the  judgment,  or  if  only  what 

13  In  re  Laughlin,  96  F.  R.  589,  3     Long,  1  N.  B.  N.  26,  1  A.  B.  R.  66; 

A.  B.  R.  1;  In  re  Freund,  1  N.  B.  but  see  U,  S.  v.  Throckmorton,  8 
N.  105,  1  A.  B.  R.  25;  In  re  Elliott.     N.  B.  R.  309,  F.  C.  16516. 

2   N.    B.    N.    R.    350;     Hudgins   v.         is  Smith  v.  Steinberg,  1  N.  B.  N. 

Lane,  11  N.  B.  R.  462,   2  Hughes,  240;    Johnson  v.  Collins,  12  N.  B. 

361,  F.  C.  6827;   In  re  Little,  1  N.  R.  70;    Braley  v.  Boomer,  Id.  303; 

B.  R.  74,  2  Ben.  136.  F.  C.  8390;  Wolf  v.  Stix,  99  U.  S.  1;  Hamilton 
Corey  v.  Perry,  17  N.  B.  R.  147;  In  v.  Bryant,  14  N.  B.  R.  479;  Bryant 
re  Noonan,  10  N.  B.  R.  330,  3  Biss.  v.  Kenyon,  6  A.  B.  R.  237. 

491,   F.   C.   10292;   In   re  Brick,  19         it  Hill  v.  Harding,  107  U.  S.  631; 

N.  B.  R.  508.  Id.  130  U.  S.  690;   In  re  Albrecht, 

14  Swarts  V.  Siegel,  8  A.  B.  R.  690.  17  N.  B.  R.  287,  F.  C.  145;  Holyoke 

15  In  re  Stevens,  5  N.  B.  R.  112,  v.  Adams,  10  N.  B.  R.  270;  see  In 
1  Sawy.  397,  F.  C.  13393;  In  re  re  Rosenthal,  108  F.  R.  368,  5  A.  B. 
Levy,  1  N.  B.  R.  66,  2  Ben.  169,  F.  R.  799. 

C.  8297;  Abendroth  v.  Van  Dolsen,  is  Goyer  v.  Jones,  8  A.  B.  R.  437; 
131  U.  S.  66;  The  "Home,"  18  N.  Wolf  v.  Stix..  99  U.  S.  1,  25  L.  Ed. 
B.  R.  557,  F.  C.  6657;     In  re  De-     309;  see  Haggerty  v.  Morrison,  59 


270  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  10 

was  before  the  lower  court  is  cognizable  above.^'-'  A  surety  on  a 
bond  conditioned  on  a  surrender  of  the  principal  before  a 
breach,  will  be  released  if  no  breach  has  occurred,  though  not 
after  breach  ;-*'  or  on  bonds  in  replevin  when  the  trustee  has  the 
replevied  articles,  judgment  being  still  obtainable  to  fix  the 
sureties'  liability.^i  If  prior  to  the  adjudication  in  bankruptcy 
a  judgment  has  been  rendered  against  a  garnishee,  a  subse- 
quent discharge  of  the  principal  debtor  does  not  operate  to  dis- 
charge the  garnishee.22 

§  416.  Sureties  on  bonds  of  officers,  co-debtors,  etc.— A  dis- 
charge in  bankruptcy  releases  a  surety  on  a  guardian's  bond 
from  liability  for  defaults  of  the  guardian  which  occurred  prior 
to  the  commencement  of  proceedings  against  the  surety  ;-^  and 
the  discharge  of  a  co-surety  releases  him  from  the  liability  to 
contribute  to  his  co-sureties.  The  discharge  of  a  joint  debtor 
does  not  prevent  judgment  for  the  full  amount  being  taken 
against  his  joint  debtor;-*  nor  of  a  joint  judgment  debtor  pre- 
vent execution  against  the  other  judgment  debtor ;-"'  nor  inter- 
fere with  the  prosecution  of  proceedings  supplementary  to 
execution  against  such  other-^^*  In  the  absence  of  specific  pro- 
vision to  the  contrary,  it  has  been  uniformly  held  that  debts 
due  the  sovereign  are  not  released  by  a  discharge  in  bank- 
ruptcy ;-^  nor  is  it  in  any  wise  affected  by  a  bankruptc}^  law  -,2- 
consequently  sureties  on  the  bonds  of  public  officers  or  other 
bonds  to  the  United  States  are  not  released.-*^ 

§417.    Discharge  of  corporation  as  to  directors'  liability.— 

Mo.  324;   Jones  v.  Coper,  16  N.  B.  2*  Lewis  Tr.  v.  U.  S.,  14  N  B.  R. 

R.  343;  Odell  v.  Wootten.  4  N.  B.  64,  92  U.  S.  618. 

R.  46.  -'  Penny  v.  Taylor.   10  N.  B.  R. 

19  Knapp  V.  Anderson,  15  N.  B.  200,  F.  C.  10957. 

R,  316.  -''  In  re  DeLong,  1  N.  B.  N.  26,  1 

20  Richardson     v.     Mclntyre,     4     A.  B.  R.  66. 

Wash.  C.  C.  412;    Bennett  v.  Alex-  ■■^-\].  S.  v.  Herron,  20  Wall..  251; 

ander,  1  Cranch,  C.  C.  90.  Attorney-General  v.  Alston,  2  Mod. 

21  See  Clemmons  v.  Brinn,  7  A.  248;  U.  S.  v.  King,  Wall.  C.  C.  R. 
B.  R.  714.  18;    U.   S.  v.  Knight,  14   Pet.  315; 

22  Marx  V.  Hart,  166  Mo.  503,  66  Bank  v.  U.  S.,  19  Wall.  239;  U.  S. 
S.  W.  260,  8  A.  B.  R.  438,  note.  v.  Hoar,  2  Mason,  311. 

23  Jones  V.  Knox,  8  N.  B.  R.  559;  28  Lewis  v.  U.  S.,  92  U.  S.  618. 
Reitz  V.  People,  16  N.  B.  R.  96;  Ex  29  u.  S.  v.  Herron,  supra;  but  see 
p.  Taylor,  16  N.  B.  R.  40,  1  Hughes,  U.  S.  v.  Throckmorton,  8  N.  B.  R. 
617,    F.    C.    13773;     Halliburten    v.  309,  F.  C.  16516. 

Carke,  10  N.  B.  R.  359. 


Ch.  16  SURETIES.  271 

By  the  amendatory  act  of  February  3,  1908,  it  is  provided  that 
the  bankruptcy  of  a  corporation  does  not  release  its  officers, 
directors  or  stockholders,  as  such,  from  any  liability  under  the 
laws  of  a  State  or  Territory  of  the  United  States.^o  Notwith- 
standing the  discharge  of  the  corporation,  a  creditor  may  take 
judgment  in  a  state  court  against  it,  in  such  limited  form  as 
Avill  enable  him  to  reap  the  benefit  of  the  directors'  liability, 
the  rendering  of  such  a  judgment  depending  upon  the  author- 
ity of  the  state  court  under  the  local  law.  In  such  case  the 
judgment  will  not  be  against  the  person  or  property  of  the 
bankrupt  and  has  no  other  effect  than  to  enable  the  plaintiff 
to  charge  the  directors  in  accordance  with  the  state  statute.^! 

a"  Sec.  4b;    see  also  In   re  Mar-     F.  R.  419;  Elsbree  v.  Bart,  9  A.  B. 
shall  Paper  Co.,  2  N.  B.  R  R.  1058,     R.  87. 

102  F.  R.  872,  4  A.  B.  R.  468;  s.  c.  -^i  In  re  Marshall  Paper  Co.,  su- 
1  N.  B.  N.  407,  2  A.  B.  R.  653,  95     pra;  Hill  v.  Harding,  130  U.  S.  699. 

32  L.  Ed.  1083. 


CllAP^J'Eii  XVII. 


DEBTS    NOT    AFFECTED    BY    DISCHARGE. 


§418   (17a)    Debts    not   affected    by 
discharge. 

419.  Provable  debts   generally  re- 

leased, unprovable  not. 

420.  Taxes  due  the  United  States, 

State,  etc. 

421.  Debts    due    the     Goverment, 

released. 

422.  Alimony  not  released. 

423.  Attachment  for  contempt  for 

failing   to     pay    discharge- 
able debt. 

424.  Bonds. 

425.  Costs,  etc. 

426.  Effect  of  proof  of  claims. 

427.  Executory     contracts. — Cove- 

nants. 

428.  Exemption  personal  to  cred- 

itor. 

429.  Fiduciary. 

430.  Fines. 

431.  Foreign  discharge. 


432.  Determination    of    character 

of  debt. 

433.  Form  of  action. 

434.  Obtaining   property  by   false 

pretenses  or  representation. 

435.  Fraud   while   acting  as  fidu- 

ciary. 

436.  Willful  and  malicious  injury 

to  person  or  property. 

437.  For  support,  seduction,  etc. 

438.  To  effectuate  valid  liens. 

— Keeping  alive  old  debts. 

439. Judgments  pending  pro- 
ceedings. 

440.  Liens. 

441.  Limitations. 

442.  Rent. 

443.  Statutory  liability. 

444.  Sureties. 

445.  Unliquidated  damages. 

446.  Unproved     and    unscheduled 

claims. 

447.  Waiver. 

448.  Wife's  debts. 


§418.     '(Sec.  17a)    Debts  not  affected  by  a  discharge.— A 

'discharge  in  bankruptcy  shall  release  a  bankrujit  from  all  of 
'his  provable  debts,  except  such  as 

'  (1)  Are  dne  as  a  tax  levied  by  the  United  States,  the  State, 
"county,  district,  or  municipality  in  which  he  resides; 

*  (2)  Are  liabilities  for  obtaining:  property  by  false  pre- 
'  tenses  or  false  representations,  or  for  willful  and  malicious 
'injuries  to  the  person  or  property  of  another,  or  for  alimony 
'due  or  to  become  due,  or  for  maintenance  or  support  of  wife 
'or  child,  or  for  seduction  of  an  unmarried  female,  or  for  crim- 
'  inal  conversation ; 

'  (3)  Have  not  been  duly  scheduled  in  time  for  proof  and 
'allowance,  with  the  name  of  the  creditor  if  known  to  the  bank- 
'rupt,  unless  such  creditor  had  notice  or  actual  knowledge  of 
'the  proceedings  in  bankruptcy;  or 

*  (4)    Were  created  by  his  fraud,  embezzlement,  misappro- 

272 


Cii.  ir 


DEBTS    NOT    DISCHARGED— TAXES. 


273 


*l)riation,  or  defalcation  while  acting  as  an  oflficer  or  in  any 
'fiduciary  capacity.'^ 

§  419.  Provable  debts  generally  released,  unprovable  debts 
not. — Debts  which  by  their  nature  are  provable,  with  the  excep- 
tions noted  in  this  section,  are  released  by  a  discharge  in  bank- 
ruptc}',  without  regard  to  whether  they  could  in  fact  be  proved 
or  not,  or  whether  by  reason  of  the  inadvertent  giving  of  wrong 
addresses,  the  creditors  received  no  notice  and  had  no  knowl- 
edge of  the  proceedings;-  and  a  discharge  is  a  complete  bar 
to  suit  thereon,  though  the  dismissal  of  such  suit  will  not 
prejudice  proof  of  the  claim  under  the  bankrupt  law.^  Debts 
not  provable  are  in  no  wise  affected  by  the  discharge.^    Debts 


1  Section  17a  was  amended  by 
the  Act  of  February  5,  1903,  by  the 
substitution  of  the  matter  in  the 
text  for  the  following: 

'A  discharge  in  bankruptcy  shall 
'release  a  bankrupt  from  all  of  his 
'provable  debts,  except  such  as 

'(1)  Are  due  as  a  tax  levied  by 
'the  United  States,  the  State, 
'county,  district,  or  municipality 
'in  which  he  resides; 

'(2)  Are  judgments  in  actions 
'for  frauds,  or  obtaining  property 
'by  false  pretenses  or  false  repre- 
'sentations,  or  for  willful  and  ma- 
'licious  injuries  to  the  person  or 
'property  of  another; 

'(3)  Have  not  been  duly  sched- 
'uled  in  time  for  proof  and  allow- 
'ance,  with  the  name  of  the  cred- 
'itor  if  known  to  the  bankrupt, 
'unless  such  creditor  had  notice  or 
'actual  knowledge  of  the  proceed- 
'ings  in  bankruptcy;    or 

'(4)  Were  created  by  his  fraud, 
'embezzlement,  misappropriation, 
'or  defalcation  while  acting  as  an 
'officer  or  in  any  fiduciary  capac- 
'ity.' 

Analogous  provision  of  Act  of 
1867.  "Sec.  33.  That  no  debt 
created  by  the  fraud  or  embezzle- 
ment of  the  bankrupt,  or  by  his 
defalcation   as  a  public   officer,   or 


while  acting  in  any  fiduciary  char- 
acter, shall  be  discharged  under 
this  act;  but  the  debt  may  be! 
proved,  and  the  dividend  thereon 
shall  be  a  payment  on  account  of 
said  debt;     .     .     . 

"Sec.  34.  That  a  discharge  duly 
granted  under  this  act  shall,  with 
the  exceptions  aforesaid,  release 
the  bankrupt  from  all  debts, 
claims,  liabilities,  and  demands 
which  were  or  might  have  been 
proved  against  his  estate  in  bank- 
ruptcy, and  may  be  pleaded,  by  a 
simple  averment  that  on  the  day 
of  its  date  such  discharge  was 
granted  to  him,  setting  the  same 
forth  in  haec  verba,  as  a  full  and 
complete  bar  to  all  suits  brought 
on  any  such  debts,  claims,  liabili- 
ties, or  demands,  and  the  certifi- 
cate shall  be  conclusive  evidence  in 
favor  of  such  bankrupt  of  the  fact 
and  [the]  regularity  of  such  dis- 
charge." 

2  In  re  Kingsley.  1  N.  B.  R.  66,  1 
Lowell  216,  F.  C.  7819;  Pattison  v. 
Wilbur,  12  N.  B.  R.  193. 

?■  Humble  v.  Carson,  6  N.  B.  R. 
84;  Dusenbury  v.  Hoyt.  10  N.  B. 
R.  313. 

*  See  Clemmons  v.  Brinn,  7  A.  B. 
R.  714. 


274  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  17 

which  may  be  proved  are  elsewhere  discussed,^  to  which  refer- 
ence should  be  made.  After  it  is  determined  whether  the  debt 
is  provable,  it  should  be  ascertained  if  it  comes  within  either  of 
the  exceptions  mentioned  in  this  section ;  and,  if  it  does  not,  it 
is  released.  The  exceptions  are  therefore  to  be  carefully  exam- 
ined and  their  scope  noted. 

The  right  to  a  discharge  and  the  effect  of  a  discharge  on  a 
claim  are  wholly  distinct  propositions.  The  proper  time  and 
place  for  the  determination  of  the  effect  of  a  discharge  is  when 
the  same  is  pleaded  or  relied  upon  by  the  debtor  as  a  defense 
to  the  enforcement  of  a  particular  claim.  The  issue  upon  the 
effect  of  a  discharge  cannot  properly  arise  or  be  considered 
in  determining  the  right  to  a  discharge.^ 

§  420.  Taxes  due  the  United  States,  etc.— Taxes  due  the 
United  States,  state,  county,  district  or  municipality  in  which 
the  bankrupt  resides  are  not  released,  but  must  be  paid  in 
advance  of  dividends  to  creditors.'^  This  accords  with  the  gen- 
eral rule  that  governmental  revenues  are  not  allowed  to  bo 
tampered  with  lest  it  interfere  with  the  performance  of  the 
important  public  duties  with  w^hich  such  governing  body  is 
charged ;  but  it  should  be  noted  that  the  taxes  included  within 
the  exception  of  this  section  are  conlined  to  the  state,  county, 
district  and  municipality  in  which  bankrupt  resides.  This  is 
not  to  be  considered,  however,  as  limiting  the  general  lien  for 
taxes  on  property  wherever  situated,  and  which  is  borne  out  by 
section  64a,  which  makes  all  taxes  paj^able  in  advance  of  divi- 
dends. Whether  or  not  any  tax  or  assessment  in  the  nature 
of  a  tax  is  within  the  meaning  of  the  word  "taxes"  as  used  in 
this  section  is  to  be  determined  by  the  laws  imposing  the  same, 
and  where,  for  instance,  the  highest  court  in  a  state  has  held 
that  the  "mulct  tax"  is  not  a  tax  though  the  legislature  called 
it  so  in  the  statute,  such  decision  must  be  followed.^ 

§  421.     Debts  due  the  government.— In  the  absence  of  specific 

•"  Sec.    63    of   act   of   1898,    post,  tinction  seems  to  have  been  over- 

§  977.  looked    by   the   Supreme    Court   in 

fi  In  re  McCarthy,  111  F.  R.  151,  the    case    of    Audubon    v.    Shufelt, 

7    A.    B.    R.    40;    In    re    Marshall  181  U.  S.  575.  5  A.  B.  R.  829. 

Paper  Co.,  102  F.  R.  872.  4  A.  B.  R.  '  Sec.  64a,  act  of  1898. 

468;  In  re  Rhutassel.  96  F.  R.  597,  «  In  re  Ott,  1  N.  B.  N.  571,  2  A. 

2  A.  B.  R.  697;   In  re  Thomas,  92  B.  R.  637,  95  F.  R.  274. 
F.  R.  912,  1  A.  B.  R.  515.    This  dis- 


Ch.  17        DEBTS    NOT    DlSCHARGED^ON    CONTEMPT.  375 

provision  to  the  contrary,  it  has  been  uniformly  held  that  debts 
duo  the  sovereign  are  not  released  by  a  discharge  in  bank- 
ruptcy;^ nor  is  it  in  anywise  bound  by  a  bankruptcy  law.^'^  It 
is  a  general  rule  of  interpretation  that  if  the  legislature  intends 
to  divest  the  sovereign  power  of  any  right,  privilege,  title  or 
interest,  it  should  so  appear  in  express  words,  and  where  an 
act  contains  no  words  to  express  such  an  intent,  it  will  be  pre- 
sumed that  the  intent  does  not  exist.' '  Under  the  act  of  1867, 
a  claimant  who  gave  bond  for  the  delivery  to  him  of  property 
seized  by  the  Government  and,  on  a  decree  in  favor  of  the  Gov- 
ernment, set  up  a  discharge  in  bankruptcy,  was  held  not 
released;^-  but  under  the  act  of  1841  a  discharge  was  held  to 
release  a  debt  due  the  United  States  for  customs  dues.^^ 

While  there  is  some  dissimilarity  between  the  act  of  1867 
and  the  present  one  with  reference  to  the  debts  not  affected  by 
a  discharge,  and  it  might  be  argued  under  this  general  rule  of 
interpretation,  and  following  the  decisions  under  the  act  of 
1867,  that  debts  due  the  United  States  are  not  released  by  the 
discharge,  although  the  same  may  only  be  a  liability  as  surety 
for  the  faithful  performance  of  duty  by  a  public  officer,i^  yet 
under  that  equally  well  known  maxim  expressio  unius  est 
exclusio  alterius,  the  fact  that  Congress  specifically  provided 
that  debts  due  the  United  States  as  a  tax  only,  would  not  be 
discharged,  would  indicate  that  debts  of  all  other  character 
are  released  by  the  discharge.^^ 

5  422.  Alimony,  not  released.— E'rior  to  the  amendment  of 
Februarj^  5,  1903,  much  diversity  of  opinion  existed  with  rela- 
tion to  the  dischargeability  of  alimony  which  had  accrued  prior 
to  the  filing  of  the  petition.  Some  courts  held  that  where  the 
liability  might  be  modified  by  the  court  which  decreed  the 
alimony,  it  was  not  released,^  ^  while  others  took  the  position 

!•  U.  S.  V.  Herron,  20  Wall.  251;  12  United  States  v.  Rob  Roy,  13 

Attorney  General  v.  Alston,  2  Mod-  N.   B.   R.   235,   1   Woods   42,   F.   C. 

ern  248;  U.  S.  v.  King,  Wall.,  C.  C.  16179. 

R.  18,  F.  C.  15536.  i3  Zaugas  Case,  F.  C.  16786. 

1"  Lewis  V.  United  States,  92  U.  i*  United   States  v.   Herron,   su- 

S.  618.  pra. 

11  United    States  v.   Herron,   su-  is  in  re  Alderson,  3  A.  B.  R.  544, 

pra;    United    States   v   Knight,   14  98  F.  R.  588. 

Pet.  315 ;  Bank  v.  United  States,  19  16  In  re  Nowell,  3  A.  B.  R.  837, 

Wall.  239:   United  States  v.  Hoar,  99  F.  R.  931;  In  re  Smith,  1  N.  B. 

2  Mason  311.  N.  471,  3  A.  B.  R.  67;   In  re  Shep- 


27G  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  17 

that  where  it  was  fixed,  certain  and  determined  and  in 
the  nature  of  a  judgment,  it  would  be  released. ^^  The  amend- 
ment settles  all  doubt  and  provides  that  alimony  whether  due 
or  to  become  due  is  not  released  by  the  discharge.^^ 

§  423.  Attachment  for  contempt  for  failing  to  pay  discharge- 
able debt. — Contempt  proceedings  may  be  taken  to  punish  the 
willful  disobedience  of  a  lawful  order  of  the  court  or  to  secure 
the  result  that  obedience  of  the  order  would  have  brought 
but  for  the  bankrupt's  disobedience,  or  both;^^  and,  if  they  are 
for  the  failure  to  obey  an  order  requiring  the  payment  of 
money  and  the  discharge  will  release  the  liability  to  pay  the 
money,  the  bankrupt  is  entitled  to  be  released.^o  The  same 
rule  applies  in  the  case  of  fines  and  costs  inuring  to  the  bene- 
fit of  the  prosecutor  ;2i  but,  if  for  the  enforcement  of  an  order 
requiring  the  performance  of  some  act  or  dut}^  not  affected  by 
the  discharge,  he  is  not  entitled  to  release  ;-2  and,  of  course, 
not,  if  it  is  to  punish  him,  a  pardon  being  the  only  relief  in 
that  case,  unless  release  is  secured  under  the  provision  as  to 
poor  debtors,  the  state  laws  relating  thereto  being  adopted  by 
the  United  States.^s 

§  424.  Bonds.— A  bond  given  by  bankrupt  to  secure  the 
release  of  a  lien  which  is  valid  under  the  bankrupt  act,  takes 
the  place  of  such  lien  and  is  not  released  by  the  discharge,  as 
where  to  dissolve  an  attachment  against  him,  issued  more  than 

ard,  97  F.  R.  187,  5  A.  B.  R.  857;  is  In  re  Hubbard,  98  F.  R.  710. 

^n  re  Anderson,  97  F.  R.  321,  5  A.  3  A.  B.  R.  528;   In  re  Baker,  1  N. 

B.   R.   858;    Audubon   v.    Shufeldt,  B.  N.  547,  3  A.  B.  R.  101,  96  F.  R. 

181    U.    S.    575,    5    A.    B.    R.    829;  954;      In    re    Cotton,    F.    C.    3269; 

Maisner  v.  Maisner.  6  A.  B.  R.  295;  Hawes  v.  Cooksey,  13  Ohio  242. 

Turner  v.   Turner,   108   F.   R.  785,  i!>McCann  v.  Randall,  146  Mass. 

6  A.   B.  R.  289;   Young  v.   Young,  181. 

7  A.  B.  R.  171;  In  re  Lachemeyer,  -'o  See  Wagner  v.  U.  S.,  104,  F.  R. 
18  N.  B.  R.  270.  F.  C.  7966;   In  re  133,  4  A.  B.  R.  596. 

Garrett,  11  N.  B.  R.  483,  2  Hughes  ^i  Hendryx  v.  Fitzpatrick.  19  F. 

235,  F.  C.  5252;  Barclay  v.  Barclay,  R.  810,  and  cases;  Jackson  v.  Bill- 

2  N.  B.  N.  R.  552;    but  see  In  re  ings,  1  Caines  252;  Buffum's  Case, 

Challon,  2  N.  B.  N.  R.  105,  3  A.  B.  13    N.    H.    14;     People    v.  Craft,  7 

R.  442,  98  F.  R.  82.  Paige  325. 

17  In  re  Houston,  1  N.  B.  N.  305,  --  Spalding  v.  New  York,  4  Hun. 

2  A.  B.  R.  107,  94  F.  R.  119;  In  re  21. 

Van  Orden,  1  N.  B.  N.  475,  2  A.  B.  -^^  Sec.  991,  U.  S.  Rev.  Stat. 
R.  801,  96  F.  R.  86;    Fite  v.  Fite, 
61  S.  W.  26,  5  A.  B.  R.  46L 


Ch.  i:  DEBTS    NOT    DISCHARGED— COVENANTS.  277 

four  months  before  the  bankruptcy  proeeedinys,  the  bankrupt 
gives  a  bond;-^  nor  if  the  bankrupt's  liability  on  such  bond 
does  not  become  fixed  by  the  happening  of  the  contingency 
named  until  after  the  filing  of  the  petition.^^  Nor  does  a  dis- 
charge release  the  bankrupt  from  liability  as  surety  for  the 
faithful  performance  of  duty  by  a  public  officer  f^  nor  if  given 
to  secure  the  delivery  of  goods  seized  by  the  Government;-" 
but  where  a  principal  is  released  from  a  debt  by  his  discharge 
in  bankruptcy,  he  will  also  be  released  from  his  contingent  lia- 
bility to  his  surety  for  the  same  debt  ;-^  or  a  bond  given  on  the 
arrest  of  a  debtor,  and  conditioned  that  he  will  apply  for  the 
benefit  of  the  state  insolvent  laws,  unless  the  debt  is  one  not 
released  by  a  discharge.-^ 

§  425.  Costs,  etc.— Costs  taxable  against  an  involuntary 
bankrupt  who  was  at  the  time  the  petition  was  filed  against 
him  plaintiff  in  an  action  which  passes  to  the  trustee  and 
which,  after  notice,  he  declines  to  prosecute,  and  taxable  costs 
incurred  in  good  faith  by  a  creditor  before  the  filing  of  the 
petition  in  an  action  to  recover  a  provable  debt,^^  are  provable 
claims  and  released  by  a  discharge ;  as  must  be  any  costs  or 
expenses  connected  with  a  provable  debt  since  the  incident 
falls  with  the  principal.  Costs  incurred  by  a  surety  for  bank- 
rupt in  attempting  to  resist  payment  can  not  be  recovered 
against  the  discharged  principal  though  the  surety  could  only 
prove  for  the  original  amount  in  the  creditor's  name.^^  In  an 
action  which  was  commenced  prior  to  the  filing  of  the  petition 
in  bankruptcy,  the  costs  taxed  against  a  bankrupt  after  the 
filing  of  the  petition,  not  being  provable  are  not  discharged.^^ 

§  426.  Effect  of  proof  of  claim.— Until  a  discharge  is 
granted,  the  fact  that  a  claim  is  provable,  or  has  been  proved, 

24  Holyoke  v.  Adams,  10  N.  B.  R.  2-  u.  S.  v.  Rob  Roy,  13  N.  B.  R. 

270;   In   re  Albrecht,   17  N.   B.  R.  235,  1  Woods  42,  F.  C.  16179. 

287.  F.  C.  145;  Hill  v.  Harding,  130  28  Halliburton  v.  Carter,  10  N.  B. 

U.    S.    699,   9    S.    Ct.    725;    Contra,  R.  359. 

Hamilton  v.   Bryant,   14   N.   B.   R.  29  Hubert  v.  Horter,  14  N.  B.  R. 

479.  430. 

2r.  Eastman  v.  Hibbard,  13  N.  B.  so  Sec.  63a,  act  of  1898. 

R.  360.  ••'1  Sec.   57i,   act  of   1898;    Fisher 

20  U.  S.  V.  Herron,  9  N.  B.  R.  535,  v.  Tifft,  127  Mass.  313;   see  Aiken, 

20    Wall.  251;    but    see    U.    S.    v.  Lambert  v.  Haskins,  6  A.  B.  R.  46. 

Throckmorton,  8  N.  B.  R.  309.  F.  32  in  re  Marcus,  5  A.   B.  R.  19; 

C.  16516.  Aiken,  Lambert  v.  Haskins,  supra, 


278  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  17 

does  not  prevent  its  enforcement  by  other  means  and  a  suit 
may  be  brought  on  a  provable  claim,  or  prosecuted  to  judg- 
ment, notwithstanding  the  pendency  of  bankruptcy  proceed- 
ings, in  which  a  discharge  may  be  granted  which  will  release 
it,  unless  stayed  by  the  court  of  bankruptcy,  or  the  court  in 
which  it  is  brought ;  and,  if  no  discharge  is  granted,  a  suit  may 
be  brought  for  the  balance  after  the  distribution  of  the  bank- 
rupt's estate  pro  rata.^^  A  creditor  is  not  estopped  from  pros- 
ecuting an  action  on  a  claim  not  discharged  in  bankruptcy, 
by  electing  to  prove  his  claim  in  bankruptcy,  but  may  receive" 
a  dividend  and  then  sue  for  so  much  as  remains  unsatisfied.^^ 
§  427.  Executory  contracts.— Covenants,— A  discharge  in 
bankruptcy  does  not  affect  the  bankrupt's  contractual  liabili- 
ties beyond  releasing  him-  from  personal  liability  for  such  as 
had  accrued  prior  to  the  bankruptc}^  or  if  the  trustee  deems 
such  contract  to  be  beneficial  to  the  estate  and  assumes  it,  in 
which  cases  he  assumes  liability  and  the  bankrupt  is  released, 
but  otherwise  not;^''''  thus  counsel  employed  by  the  bankrupt 
prior  to  the  bankruptcy  to  carry  on  a  suit  at  their  own  expense 
for  a  contingent  fee  of  one-half  are  entitled  to  such  one-half 
though  the  recovery  is  after  the  bankrupt's  discharge  ;3<'  or  a 
landlord  to  collect  rent  from  the  bankrupt  under  a  lease  accru- 
ing after  the  adjudication.^^  The  bankrupt  is  released  by  his 
discharge  from  the  breach  of  a  covenant  which  occurred  prior 
to  his  discharge,  if  the  same  result  in  a  provable  liability ,3^  but 
if  he  sells  land  prior  to  his  bankruptcy  with  a  covenant  of  title, 
he  remains  liable  therein  after  the  discharge,^^  but  in  the  case 

33  Holland  v.  Martin,  18  N.  B.  R.  3  A.  B.  R.  564,  98  F.  R.  967;  In  re 
359;  Frey  v.  Torrey,  8  A.  B.  R.  Frankel,  2  N.  B.  N.  R.  840;  In 
196;  Whitney  v.  Crafts,  10  Mass.  re  Mahler,  3  N.  B.  N.  R.  39,  aff'g  2 
23;'Dingee  v.  Becker,  F.  C.  3919;  Id.  70;  Bray  v.  Cobb,  2  N.  B.  N.  R. 
Lewensohn,  2  N.  B.  N.  R.  381,  99  586,  100  F.  R.  270,  3  A.  B.  R.  788 ; 
F.  R.  73;  Robinson,  2  N.  B.  R.  341,  In  re  Arnstein,  101  F.  R.  706,  4  A. 
F.  C.  11939.  B.  R.  246,  aff'g  2  N.  B.  N.  R.  106; 

34  Frey  v.  Torrey,  supra;  see  In  Contra,  In  re  Jefferson,  supra;  see 
re  Rundle,  2  N.  B.  R.  49,  F.  C,  In  re  Webb,  6  N.  B.  R.  302,  F.  C. 
12138.  739;    Bailey  v.  Lock,   11   N.  B.   R. 

35  In  re  Schiermann.  2  N.  B.  N.  271.  2  Woods  578,  F.  C.  739;  In  re 
R.  188;  Contra,  In  re  Jefferson,  1  Bleek,  12  N.  B.  R.  215,  8  Ben.  93. 
N.   B.   N.    288,    2   A.   B.   R.   206,    93  F.  C.  1822. 

F.  R.  948.  "^  Williams  v.  Harkins,  15  N.  B. 

•t6  Maybin  v.  Raymond,  15  N.  B.  R.  34. 

R.  353.  F.  C.  9338.  ^^  In  re  Burton,  29  F.  R.  637. 

37  In  re  Ells,  2  N.  B.  N.  R.  360, 


ClI.  i;  DEBTS    NOT    DISCHARGED— FIDUCIARY.  279 

whore  there  is  an  unrelinquished  dower  right,  and  the  husband 
of  the  person  having-  the  inchoate  right  of  dower  is  living, 
there  is  no  provable  claim  and  it  is  not  released."^*^ 

§  428.  Exemption  personal  to  creditor.— By  proving  his 
claim  a  creditor  waives  any  personal  exemption  he  may  have, 
as  being  out  of  the  jurisdiction,  omitted  from  the  proceedings 
and  without  knowledge  thereof  or  the  like.'*^ 

§  429.  Fiduciary.— The  exemption  of  debts  created  by  bank- 
rupt's fraud,  embezzlement,  misappropriation  or  defalcation 
while  acting  as  an  officer  or  in  any  fiduciary  capacity  applies 
only  to  a  person  who  was  already  an  officer  or  a  fiduciary 
when  the  debt  was  created,  and  not  to  one  created  under  cir- 
cumstances in  which  trust  or  confidence  is  reposed  in  the 
debtor  in  the  popular  sense  of  those  terms;*-  that  is,  only 
technical  or  special  trusts,  as  contradistinguished  from  those 

which  the  law  implies  from  the  contract,  are  within  the 
exception.-^s 

The  terms  "fraud,"  "embezzlement,"  "misappropriation," 
or  "defalcation,"  relate  and  are  limited  to  one  act- 
ing as  an  officer  or  holding  a  fiduciary  position,  and 
it  is  not  the  defalcation  only  of  such  a  person  that 
is  referred  to,  but  it  is  any  act  of  fraud,  embezzle- 
ment or  misappropriation  as  well  as  defalcation  on  his  part 
that  is  not  released.**  A  debt  due  by  a  bankrupt  in  the  character 
of  a  commission  merchant,  arising  out  of  his  failure  to  account 
for  the  value  of  goods  consigned  to  him  for  sale  on  commission 
is  not  within  the  exception  but  will  be  released  by  a  dis- 
charge;*^ and  if  such  debtor  is  arrested  under  a  state  statute 

ioRiggin  V.  Maguire,  8  N.  B.  R.  Ed.  565;  In  re  Benedict,  8  A.  B.  R. 

484,  15  Wall.  549.  463;  Noble  v.  Hammond,  129  U.  S. 

"Clay    V.    Smith,    3    Pet.    411;  65,  32  L.  Ed.  621;  Kelm  v.  Graff, 

Jones  V.  Horsey,  4  Md.  306;    Mur-  17  N.  B.  R.  319,  F.  C.  7650. 

ray  v.  Roberts,  150  Mass.  599.  ^i  In  re  Bullis,   7  A.  B.  R.   238; 

42  In  re  Rogers,  1  N.  B.  N.  211,  1  Morse  et  al.  v.  Kaufman,  7  A.  B.  R. 
A.  B.  R.  541;  Claflin  v.  Eason,  1  549;  but  see  Frey  v.  Torrey,  6  A.  B. 
N.  B.  N.  360.  2  A.  B.  R.  263;  Up-  R.  448;  Western  Union  Cold  Stor- 
shur  V.  Briscoe,  138  U.  S.  365;  Bry-  age  Co.  v.  Hurd,  116  F.  R.  442,  8 
ant  V.  Kinyon,  6  A.  B.  R.  237.  A.  B.  R.  633;  Contra,  Frey  v.  Tor- 

43  Bracken  v.   Milner,   104  F.   R.  rey,  8  A.  B.  R.  196. 

5212,  5  A.  B.  R.   23;   Gee  v.  Gee,  7  *-  in  re  Basch,  2  N.  B.  N.  R.  122, 

A.   B.    R.    500;    Neal   v.    Clark,    95  3  A.  B.  R.  235,  97  F.  R.  761;  Zepe- 

U.  S.  704,  24  L.  Ed.  586;    Henne-  rink  v.  Card.  11  F.  R.  295;   Wool- 

quin  V.  Clews,  111  U.  S.  676,  28  L.  sey  v.  Cade,  15  N.  B.  R.  238;  Keime 


•280  THE    NATIONAL    BANKRUPTCY    LAW.  ClL  1? 

he  will  be  released  on  application  to  the  coui't  of  bankruptcy ; '" 
so  a  creditor  who  holds  collateral  for  his  own  security,  is  not 
a  trustee,  and,  a  failure  to  deliver  it  up  being  a  breach  of  con- 
tract and  not  a  breach  of  trust,  a  discharge  releases  the  claim 
arising  from  his  appropriation  to  his  own  use  of  such  secur- 
ities.^'^ Where  a  produce  dealer,  as  an  accommodation,  col- 
lects moneys  and  without  fraudulent  intent  deposits  the  pro- 
ceeds with  his  own  funds  and  before  payment  is  thrown  into 
bankruptcy,  such  debt  is  not  within  the  exception  ;"^^  nor  is  a 
debt  created  by  an  agent's  failure  to  pay  over  moneys  entrusted 
to  him  to  loan  and  to  receive  the  interest  and  principal  of  such 
loans  and  remit  the  same  to  the  lender  ;^''  though  if  he  takes 
mortgages  to  himself  or  his  partner,  in  which  latter  case  he 
caused  foreclosure  proceedings  and  purchases  the  property 
himself,  it  would  be  ;^'^  nor  is  a  husband's  liability  to  his  wife 
for  her  paraphernal  property  under  the  law  of  Louisiana.^ ^ 
The  implied  trust  relation  existing  between  partners,  under 
which  their  liabilities  to  each  other  must  be  determined,  does 
not  bring  their  affairs  within  the  definition  of  the  excepted 
term  "fiduciary, "^2  j^or  the  relation  between  a  stock  broker 
and  a  customer  on  an  open  account.'^^ 

Debts  of  the  bankrupt,  while  register  of  a  land  office,  in  con- 
verting to  his  own  use  money  deposited  by  private  parties  to 
purchase  public  lands,-^^  or  a  defalcation  by  a  guardian,^-"*  ex- 
ecutor or  administrator  would  not  be  released  r'^*^  while  the 
obligation  of  the  surety  on  a  guardian's  bond  would  be.     A 

V.  Graff,  supra;    Owsley  v.  Cobin,  ^^  Noble  v.  Hammond,  129  U.  S. 

15  N.  B.  R..  489,  2  Hughes  433,  F.  65. 

C.   10636;    Chapman  v.  Forsyth,   2  *:' Bracken  v.   Milner,  104  F.  R. 

How.  202;  Knott  v.  Putnam,  107  F.  522;    Upshur  v.  Briscoe,  138  U.  S. 

R.  907,  6  A.  B.  R.  80;   In  re  Bene-  365;   and  see  In  re  Shepperd,  2  N. 

diet,  8  A.  B.  R.  463 ;  Contra,  Lenke  B.  N.  R.  1070. 

V.  Booth,  5  N.  B.  R.  351 ;    Meador  -o  Bracken  v.  Milner,  supra. 

V.  Sharpe,  4  N.  B.  492;   Treadwell  "i  Fleitas  v.  Richardson,   147  U. 

V.  Holloway,  12  N.  B.  R.  61;    In  re  S.  550. 

Seymour,  1  N.  B.  R.  29,  1  Ben.  348,  ■•■^  Gee  v.  Gee,  7  A.  B.  R.  500. 

F.  C.  12684.  ''^  In  re  Gaylord,  113  F.  R.  131,  7 

46  In  re  Smith,  18  N.  B.  R.  24,  F.  A.  B.  R.  577. 

C.  12976;   Grover  v.  Clinton,  8  N.  "'^  Ex  p.  Wright,  F.  C.  18064. 

B.  R.  312,  5  Biss.  324,  F.  C.  5845.  ■'■•  Halliburton  v.  Carter,  10  N.  B. 

47  Hennequin  v.  Clews,  111  U.  S.  R.  359 ;  In  re  Maybin,  15  N.  B.  R, 
676;  Palmer  v.  Hussey,   119  U.  S.  458,  F.  C.  9337. 

96.  '  5«  Ex  p.  Taylor,  16  N.  B.  R.  40,  1 

Hughes  617,  F.  C.  13773. 


ClI.  i:  DEBTS    NOT    DISCHARGED— FIDUCIARY.  281 

debt  is  within  the  excei)tion  where  the  bankrupt  while  acting 
as  agent  for  the  creditor  converted  to  his  own  use  money  of 
the  creditor  received  as  agent;-''"  and  it  has  been  held  that  a 
city  auctioneer  acts  in  a  fiduciarj^  capacity,  though  in  this  case 
it  should  be  observed  that  he  is  an  officer.^*^  An  attorney  who 
professionally  collects  a  debt  for  his  client  is  undoubtedly  act- 
ing in  a  fiduciary  capacity  f^  but,  if  he  does  not  act  in  his  pro- 
fessional capacity,  it  is  otherwise,^*'  The  fiduciary  relation 
does  not  exist  where  the  agent  is  to  share  in  the  profits,  acting 
with  the  knowledge  of  the  principal  and  more  as  a  partner 
than  an  agent ;  or  where  a  limited  partnership  is  formed  and 
one  member  becomes  indebted  to  another.^^ 

§  430.  Fines.— Upon  the  question  whether  or  not  a  fine  is 
provable  and  consequently  affected  by  a  discharge,^^  ggg  Debts 
provable,  post  §  993. 

§431.  Foreign  discharge.— While  a  discharge  is  as  much  a 
release  of  a  debt  due  an  alien  as  of  one  due  a  citizen  of  the 
United  States  w^hether  the  alien  was  a  party  to  the  proceed- 
ings or  not,^3  a  bankrupt's  discharge  in  a  foreign  country 
under  a  foreign  bankrupt  law  does  not  discharge  a  debt  made 
in,  and  with  reference  to  the  laws  of  this  country,  nor  bar  an 
action  on  a  contract  made  in  this  country.^* 

§  432.    Determination  of  character  of  debt.— Prior    to    the 

amendment  the  question  frequently  arose  as  to  the  nature  of 
the  debt  as  evidenced  by  the  judgment,  and  while  it  was  fre- 
quently held  that  the  nature  of  the  action  whether  for  'fraud 
or  not  was  determined  by  the  record,  and  not  by  any  allegation 
or  proof  outside  of  it,^^  and  would  be  conclusive  as  to  matters 

5 T  Fulton  V.  Hammond,  11  F.  R.  193;  Moore  v.  Horton,  32  Hun.  393. 

291.  ''*  In  re  Sheppard,  1  N.  B.  R.  116, 

58  Mayor  v.  Walker,  11  N.  B.  R.  F.  C.  12753;  McMillan  v.  McNeil, 
478;  Comp.  In  re  Lord,  F.  C.  8501.  4  Wheat,  209;  Green  v.  Sarmiento. 

59  Flanagan  v.  Pearson,  14  N.  B.  Pet.  C.  C.  74,  3  Wash.  C.  C.  17.  F. 
R.  37.  C.  5760;  Zarega's  Case,  F.  C.  18204. 

GO  McAdoo  V.  Loomis,  43  Tex.  227.         es  Burnham  v.  Pidcock,   5  A.  B. 

61  Pierce  v.  Shipper,  19  N.  B.  R.  R.  590;  In  re  Whitney,  18  N.  B.  R. 

221.  563,  F,  C.  17581;    In  re  Patterson, 

02  In  re  Anderson,  3  A.  B.  R.  544,  1   N.   B.   R.   307,  F.   C.   10817;    but 

98  F.  R.  588 ;  but  see  In  re  O'Don-  see   Forsyth   v.    Vehmeyer,   177   U. 

nell,  1  N.  B.  N.  59.   See  attachment  S.   177,  44  L.  Ed.   723,  3  A.  B.  R. 

for  contempt,  ante,  §  423.  807;  In  re  Bullis,  7  A.  B.  R,  238. 

OS  Pattison  v.  Wilbur,  12  N.  B.  R. 


282  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  17 

before  the  state  court  for  decision,""  yet  if  it  did  not  appear 
from  the  judgment  itself,  it  would  be  sufficient  if  it  appeared 
from  the  record  of  the  case,  and  it  has  been  held  that  a  judg- 
ment may  always  be  examined  into  to  see  if  the  fraud  is  such 
as  is  mentioned."^  The  cause  of  action  does  not  become 
merged  in  the  judgment  thereon,  to  the  extent  of  precluding 
the  plaintiff  from  showing  the  nature  of  the  original  debt."** 

§  433.  Form  of  action.— The  form  of  action,  tort  or  contract, 
is  now  immaterial  and  the  court  will  look  behind  the  form 
to  the  substance  and  if  the  debt  is  not  within  the  exceptions 
a  discharge  will  bar  the  action."^  It  is  not  necessary  that  an 
action  of  tort  be  brought  on  a  debt  created  by  fraud,  for  an 
action  of  assumpsit  may  be  brought  on  the  debt  and  if  the  dis- 
charge be  pleaded  the  plaintiff  may  reply  that  the  debt  men- 
tioned in  the  judgment  was  created  by  fraud,  misrepresenta- 
tion, false  pretenses  or  the  like  and  was  therefore  not  released, 
and  thus  show  the  existence  of  the  fraud.'*'  The  burden  of 
proving  that  the  debt  was  created  by  false  pretenses  or  false 
representations,  would  be  on  the  plaintiff  in  such  case."^ 

§  434.  Obtaining  property  by  false  pretenses  or  false  repre- 
sentations.— A  liability  growing  out  of  the  obtaining  of  prop- 
erty by  false  representations  or  fdlse  pretenses  is  released  by 
a  discharge,  though  prior  to  the  amendment  of  1903  this  was 
only  true  when  such  liability  had  been  reduced  to  judgment. 
The  representation  must  have  been  as  to  a  fact  made  know- 

<i'i  Knott    V.    Putnam,    107    F.    R.         7o  Stewart  v.  Emerson,  8  N.  B.  R. 

907,  6  A.  B.  R.  80.  462;  Forsyth  v.  Vehemeyer,  177  U. 

07  In  re  Khutassel,  96  F.  R.  297,  S.  177,  3  A.  B.  R.  807,  44  L.  Ed. 

2  A.  B.  R.  697;   Flanagan  v.  Pear-  T23;    In  re  Patterson,   1   N.  B.  R. 

son,  14  N.  B.  R.  37;  Palmer  v.  Hus-  307,  F.   C.   10817;    In   re   Bullis,   7 

sey,  87  N.  Y.  303.  A.    B.   R.    238;    In    re  Thomas,   92 

68  Packer  v.   Whittier,   91   F.   R.  F.  R.  912,  1  A.  B.  R.  515;    Stokes 

511;  In  re  Pettis,  2  N.  B.  R.  17,  F.  v.  Mason,  12  N.  B.  R.  498;  but  see 

C.  11046;  Warner  v.  Cronkhite,  13  Hagardine-McKitrick     Dry     Goods 

N.  B.  R.  52,  F.  C.  17180.  Co.  v.  Hudson,  111  F.  R.  361,  6  A. 

«!•  In  re  Kimball,  1  N.  B.  R.  193,  B.  R.  657;  In  re  Rhutassel,  96  F.  R. 

2  Ben.    38,    F.  C.    776;    Hayes    v.  597,  2  A.   B.  R.  697;    Burnham  v. 

Nash,    129    Mass.    62;     Brown     v.  Pidcock,  5  A.  B.  R.  42,  aff'd  5  id. 

Treat,  1  Hill  225;  Bickford  v.  Bar-  590. 

nard,     8     Allen     314 ;     Merrill     v.         ^i  Sherwood  v.   Mitchell,  4  Den. 

Schwartz,  68  Me.  514;    In  re  Lew-  435. 
ensohn,  99  F.  R.  73,  2  N.  B.  N.  R. 
381. 


Ch.  17  DEBTS    NOT    DISCHARGED— FRAUDULENT.  283 

ingly,  falsely  and  fraudulently,  for  the  purpose  of  obtaining 
money  or  property  from  another  and  by  means  of  which  such 
money  or  property  is  obtained;  in  which  event  the  debt  is 
created  by  means  of  a  fraud  involving  moral  turpitude  and 
intentional  wrong.  Thus,  where  one  obtains  goods,  money  or 
property  from  another  with  a  preconceived  intent  of  not  pay- 
ing for  them  according  to  the  terms  of  the  agreement,  and 
ships  them  at  once  beyond  the  state  or  transfers  them  beyond 
his  control,  with  the  intent  to  defraud,  the  liability  is  one 
which  will  not  be  discharged,'^^  and  the  same  is  true  where  one 
obtains  advances  of  money  or  goods  by  false  and  fraudulent 
representations,  such  representations  not  being  the  sole  con- 
sideration, but  being  material  and  the  credit  not  otherwise  ob- 
tained.'^* 

Where  the  representation  or  statement  is  made  direct  to  the 
creditor  or  his  agent,  with  the  purpose  and  intent  of  influenc- 
ing the  creditor  in  extending  credit,  which  representation  or 
statement  proves  to  be  false,  the  debt  is  not  released,  though 
it  is  a  doubtful  question  whether  a  statement  made  to  a  com- 
mercial agency  for  use  of  its  subscribers,  which  is  acted  upon 
by  the  creditor  as  a  basis  for  extending  credit,  would  be  such 
a  representation  if  proven  false  as  would  warrant  the  court 
in  holding  that  the  debt  was  not  released.  While  Congress 
may  have  intended  this  to  be  the  case,  in  the  absence  of  an 
express  statement  to  that  effect,  it  is  not  believed  that  the  debt 
would  come  within  the  exception,  if  the  false  representation 
consists  merely  that  made  to  the  agency,  unless  it  be  shown 
that  the  representation  was  with  the  purpose  of  obtaining  the 
property  out  of  which  the  liability  grows. 

§435.  Fraud  while  acting  as  a  fiduciary.— By  the  Act  of 
1898  judgments  in  actions  for  fraud  or  obtaining  property  by 
false  pretenses  or  false  representations  were  not  released  by 
the  discharge.  By  the  amendment  of  1903  both  the  terms 
"judgment"  and  "fraud"  are  omitted  so  that  unless  the  fraud- 
ulently contracted  liability  grows  out  of  a  fraud  committed  by 
the  bankrupt  while  acting  as  an  officer  or  as  a  fiduciary,  or 
is  a  liability  for  obtaining  property  by  false  pretenses  or  false 
representation,  it  is  discharged  whether  reduced  to  judgment 

73  Ames  V.  Moir,  138  U.  S.  306;  74  in  re  Gany,  103  F.  R.  930,  2 

In  re  Alsberg,  16  N.  B.  R.  166,  F.  N.  B.  N.  R.  1082,  4  A.  B.  R.  576; 

C.  261;  Classen  v.  Schoenemaw,  16  In  re  Wright,  2  N.  B.  R.  14,  F.  C. 
N.  B.  R.  98. 


284  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  IT 

ur  uot.  To  bring  a  debt  within  the  exception  as  to  debts 
created  by  the  bankrupt's  fraud,  embezzlement  or  defalcation 
while  acting  as  an  officer  or  in  any  fiduciary  capacity,  the 
fraud  must  be  positive  fraud,  or  fraud  in  fact,  involving  moral 
turpitude  or  intentional  wrong,  and  not  implied  fraud,  or 
fraud  in  law,  which  may  exist  without  bad  faith  or  immoral- 
ity ;^^  and  must  exist  in  the  creation  of  the  debt,  as  subsequent 
fraudulent  conduct  is  insufficient.'^^  If  the  debt  be  created  in 
fraud,  it  is  immaterial,  for  instance,  that  the  fraud  consists  in 
false  statements  by  only  one  member  of  a  firm,  especially  if  the 
firm  reaps  the  benefit."'^  If  the  original  debt  arose  in  contract 
and  the  fraud  was  but  an  incident  of  the  debt  and  not  its  crea- 
tive power,  the  debt  is  merged  in  the  judgment  and  the  bank- 
rupt released  thereafter.'^'' 

The  good  of  the  community  and  public  policy  forbid  the 
discharge  of  the  bankrupt  from  a  debt  incurred  through  fraud 
while  acting  as  an  officer  or  in  a  fiduciary  capacity,  and  a  debt 
so  created,  whether  reduced  to  judgment  or  not,  is  not  to  be 
discharged  in  bankruptcy  ;'^^  but  it  may  be  proved  and  divi- 
dends received  on  it.^^ 

§  436.  Willful  and  malicious  injury  to  person  or  property.— 
Under  the  Act  of  1898,  judgments  in  actions  for  willful  and 

18070;  Forsyth  v.  Vehneyer,  177  U.  field,  1  N.  B.  R.  161,  F.  C.  12058; 

S.  177.  In  re  Stokes,  2  N.  B.  R.  76,  F.  C. 

"Strang  v.   Bradner,   144   U.  S.  13476;    In  re  Talman,   1  N.   B.  R. 

555;  Noble  v.  Hammond,  129  U.  S.  122,  2  Ben.  348,  F.  C.  13739;   In  re 

65;   Upshur   v.   Briscoe,   138   U.   S.  Wright,  2  N.  B.  R.  14,  F.  C.  18070; 

365;   Ames  v.  Moir,  138  U.  S.  306,  Neal  v.  Clarke.  95  U.  S.  704;  How- 

34    L.    Ed.    951;    Forsyth   v.    Veh-  land  v.   Carson,   16   N.  B.  R.  372; 

meyer,  179  U.   S.    177,   3  A.   B.   R.  In  re  Patterson,  1  N.  B.  R.  58,  2 

807.  Ben.  155,  F.  C.  10817;  In  re  Pettis, 

76  u.  S.  V.  Rob  Roy,  13  N.  B.  R.  2  N.  B.  R.  16,  F.  C.  11046;  In  re 
235.  1  Woods  42.  F.  C.  16179.  Robinson.  2  N.  B.  R.  108,  6  Blatch. 

77  Strang  v.  Brandon.  114  J.  S.  253,  F.  C.  11939 ;  In  re  Stokes,  2 
555.  N.    B.   R.    76,   F.    R.    13476;    In   re 

7«  Sherman  v.  Straus.  10  N.  B.  R.  Wright.  2  N.  B.  R.  14,  F.  C.  18070; 

300.  Libbey  v.  Strasburger.  17  N.  B.  R. 

7C  In  re  Thomas.  1  N.  B.  N.  329,  468. 
1  A.  B.  R.  515,  92  F.  R.  912;   In  re         »o  Strang  v.  Bradner,  144  U.  S. 

Lieber,  2  N.  B.  N.  R.  21,  3  A.  B.  R.  555;    Wilmot  v.   Mudge,  103 'U.  S. 

217;  In  re  Bradford.  2  N.  B.  R.  26,  217;    In  re  Wright,  2  N.  B.  R.  14, 

F.  C.  1090 ;  In  re  Clarke,  2  N.  B.  R.  F.  C.  18070  ;  In  re  Robinson,  supra; 

44,  F.  C.  2844;    In  re  Doody,  2  N.  In  re  Rosenberg,  2  N.  B.  R.  81,  3 

B.  R.  74,  F.  C.  3995;    In  re  Rath-  Ben.  14.  F.  C.  12054;   In  re  Nigel, 

bone,    F.    C.   11580;    In   ro   Rosen-  2  N.  B.  R.  481,  F.  C.  9536. 


Ch.  17  JUDGMENTS  FOR  FRAUD.  285 

malicious  injuries  to  the  person  or  property  of  another  were 
not  released  by  a  discharge,**^  but  in  such  cases  the  ground  of 
the  action  and  basis  of  the  recovery  was  the  willful  and  ma- 
licious injury  to  the  person  or  property  of  the  creditor.  By 
the  amendment  of  1903,  the  mere  liability  for  such  injuries, 
whether  reduced  to  judgment  or  not,  are  excepted.  A  liability 
growing  out  of  a  breach  of  contract  to  marry  does  not  come 
within  the  excepted  class  of  "willful  and  malicious  injuries  to 
the  person  or  property  to  another,"  but  is  released  by  the 
discharge,  although  seduction  may  be  pleaded  and  proven.^^ 
It  has  also  been  held  that  a  judgment  for  alienation  of  affec- 
tions would  not  be  released.^^a 

§  437.  For  support,  seduction  or  criminal  conversation.— 
Under  the  Act  of  1898,  considerable  question  arose  as  to 
whether  claims  of  this  character  came  within  the  excepted 
class,  but  in  no  case  was  it  excepted  unless  reduced  to  judg- 
ment. Thus  it  was  held  that  a  judgment  recovered  by  an  un- 
married woman  for  her  own  seduction, ^^  or  by  a  father  for  the' 
seduction  of  his  child,^^  was  one  for  a  willful  and  malicious 
injury  and  not  discharged,  while  a  judgment  for  criminal  con- 
versation was  held  to  be  neither  an  injury  to  the  person  or 
property  of  the  husband,  and  would  therefore  be  discharged.^-'"' 

By  the  amendment  of  February  5,  1903,  all  liabilities  for 
maintenance  or  support  of  wife  or  child,  or  for  the  seduction 
of  an  unmarried  female  or  for  criminal  conversation,  whether 
reduced  to  judgment  or  not,  are  now  excepted  from  the  effects 
of  the  discharge.^^* 

§  438.  Judgments  to  effectuate  valid  liens.— Keeping  alive 
old  debts. — A  creditor,  who  brought  an  action  and  issued  an 
attachment  more  than  four  months  before  the  bankruptcy  may 

81  In  re  Carmichael,  2  A.  B.  R.  A.  B.  R.  479;  Contra,  In  re  Sulli- 
815,  96  F.  R.  594.  van,  1  N.  B.  N.  380,  2  A.  B.  R.  30. 

82  Disler  v.  McCauley,  7  A.  B.  R.  sn  in  re  Tinker,  2  N.  B.  N.  R.  391, 
138,  reversing  6  A.  B.  R.  491;  Fin-  3  A.  B.  R.  580,  99  F.  R.  79,  citing 
negan  v.  Hall.  6  A  B.  R.  648;  In  re  In  re  Haensell.  1  N.  B.  N.  240,  1 
Fife,  109  F.  R.  880.  6  A.  B.  R.  258;  A.  B.  R.  286.  91  F.  R.  355;  Liver 
In  re  McCauley,  101  F.  R.  223;  In  good  v.  Greer,  43  111.  213;  Ander 
re  Sidle,  2  N.  B.  R.  77,  F.  C.  12844.  son  v.  How,  116  N.  Y.  342;  Com.  v 

82a  Leicester  v.  Hoadley,  9  A.  B.  Williams,  110  Mass.   401 ;   Contra 

R.  318.  Colwell  v.  Tinker,  6  A.  B,  R.  434 

^>  In  re  Maples,  105  F.  R.  919.  5  aff'd  169  N.  Y.  537,  7  A.  B.  R.  334. 
A.  B.  R.  426.  86  In  re  Hubbard,  98  F.  R.  710,  3 

84  In  re  Freche.  109  F.  R.  620,  6  A.  B.  R.  528 ;  In  re  Baker,  96  F.  R. 


28G  THE    NATIONxYL    BANKRUPTCY    LAW.  Ch.  17 

have  a  special  judgment  against  the  property  notwithstanding 
the  discharges'^  Debts  existing  under  the  Act  of  1867  and 
kept  alive  by  subsequent  judgments,  or  in  fact  any  existing 
judgment,  are  not  excepted  from  the  operation  of  the  present 
actjSs  but  will  be  discharged. 

§  439.  Judgments  pending*  proceedings.— A  judgment  recov- 
ered between  the  adjudication  and  the  discharge  in  a  suit 
begun  before  the  bankruptcy  is  released  by  the  discharge  and 
bankrupt  is  entitled,  on  filing  a  certified  copy  of  the  discharge, 
to  a  perpetual  stay  of  execution  ;S^  and  a  suit  brought  after 
bankruptcy  by  an  execution  creditor  to  establish  a  lien  on 
equitable  assets  of  bankrupt  is  founded  on  the  judgment  which 
is  a  claim  released  by  discharge  and  hence  the  suit  is  properly 
stayed.^*' 

§  440.  Liens. — A  discharge  in  bankruptcy  releases  the  bank- 
rupt from  a  provable  debt  not  within  the  excepted  classes  and 
takes  away  the  creditor's  right  to  proceed  against  him  in  per- 
sonam, but  it  does  not  affect  a  lien  on  his  property  acquired 
more  than  four  months  before  the  filing  of  the  petition  pro- 
vided it  is  otherwise  valid  ;'*^  or  liens  excepted  from  the  opera- 
tion of  the  aet,^^  as  a  lien  for  wages  created  and  preserved 
according  to  statute  ;^^  or  where  bank  stock  is  delivered  as 
security  for  a  loan,  the  only  thing  remaining  to  be  done  being 
the  transfer  of  the  stock  on  the  books  of  the  bank  issuing  the 
stock ;^'*  or  a  vendor's  lien  where  such  lien  is  recognized  by 
state  laws  v*^  or  a  mortgage  lien,  if  the  trustee  fails  to  redeem 
the  property,  or  agree  with  the  creditors  as  to  its  value,  or 
have  it  ascertained  by  a  sale  under  direction  of  the  court  of 
bankruptcy  ;"*^  or  if  the  incumbered  property  does  not  form 

954,  3  A.  B.  R.  101;    In  re  Coton,  259,  1  A.  B.  R.  633.  94  F.  R.  476; 

F.  C.  3269.  Evans  v.   Rounsaville,   8   A.   B.   R. 

«T  Ray  V.  Wright.  14  N.  B.  R.  563 ;  236. 

Stoddard  v.  Locke,  9  N.  B.  R.  73;  92  Sec.  67  of  act  of  1898. 

Deighton  v.  Kelsey,  4  N.  B.  R.  155.  93  in  re  Kerby-Denis  Co.,  1  N.  B. 

««  In  re  Herrman,  102  F.  R.  753,  N.   399,   2   A.   B.   R.   402,   95   F.   R. 

2  N.  B.  N.  R.  905.  4  A.  B.  R.  139.  116,  aff'g  1  N.  B.  N.  337,  2  A.  B.  R. 

80  Boynton  v.  Ball.  121  U.  S.  457;  218,  94  F.  R.  8181. 

Braman  v.  Snider,  21  F.  R.  871;  In  ni  Bk.  v.  Bk.,  11  N.  B.  R.  49. 

re    Stansfield,   16   N.   B.   R.    268,   4  "-Lewis    v.    Hawkins,   23    Wall. 

Sawy.  334,  F.  C.  13294.  119. 

90  In   re  McNamara,   2  N.   B.  N.  ne  Reed   v.   Bullington,   11   N.   B. 

R.  341.  R.   408;    Brown  v.  Gibbons,  13  N. 

01  In    re    Blumberg.    1    N.   B.   N.  B   R.  407. 


Ch.  17  DEBTS    NOT    DISCHARGED— RENT.  287 

part  of  the  assets  in  bankruptcy,  though,  if  it  afterwards  comes 
into  the  possession  of  bankrupt,  the  court  of  bankruptcy 
may  enforce  the  lien;^'  but  the  lien  of  a  mortgage  given  his 
wife  for  money  forming  part  of  her  paraphernal  estate,  which 
mortgage  was  recorded  prior  to  the  husband's  discharge  as  a 
bankrupt,  is  released  by  the  discharge  as  far  as  concerns  his 
after  acquired  property  and  the  discharge  can  be  urged  by  a 
mortgagee  of  such  property  ;^s  or  where  the  lien  is  acquired 
within  the  prohibited  four  months.^^ 

§441.  Limitation.— Since  all  debts  provable  by  nature,  not 
within  the  excepted  classes,  are  released  by  a  discharge  in 
bankruptcy,  the  fact  that  such  a  debt  can  not  in  fact  be  proved 
because  barred  by  the  statutes  of  limitation  does  not  affect  the 
question  of  its  release.^  See  New  promise  to  pay  debt,  ante, 
§  391. 

§  442.  Rent.— Each  sum  of  rent  is  a  distinct  debt,  there 
being  no  provision  in  the  present  act  for  the  apportionment  of 
rent,  so  that,  no  matter  how  large  a  portion  of  the  installment 
period  has  transpired  when  the  petition  in  bankruptcy  is  filed, 
only  those  installments  which  have  become  due  and  payable  at 
the  time  of  such  filing  are  provable  and  released  by  the  dis- 
charge.2  But  rent  as  such  is  an  incident  to  and  grows  out  of 
the  use  and  occupation,  and  is  the  consideration  thereof,  and 
unaccrued  rent  can  not  be  said  to  be  a  fixed  liability  absolutely 
owing  when  the  petition  is  filed,  payable  in  the  future,  or 
indeed  a  debt  of  any  kind,  as  the  word  is  used  in  the  act,  being 
only  an  unmatured  obligation  to  pay  in  the  future  (a  consider- 
ation for  future  enjoyment  and  occupancy),  and  therefore  not 
provable  or  released  by  a  discharge.^     The   same  is  true  of 

s"  Dixon    V.    Barnum,    3    Hughes  270.  3  A.  B.  R.  788;   In  re  Ells,  2 

207,  F.  C.  3928.  N.  B.  N.  R.  360,  3  A.  B.  R.  564,  98 

98Fleitas  v.  Richardson,   147  U.  F.  R.  967;  In  re  Shilladay,  1  N.  B. 

S.  550,  aff'g  same  v.  Mellen,  39  F.  N.  475;   In  re  Cronson,  1  N.  B.  N. 

R.  129.  474 ;     In    re    Goldstein,    1    N.    B. 

no  Ex  p.  Foster.   2  Story  131,  F.  N.  422,  2  A.  B.  R.  603;   In  re  Ger- 

C.  4960.  son,  1  N.  B.  N.  315,  2  A.  B.  R.  170; 

1  In  re  Kingsley,  1  N.  B.  R.  66,  In  re  Jefferson,  1  N.  B.  N.  288,  2 
1  Lowell  216,  F.  C.  7819.  A.  B.  R.  206,  93  F.  R.  948. 

2  Reed  v.  Phinney,  2  N.  B.  N.  R.  3  in  re  Frankel.  and  cases  above 
1009;  In  re  Frankel,  2  N.  B.  N.  R.  cited;  In  re  Arnstein,  101  F.  R. 
840;  In  re  Collignon.  2  N.  B.  N.  706,  4  A.  B.  R.  246,  aff'g  2  N.  B.  N. 
R.  660,  4  A.  B.  R.  250;  Bray  v.  R.  106;  In  re  Mahler.  Id.  70; 
Cobb,  2  N.  B.  N.  R.  586.  100  F.  R.  Treadwell  v.  Marden,   18  N.  B.  R. 


2HS  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  I7 

warehouse  charges  accruing  after  the  filing  of  tlie  petition^ 
which  are  not  released  by  the  discharge.^ 

§  443.  Statutory  liability.— A  stock  subscriber's  liability  to 
calls  on  the  bankruptcy  of  a  corporation  becomes  a  contin- 
gent liability  of  undetermined  amount,  payable  when  a  call  is 
made,  and  if  such  subscriber  subsequently  becomes  bankrupt 
and  receives  a  discharge  he  is  released  from  such  liability 
though  the  call  is  not  made  until  after  the  discharge  f  and  so 
a  shareholder  in  a  national  bank  is  released  from  his  statutory 
individual  liability  to  the  bank's  creditors,  if,  at  the  time  of 
his  discharge,  their  claims  were  provable  and  not  merely  con- 
tingent;*' but  a  discharge  of  the  corporation  will  not  release 
its  directors  and  stockholders  from  a  liability  for  its  debts  and 
contracts  imposed  on  them  personally  by  statute  J 

,>  444.  Sureties. — The  liability  of  a  person  who  is  a  co-debtor 
with,  or  guarantor  or  in  any  manner  a  surety  for  a  bankrupt 
will  not  be  altered  by  the  discharge,^  whether  as  partner,  joint 
contractor,  indorser,  surety  or  otherwise  ;^  nor  will  a  discharge 
release  a  bankrupt  from  liability  as  surety  where  no  cause  of 
action  arose  until  after  such  discharge  ;^^  nor  as  surety  for  the 
faithful  performance  of  a  duty  as  a  public  officer  ;^  ^  but,  where 
a  surety  on  a  guardian's  bond  receives  a  discharge  in  bank- 
ruptcy, he  is  released  from  liability  for  defaults  of  the  guar- 
dian prior  to  his  bankruptcy  ;^^  or  if  one  enters  an  appeal  and 
becomes  a  bankrupt  and  is  discharged  prior  to  the  affirmance 
of  the  judgment,  his  surety  on  the  appeal  is  discharged^^  in 

353;    Contra,    In    re    Goldstein,    1  Dolsen,    131    U.    S.    66;    In  re  AI- 

N.  B.  N.  422,  2  A.  B.  R.  603;  Bray  brecht,  17  N.  B.  R.  287,  F.  C.  145; 

V.  Cobb,  2  N.  B.  N.  R.  586,  100  F.  R.  Knapp  v.    Anderson,    15   N.   B.   R. 

270,  3  A.  B.  R.  788.  316;   but  see  In  re  Perkins,  10  N. 

4  Robinson    v.    Pesant,    8    N.  B.  B.  R.  529,  F.  C.  10983. 

R.  426.  10  Eastman  v.  Hibbard,  13  N.  B. 

5  Carey  v.  Mayer,  79   F.  R.  926,     R.  360. 

25  C.  C.  A.  239.  'i  U.    S.    v.    Herron,    9   N.   B.   R. 

6  Richmond  v.  Irons,  121  U.  S.  535,  20  Wall.  251;  but  see  U.  S.  v. 
27,  rev'g  Irons  v.  Bk.,  27  F.  R.  591.     Throckmorton,  8  N.  B.  R.  309,  F. 

-  In    re    Marshall    Paper    Co..  2  C.  16516. 
N.  B.  N.  R.  656,  95  F.  R.  419,  2  A.         '->  Jones  v.  Knox,  8  N.  B.  R.  559; 

B.  R.  656;   ante,  §  109.  Reitz  v.  People,  16  N.  B.  R.  96;  Ex 

8  Sec.  16,  of  act  of  1898.  p.  Taylor.  16  N.  B.  R.  40;  1  Hughes 

9  In   re  Levy,    1    N.   B.   R.   66,   2  617.  F.  C.  13773. 

Ben.  169,  F.  C.  8297;  Abendroth  v.         i>  Odell  v.  Wooten,  4  N.  B.  R.  46. 


Ch.  17  DEBTS   NOT   DISCHARGED— CLAIMS.  289 

those  states  where  the  discharge  can  be  called  to  the  attention 
of  the  appellate  court.    See  also  post  §  987. 

§  445.  Unliquidated  damages.— The  act  expressly  provides 
that  unliquidated  claims  against  the  bankrupt  may,  pursuant 
to  application  to  the  court,  be  liquidated  in  such  manner  as  it 
shall  direct,  and  may  thereafter  be  proved  and  allowed  against 
his  estate,^  "*  and  accordingly  W' ould  be  released  by  a  discharge. 
For  full  discussion  see  Debts  which  may  be  proved,  Sec.  63b, 
of  law,  post  §§  979-1005. 

§  446.  Unproved  and  unscheduled  claims.— Under  the  Act  of 
1867,  if  the  court  of  bankruptcy  had  jurisdiction  of  the  bank- 
rupt and  the  subject  matter,  in  the  absence  of  fraud,  the  omis- 
sion of  a  claim  from  the  schedule,  if  not  willful,  and  the  con- 
sequent lack  of  notice  to  the  creditor  would  not  prevent  the 
discharge  barring  such  claim.^^  The  present  act  expressly  ex- 
cepts from  the  discharge  debts  which  have  not  been  duly 
scheduled  in  time  for  proof  and  allowance,  with  the  name  of 
the  creditor  if  known  to  the  bankrupt,  unless  such  creditor 
had  notice  or  actual  knowledge  of  the  proceedings  in  bank- 
ruptcy, whether  the  omission  be  fraudulent  or  otherwise.^^  If 
the  bankrupt  had  knowledge  of  the  proceedings  although  not 
scheduled,  the  debt  will  be  discharged,  though  if  such  knowl- 
edge did  not  come  to  the  creditor  until  too  late  to  prove  his 
claim  and  thus  receive  a  dividend  equal  to  other  creditors  of 
a  like  class,  he  need  take  no  part  in  the  proceedings  but  may 
make  the  amount  of  his  claim  out  of  any  property  acquired 
by  the  bankrupt  subsequent  to  the  filing  of  the  petition,^''  A 
bankrupt  who  schedules  the  name  of  the  original  payee  of  a 
note,  but  fails  to  list  the  name  of  the  transferee  notwithstand- 
ing he  had  knowledge  of  the  fact  after  transfer  and  knew  the 
name  of  the  holder,  would  still  be  liable  on  the  note,  if  such 
transferee  had  no  knowledge  of  the  proceedings.^^ 

§  447.    Waiver. — The   discharge,   as  stated,   merely  releases 

"Sec.  63b  of  act  of  1898.  v.  Moore,  2  N.  B.  R.  174;  Batchel- 

15  Lamb  v.  Brown,  12  N.  B.  R.  der  v.  Low,  8  N.  B.  R.  571. 

522,  F.  C.  8011 ;  Pattison  v.  Wilbur,         le  Tyrrel  v.   Hammerstein,   6  A. 

12  N.  B.  R.  193;  Heard  v.  Arnold,  B.  R.  430;   In  re  Beerman,  112  F. 

15  N.  B.  R.  543;  Thurmond  v.  An-  R.  662,  7  A.  B.  R.  434. 

drews,  13  N.  B.  R.   157;   Piatt  v.         n  In  re  Monroe,  114  F.  R.  398,  7 

Parker,  13  N.  B.  R.  14;    Symonds  A.  B.  R.  706. 

V.  Barnes,  6  N.  B.  R.  377;  Barnes        is  Columbia  Bank  v.   Birkett,   7 

A.  B.  R.  222. 


290  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  17 

the  bankrupt  from  personal  liability  and  must  be  pleaded  and 
consequently  may  be  waived  and,  if  waived,  can  not  after- 
wards be  relied  on.^^ 

§448.  Wife's  debts.— The  question  of  the  effect  of  the  hus- 
band's discharge  on  the  wife's  debts  is  an  interesting  one  and 
turns  on  the  point  whether  he  is  liable  for  them  individually, 
or  jointly  with  her,  or  whether  she  alone  is  liable.  This  is  a 
question  of  local  law.  At  common  law  the  husband,  at  mar- 
riage, became  liable  for  the  wife's  ante-nuptial  debts  and  such 
as  she  might  contract  for  necessaries,  etc.,  and  in  such  case 
his  discharge  would  release  such  debtSj^*^  but  the  question  was 
raised  if  they  were  not  merely  suspended  and  would  revive  on 
her  surviving  him.^i  Where  the  wife  has  been  made  respon- 
sible for  her  debts,  she  remains  equally  so  after  his  discharge  ;22 
and,  if  they  can  contract  directly  with  each  other,  a  discharge 
of  the  husband  releases  debts  due  from  him  to  his  wife,  and 
vice  versa.23  The  husband's  discharge  will  not  affect  the 
wife's  liability,  to  have  her  separate  estate  charged  in  eqnityf-^ 
and,  if  the  wife  have  separate  property,  a  court  will  not  release 
her  if  charged  in  execution  because  of  the  husband's  dis- 
charge.25 

19  Dewey  v.  Moyer,  16  N.  B.  R.  1.  -'^  Ailing  v.  Eagan,  11  Rob.  (La.) 

20Lockwood    V.    Salter,    5    B.    &  244. 

Ad.  303.  24  Hamlin  v.  Bridge,  24  Me.  145. 

21  Vanderheyden  v.  Mallory,  1  25  Bonner  v.  Bonner,  17  Beav. 
N.  Y.   452.  86. 

22  Mobley  v.  Cureton,  6  So.  Car. 
19. 


CHAPTER  XVIII. 


PROCESS,    PLEADINGS    AND    ADJUDICATIONS. 


§449. 

(18a)   Process  and  Petitions. 

475. 

Defenses. 

450. 

Process,  form  of. 

476. 

c.  Matter  of  fact  to  be  veri- 

451. 

When  issued  and  when 

fied. 

returnable. 

477. 

Verification  necessary. 

452. 

Service  of,  personal. 

478. 

Of  corporation. 

453. 

By  publication. 

479. 

By  agent  or  attorney. 

454. 

Voluntary  appearance. 

480. 

Defect  in,   cure  of. 

455. 

Collateral  attack. 

481. 

Waiver  of. 

456. 

Petition,  form  of. 

482. 

d.  Decision  of  issue  with  or 

457. 

-Parties  to. 

without  jury. 

458. 

Allegations  of. 

483. 

Trial,    effect    of    appe^-ance 

459. 

When    against    partner- 

and plea. 

ship. 

484. 

When  trial  by  jury  desired. 

460. 

When  multifarious. 

485. 

Jurisdiction  over  creditors. 

461. 

Filing  of. 

486. 

Burden  of  proof. 

462. 

Amendment  of,  by  whom 

487. 

Dismissal  of  the  petition. 

allowed. 

488. 

e.  Adjudication  or  dismissal 

463. 

Requires        special 

on  failure  to  plead. 

showing. 

489. 

Failure  to  plead. 

464. 

Objections  to. 

490. 

f.  When  clerk  to  refer  invol- 

465. 

Allowed,  when. 

untary  petition. 

466. 

Denied,  when. 

491. 

g.  Action  on  voluntary  peti- 

467. 

b.  Appearance  and  Plea. 

tion. 

468. 

Parties. 

492. 

When  clerk  to  refer. 

469. 

Appearance,  mode  of,  person- 

493. 

Order  of  reference. 

ally. 

494. 

Adjudication,  in  general. 

470. 

By  attorney  or  agent. 

495. 

Effect  of. 

471. 

Time  of. 

496. 

When  not  set  aside. 

472. 

Demurrer. 

497. 

When  set  aside. 

473. 

Plea. 

498. 

Appeal  from. 

474. 

Replication. 

499. 

Change  of  venue. 

§449.  '(Sec.  18a.)  Process  and  petition.— Upon  the  filing 
of  a  petition  for  involuntary  bankruptcy,  service  thereof,  with 
a  writ  of  subpoena,  shall  be  made  upon  the  person  therein 
named  as  defendant  in  the  same  manner  that  service  of  such 
process  is  now  had  upon  the  commencement  of  a  suit  in  equity 
in  the  courts  of  the  United  States,  except  that  it  shall  be  re- 
turnable within  fifteen  days,  unless  the  judge  shall  for  cause 
fix  a  longer  time ;  but  in  case  personal  service  can  not  be  made, 
then  notice  shall  be  given  by  publication  in  the  same  man- 
ner and  for  the  same  time  as  provided  by  law  ior  notice  by 

291 


292 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch.  18 


'publication  in  suits  to  enforce  a  legal  or  equitable  lien  in 
'courts  of  the  United  States,  except  that,  unless  the  judge 
'shall  otherwise  direct,  the  order  shall  be  published  not  more 
'than  once  a  week  for  two  consecutive  weeks,  and  the  return 
'day  shall  be  ten  days  after  the  last  publication  unless  the 
'judge  shall  for  cause  fix  a  longer  time.'^ 

§  450.  Process,  form  of.— All  process,  summons  and  sub- 
poenas shall  issue  out  of  the  court,  under  its  seal,  and  be 
tested  by  the  clerk ;  and  upon  application,  blanks  with  the  sig- 
nature of  the  clerk  and  seal  of  the  court,  may  be  furnished  to 
the  referees.^     The  referee  has  no  power  to  issue  a  subpoena.* 


1  By  the  act  of  February  5,  1903, 
section  18a,  was  amended  by  the 
substitution  of  the  matter  in  the 
text  for  the  following: 

'Upon  the  filing  of  a  petition  for 
'involuntary  bankruptcy,  service 
'thereof,  with  a  writ  of  subpoena, 
'shall  be  made  upon  the  person 
'therein  named  as  defendant  in  the 
'same  manner  that  service  of  such 
'process  is  now  had  upon  the  com- 
'mencement  of  a  suit  in  equity  in 
'the  courts  of  the  United  States, 
'except  that  it  shall  be  returnable 
'within  fifteen  days,  unless  the 
'judge  shall  for  cause  fix  a  longer 
'time;  but  in  case  personal  service 
'cannot  be  made,  then  notice  shall 
'be  given  by  publication  in  the 
'same  manner  and  for  the  same 
'time  as  provided  by  law  for  no- 
'tice  by  publication  in  suits  in 
'equity  in  courts  of  the  United 
'States.' 

Analogous  provision  of  Act  of 
1867.  "Sec.  40.  .  .  .  That  upon 
the  filing  of  the  petition  author- 
ized by  the  next  preceding  section, 
if  it  shall  appear  that  sufficient 
grounds  exist  therefor,  the  court 
shall  direct  the  entry  of  an  order 
requiring  the  debtor  to  appear  and 
show  cause,  at  a  court  of  bank- 
ruptcy to  be  hoi  den  at  a  time  to  be 
specified    in    the    order,   not  less 


than  five  days  from  the  service 
thereof,  why  the  prayer  of  the  pe- 
tition should  not  be  granted;  and 
may  also,  by  its  injunctions,  re- 
strain the  debtor,  and  any  other 
person,  in  the  meantime,  from 
making  any  transfer  or  disposition 
of  any  part  of  the  debtor's  prop- 
erty not  excepted  by  this  act  from 
the  operation  thereof  and  from 
any  interference  therewith.  .  .  . 
A  copy  of  the  petition  and  of  such 
order  to  show  cause  shall  be  served 
upon  such  debtor  by  delivering  the 
same  to  him  personally,  or  leaving 
the  same  at  his  last  or  usual  place 
of  abode;  or,  if  such  debtor  can- 
not be  found,  or  his  place  of  resi- 
dence ascertained,  service  shall  be 
made  by  publication  in  such  man- 
ner as  the  judge  may  direct.  No 
further  proceedings,  unless  the 
debtor  appear  and  consent  thereto, 
shall  be  had  until  proof  shall  have 
been  given,  to  the  satisfaction  of 
the  court,  of  such  service  or  pub- 
lication; and  if  such  proof  be  not 
given  on  the  return  day  of  such 
order,  the  proceedings  shall  be  ad- 
journed and  an  order  made  that 
the  notice  be  forthwith  so  served 
or  published." 

3  G.  O.  Ill;    Forms  4  and  5. 

4  In  re  Pierce,  111  F.  R.  516,  6 
A.  B.  R.  747. 


Ch.  18  PROCESS,    FORM    OF— WHEN    ISSUED.  293 

§  451. When  issued  and  when  returnable. — No  process 

of  subpoena  will  issue  from  the  clerk's  office  in  any  suit  in 
equity  until  the  bill  is  filed  in  the  office,'"*  that  is,  in  bankruptcy 
proceedings  until  the  petition  is  filed ;  and,  whenever  a  bill  or 
petition  is  filed,  the  clerk  must  issue  the  process  of  subpoena 
thereon,  as  of  course,  upon  the  application  of  the  plaintiff  or 
petitioner,<5  which  must  be  returnable  within  fifteen  days,  un- 
less the  judge  for  cause  fixes  a  longer  time.'^  Where  there  is 
more  than  one  defendant  or  respondent,  a  writ  of  subpoena 
may,  at  the  election  of  the  plaintiff  or  petitioner,  be  issued  out 
separately  for  each  defendant  or  respondent,  except  in  the 
case  of  husband  and  wife  defendants,  or  a  joint  subpoena 
against  all  the  defendants  or  respondents.^ 

§  452. Service  of— Personal.— Whenever  any  subpoena 

shall  be  returned  not  executed  as  to  any  defendant,  the 
plaintiff  shall  be  entitled  to  another  subpoena,  toties  quoties, 
against  such  defendant  if  he  shall  require  it,  until  the  due 
service  is  made  ;^  and  the  service  of  all  process,  mesne  and 
final,  shall  be  by  the  marshal  of  the  district,  or  his  deputy,  or 
by  some  other  person  specially  appointed  by  the  court  for 
that  purpose,  and  not  otherwise.  In  the  latter  case,  the  per- 
son serving  the  process  must  make  affidavit  thereof.  Upon 
the  return  of  the  subpoena  as  served  and  executed  upon  any 
defendant,  the  clerk  must  enter  the  suit  upon  his  docket  as 
pending  in  the  court,  and  state  the  time  of  the  entry .^^^ 

The  duplicate  petition  with  a  writ  of  subpoena  must  be 
served  upon  the  alleged  bankrupt.  An  order  to  show  cause 
why  the  prayer  of  the  petition  should  not  be  granted  is  pro- 
vided,^^  which  also  orders  a  copy  of  the  petition  with  a  sub- 
poena to  be  served^  2  upon  the  alleged  bankrupt  by  delivering 
to  him  personally  or  ''by  leaving  the  same  at  his  last  usual 
place  of  abode  in  said  district"  at  least  five  days  before  the 
time  fixed  for  the  hearing.  The  mode  of  service  directed  in  the 
order  to  show  cause^^  must  be  construed  to  mean  "last"  in 
time,  that  is,  the  existing,  present,  dwelling-house,  or  the  exist- 
ing, present,  usual,  customary  place  of  abode,i^  and  if  he  has 

n  Equity  Rule  11.  "  Form  4. 

c  Equity  Rule  12.  12  See  Equity  Rule  13. 

7  Sec.   18a,   act  of  1898.  13  Form    4. 

'*  Equity  Rule  12.  14  Hyslop  v.  Hoppock,  6  N.  B.  R. 

n  Equity  Rule  14.  552,  5  Ben.  447,  F.  C.  6988. 

10  Equity  Rule  15. 


J^94  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

had  more  than  one  place  of  abode  in  the  district,  it  would  be 
the  last,  in  common  parlance,  though  correctly  used  "last" 
signifies  past  and  done  with.  However,  if  inquiry  at  the  "last" 
and  usual  abode  of  an  alleged  bankrupt  elicits  no  information 
as  to  his  present  whereabouts  beyond  the  fact  that  he  is  not 
in,  service  is  sufficiently  made  by  leaving  the  papers  with  some 
adult  person  who  is  a  member  of  or  resident  in  the  family, 
stating  that  they  are  for  the  bankrupt.^  ^  Service  on  the  cash- 
ier of  a  corporation  which  has  passed  into  the  hands  of  a  re- 
eeiver,^^  or  upon  the  agent  or  attorney  appointed  to  receive 
service  of  process  within  the  state,  in  case  of  a  foreign  cor- 
poration, is  sufficient.^ '^ 

Where  service  of  the  order  on  a  petition  in  involuntary 
bankruptcy  is  made  upon  the  defendant  outside  the  district, 
without  an  appearance  on  his  part,  no  order  can  be  made  which 
Mall  apply  to  him  in  person,  but  the  proceeding  will  affect  only 
property  which  can  come  into  possession  of  the  trustee.^  ^  The 
court  does  not  lose  jurisdiction  by  reason  of  the  fact  that  the 
subpoena  accompanying  the  original  petition  is  returned  with 
the  endorsBment  that  the  debtor  cannot  be  found,  and  nothing 
further  is  done.^^ 

§  453. By  publication. — In  case  personal  service  can- 
not be  made,  notice  must  be  given  by  publication  in  the  same 
manner  and  for  the  same  time  as  provided  by  law  for  notice  by 
publication  in  suits  to  enforce  a  legal  or  equitable  lien,  in  the 
courts  of  the  United  States,  except  that  unless  the  judge  shall 
otherwise  direct,  the  order  need  not  be  published  more  than 
once  a  week  for  two  consecutive  weeks.-*^  Service  by  pub- 
lication is  only  authorized  where  the  party  to  be  served  cannot 
be  found  or  his  place  of  residence  ascertained.^^  Notwith- 
standing the  fact  that  a  lunatic  has  been  personally  served, 
the  better  practice  is  to  supplement  it  by  the  usual  publica- 

1!-.  In  re  Derby,  8  N.  B.  R.  106,  F.  "  Magid  Hope  Silk  Mfg.  Co.,  110 

C.  3815 ;  Ala.  &  Chatt.  R.  R.  Co.  v.  F,  R.  352,  6  A.  B.  R.  610. 

Jones,  5  N.  B.  R.  97,  F.  C.  126.  is  In  re  Appel,  103  F.  R.  931,  2 

lop'latt   V.    Archer,    6    N.    B.    R.  N.  B.  N.  R.  907. 

465,  9  Blatch.  559,  F.  C.  11213;  Ala.  is  In  re  Stein,  105   F.  R.  749,  5 

&  Chatt.  R.  R.  Co.  v.  Jones,  5  N.  A.  B.  R.  288. 

B.  R.  97,  F.  C.  126;   Isett  v.  Stew-  20  Sec.  18a,  act  of  1903. 

art,  16  N.  B.  R.  191 ;  Stuart  v.  21  Stuart  v.  Hines,  6  N.  B.  R,  416. 
Hines,  6  N.  B.  R.  416. 


Ch.  18  PROCESS— SERVICE.  295 

tion,22  If  a  member  or  members  of  a  firm  file  a  petition  ask- 
ing that  the  firm  be  adjudged  bankrupt  and  the  non-joining 
members  can  be  found  in  the  district  or  out  of  it,  personal 
service  must  be  made ;  but,  if  personal  service  cannot  be  had, 
then,  upon  filing  before  the  judge,  or  referee,  if  the  case  has 
been  referred  by  the  clerk,  an  affidavit  stating  the  facts  why 
personal  service  cannot  be  made,  an  order  of  publication  will 
be  made  according  to  the  provision  of  the  above  act.-^ 

§  454. Voluntary  appearance.— The  voluntary  appear- 
ance of  the  alleged  bankrupt,  either  in  person  or  by  attorney, 
will  give  the  court  jurisdiction^'^  if  it  has  jurisdiction  of  the 
subject  matter  which  latter  must  be  conferred  by  statutory 
authority  and  cannot  be  given  by  consent  of  the  parties  and 
may  be  questioned  by  the  court  sua  sponte,  or  on  motion,  at 
any  time  or  collaterally.-^  If  he  once  appears  generally,  such 
appearance  cannot  be  withdrawn  so  as  to  divest  the  court 
of  jurisdiction,^^  as  any  irregularity  in  the  service  is  thereby 
waived.-'''  Objections  going  to  the  jurisdiction  must  be  raised 
at  the  first  or  at  least  an  early  opportunity  or  they  will  be 
deemed  to  have  been  waived  and  a  creditor,  who  appeared  at 
the  first  meeting,  nominated  the  trustee  and  examined  the 
bankrupt,  cannot,  on  application  for  discharge,  for  the  first 
time  urge  that  the  court  is  without  jurisdiction  on  the  ground 
that  the  adjudication  was  made  by  the  referee  and  not  by  the 
judge. -s 

§  455.     Collateral  attack.— See  Collateral  Attack,  ante  §  42. 

§  456.  The  petition— form  of.— All  petitions  and  schedules 
filed  therewith  must  be  printed  or  written  out  plainly,  without 
abbreviation  or  interlineation,  except  where  such  abbreviation 
and  interlineation  may  be  for  the  purpose  of  reference^^  and 

22  In  re  Burka,  107  F.  R.  674,  5  In  re  Leighton,  5  N.  B.  R.  95;  Job- 
A.  B.  R.  843.  bins  v.  Montag,  6  N.  B.  R.  509;  In 

23  In  re  Murray,  1  N.  B.  N.  570,     re  Weyhausen,  1  Ben.  397. 

96  F.  R.  600,  3  A.  B.  R.  601.  26  in  re  Frischberg,  supra;  In  re 

2i  In  re  Frischberg,   8  A.   B.  R.  Ulrich,  3  Ben.  355. 

607.  2-  In  re  McNaughten,  8  N.  B.  R. 

25  Shutts  V.  Bk.,  2   N.   B.  N.  R.  44. 

320,  98  F.  R.  705.  3  A.  B.  R.  492;  28  in  re  Polakoff,  1  N.  B.  N.  232, 

In  re  Mason,  2  N.  B.  N.  R.  425,  99  1  A.  B.  R.  358;   In  re  Mason,  2  N. 

F.  R.   256,  3  A.  B.  R.  599;    In  re  B.  N.  R.  425.  99  F.  R.  256,  3  A.  B. 

Penn,  3  N.  B.  R.  582,  4  Ben.  99;  In  R.  599. 

re  Little,  2  N.  B.  R.  294,  3  Ben.  25;  29  g.  O..  V.:    Forms  1,  2  and  3. 


296  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

must  be  in  duplicate,  one  copy  for  the  clerk  and  the  other  for 
service  on  the  bankrupt.^o  It  has  been  held  that  petitions 
in  bankruptcy  will  not  be  filed  or  considered  unless  they  are 
the  prescribed  printed  forms,  and  that  written  or  typewritten 
petitions  and  schedules  will  be  returned  to  the  parties  without 
action  ;2i  but  such  requirement  is  governed  entirely  by  rule 
of  court  and  not  by  any  provision  of  the  law. 

§  457. Parties  to.— See  Petitions,  Chap.  LIX,  post. 

§  458. Allegations  of— generally.— A  petition  in  invol- 
untary bankruptcy  is  in  the  nature  of  a  pleading  and  should 
set  forth  all  the  facts  material  to  the  claim  of  the  petitioner  for 
an  adjudication  so  that  the  alleged  bankrupt  may  be  distinctly 
apprised  of  what  he  is  required  to  answer  ;32  though  the  alle- 
gations may  be  made  upon  information  and  belief  especially 
if  the  sources  of  information  and  the  grounds  of  belief  are 
given.33  Facts,  not  conclusions  of  law,  must  be  alleged,  so 
that  it  is  not  sufficient  to  allege  that  petitioner  has  a  "provable 
claim"  but  the  facts  showing  that  it  is  one  must  be  alleged,^^ 
and  a  petition  is  insufficient  if  it  states  disjunctively,  or  in  the 
alternative  several  facts,  any  one  of  which  would  be  sufficient 
if  alleged  unqualifiedly.^^ 

The  intent  to  defraud  should  be  alleged  as  a  fact  and  not 
as  a  matter  of  information  and  belief  in  a  petition  setting  up 
a  fraudulent  conveyance  as  an  act  of  bankruptcy.^^  It  is 
preferable  that  the  petition  show  the  business  of  the  defend- 
ant, or  that  he  does  not  come  within  the  expected  classeSj^"^ 
though  the  form  prescribed  by  the  Supreme  Court  makes  no 
provision  for  such  information.  The  authority  under  which 
he  acts  need  not  be  set  forth  by  the  agent  of  a  petitioner 
in  bankruptcy,^^  nor  that  the  notes  were  given  for  the  pur- 

80  Sec.   59c,  act  of  1898;     In   re  B.  R.  66,  6  Biss.  130;    Mueller  v. 

Stevenson,  1  N.  B.  N.  313,  2  A.  B.  Brentano,   3   N.   B.  R.  329;     In   re 

R.  66,  94  F.  R.  110;   In  re  Dupree.  Scull,  7  Ben.  371. 

I  N.  B.  N.  513,  97  F.  R.  28.  34  in  re  Hadley,  12  N.  B.  R.  366, 

31  Mahoney  v.  Ward,  2  N.  B.  N.     F.  C.  5894. 

R.  538,  3  A.  B.  R.  770,  100  F.  R.  35  in  re  Laskaris,  1  N.  B.  N.  209, 

278;  see  also  1  N.  B.  N.  239,  396.  1  A.  B.  R.  480;  In  re  Hannibal,  15 

32  In  re  Raynor,  7  N.  B.  R.  527,  N.  B.  R.  233,  F.  C.  6023;  Arnat  v. 

II  Blatch.  43,  F.  C.  11597;     In  re  Wright,  55  Hun.  561. 

Randall,  3  N.  B.  R.  4,  Deady  557,  se  Orem  v.  Harley,  3  N.  B.  R.  62, 

F.  C.  11551;  In  re  Chappel,  4  N.  B.  F.  C.  10567. 

R.  176,  F.  C.  2612.  37  in   re  Taylor,   102   F.   R.    728, 

33  Orem  v.  Harley,  3  N.  B.  R.  62,  2  N.  B.  N.  R.  929,  4  A.  B.  R.  515. 
F.C.  10567-    In  re  Scammon,  10  N.  39  in    re   Taylor,  supra;      In    re 


Ch.  18  PLEADING— PETITION.  297 

l)oses  of  their  business  in  a  petition  averring  that  a  firm 
were  manufacturers  and  had  made  and  delivered  certain 
notes  which  were  negotiated  but  not  paid."*^  In  other  words 
the  statute  contemplates  that  a  trial  by  jury  may  be 
had  upon  the  allegations  of  the  petition  in  case  the  alleged 
bankrupt  so  chooses  and  therefore  the  allegations  must  be 
of  issuable  facts,  made  with  reasonable  and  sufficient  cer- 
tainty.^^ The  allegation  that  the  debtor,  w^ithin  four  months 
last  past,  transferred  property  to  creditors  with  intent  to 
prefer  such  creditors  is  insufficient  but  the  specific  fact  relied 
on  must  be  alleged  with  time,  place,  person  and  circumstance 
as  in  any  other  allegation  of  fraud  in  a  pleading  either  at  law 
or  in  equity  ;'*2  as  also  w^here  the  act  relied  on  is  the  suffering 
creditors  to  obtain  a  preference  through  legal  proceedings.'*^ 
A  creditor  other  than  the  original  petitioner  may  enter  his 
appearance  by  a  petition  alleging  that  he  is  a  creditor,  stating 
the  purpose  of  his  petition  and  nothing  more,  and  thereby 
acquire  all  the  rights  of  the  original  petitioner  even  though  the 
original  petitioner  prove  to  have  no  claim;  and  the  bankrupt 
may  answer  denying  that  such  person  is  a  creditor,  but  need 
answer  for  no  other  purpose ;  and  no  process  issues  if  process 
issued  on  the  original  petition.'*^  A  false  statement  of  a  juris- 
dictional fact  for  the  purpose  of  making  bankrupt  file  a  state- 
ment of  his  creditors  constitutes  a  fraud  upon  the  court  which 
should  set  aside  any  process  obtained  by  such  deception,  as 
where  a  petition  in  involuntary  bankruptcy  was  signed  by  six 
creditors,  the  first  five  of  whom  verified  it,  alleging  that  they 
believed  thej'  were  one-fourth  of  the  creditors  when  they  knew 
it  w^as  untrue.*^ 


§  459. Against  partnership.— The  general  form  of  peti- 


Oregon  Bull.  Pr.  and  Pub.  Co.,  14  1183;    In   re   Mawson,   1   N.   B.   R. 

N.  B.  R.  405,   3   Sawy.   614,  F.  C.  115,  F.  C.  9318;  Ex  p.  Potts,  F.  C. 

10561,  s.  c.  13  N.  B.  R.  503,  F.  C.  11344. 

10550;  Ala.  and  Chatt.  R.  R.  Co.  v.  *2  In  re  Nelson,  98  F.  R.  76. 

Jones,  5  N.  B.  R.  97,  F.  C.  126.  ^3  in  re  Cllffe,  1  N.  B.  N.  509,  2 

40  In  re  Kenyon,  6  N.  B.  R.  238;  A.  B.  R.  317,  94  F.  R.  354. 
Contra,  In  re  Cap.  Pub.  Co.,  18  N.  ^^  in  re  Taylor,  1  N.  B.  N.  412; 
B.  R.  319.  In  re  Lacey,  10  N.  B.  R.  477,  483, 

41  In  re  Butterfield,   5  Biss.  120,  492. 

F.  C.  2247;    In  re  Rathbone,  1  N.  ^s  in  re  Keller,  18  N.  B.  R.   10, 

B.   R.    50,    65    F.    C.    11580;    In   re  F.  C.  7647;  In  re  Scammon,  11  N. 

Beardsley,    1    N.    B.    R.    52,    F.    C.  B.  R.  280,  6  Biss.  195,  F.  C.  12429. 


298  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

tiou  in  involuntary  bankruptcy^*^  should  be  used  as  the  form 
of  an  involuntary  petition  against  a  partnership  with  the  neces- 
sary adaptations  to  meet  the  particular  case,  no  special  form 
being  prescribed,  and  the  bankrupt's  answer  should  also  be 
in  the  form  prescribed.'*'^  If  it  is  not  proposed  to  adjudicate 
the  firm,  the  petition  must  show  that  the  petitioner  was  a 
member  of  the  firm  and  ask  a  discharge  from  firm  as  well  as 
individual  debts,  and  this  fact  must  be  set  forth  in  the  notice 
given  creditors  of  the  first  meeting,  also  in  the  petition  for 
discharge  and  in  the  notice  to  creditors  thereof.'*^  A  petition 
against  a  partnership  must  show  whether  any  of  the  individual 
partners'are  solvent,  and  the  averment  that  "the  partnership 
is  insolvent,"  where  it  seems  to  be  meant  thereby  that  the 
joint  assets  are  not  sufficient  to  pay  the  joint  obligations,  is 
ambiguous  and  insufficient,  for,  as  each  partner  is  liable  for 
all  of  the  debts,  a  partnership  cannot,  with  strictness,  be  said 
to  be  insolvent  while  any  one  of  the  partners  is  able  to  pay 
all  of  the  firm's  liabilities,  and  the  Supreme  Court  rules  and 
forms  contemplate  that  an  adjudication  of  the  firm  imports 
an  adjudication  of  all  its  members  as  well;  so  the  insolvency 
of  each  member  of  the  firm  should  be  alleged  if  an  adjudica- 
tion against  the  firm  and  an  administration  of  its  assets  are 
sought.'*^ 

§  460. When  multifarious.— ^Multifariousness    consists 

in  the  inclusion  in  one  bill  of  several  matters  perfectly  dis- 
tinct and  independent  and  is  generally  forbidden.^^  A  peti- 
tion in  involuntary  bankruptcy  which  unites  with  a  prayer  for 
the  adjudication  against  the  debtor  a  prayer  for  the  pro- 
visional seizure  of  his  property  by  the  marshal  and  a  prayer  for 
an  injunction  against  attaching  creditors  and  a  receiver  of  a 
state  court  forbidding  them  to  dispose  of  certain  property  in 
their  hands,  is  multifarious  ;^i  but  a  petition  charging  different 
acts  of  fraud,  connected'with  different  parts  of  the  estate,  but 
done  with  a  common  fraudulent  purpose,^-  or  different  acts 
of  bankruptcy,  is  not. 

46  Form  3.  so  Cooper,    Eq.   PI.    182,   18   Ves. 

47  Form  6;    Mather  v.  Coe,  1  N.     80.  2  Mass.  201,  4  Cow.  682,  2  Gray, 
B.   N.   554,   1   A.    B.   R.    504,   92   F.     467. 

R.  333.  fii  Mather  v.  Coe,  1  N.  B.  N.  554, 

4s  In  re  Russell,  1  N.  B.  N.  532,  3  1  A.  B.  R.  504,  92  F.  R.  333. 

A.  B.  R.  91,  97  F.  R.  32.  52  Norcross  v.  Nathan,  2  N.  B.  N. 

49  In  re  Blair,  2  N.  B.  N.  R.  364,  R.  405,  99  F.  R.  414,  3  A.  B.  R.  613; 

99  F.  R.  76,  3  A.  B.  R.  588.  Carter  v.  Hobbs,  1  N.  B.  N.  191,  1 


Ch.  18     PLEADING— ALLEGATIONS  OF  FRAUD.         299 

> 

>;  461. Filing"  of  petition. — A  petition  in  bankruptcy 

is  filed  within  the  meaning  of  the  bankruptcy  law  when  it  is 
delivered  in  duplicate  to  the  Clerk  of  the  Bankruptcy  Court 
and  by  him  marked  "Filed,"  though  it  is  done  outside  of  his 
office  and  after  office  hours,'^^  but  if  the  duplicate  is  not  filed 
until  after  the  expiration  of  four  months  from  the  act  of  bank- 
ruptcy, it  will  be  fatal  and  incurable,  consequently  the  clerk's 
docket  should  show  the  filing  of  both  copies.^^  The  petition 
should  be  filed  with  the  clerk  direct  and  not  with  the  judge.^^ 
If  the  issuing  of  the  subpoena  is  delayed  until  after  the  expira- 
tion of  the  four  months,  though  the  petition  was  filed  within 
that  time,  the  proceeding  will  nevertheless  be  valid.^^ 

A  petition  signed,  verified  and  presented  by  all  the  members 
of  a  firm  and  accompanied  by  schedules  of  firm  creditors  and 
firm  assets,  no  adjudication  being  made  thereon,  which  is  sub- 
sequently in  part  withdra^Ti,  and  a  new  petition  filed,  with 
certain  parts  of  the  old  petition  pasted  thereon  accompanied 
by  the  individual  schedules  of  all  the  partners  by  way  of 
amendment,  and  an  adjudication  made,  within  the  meaning  of 
thp  act  the  petition  was  filed  on  the  later,  and  not  the  earlier 
date.^'''  The  pendency  of  an  involuntary  petition  before  adju- 
dication does  not  necessarily  invalidate  a  subsequent  volun- 
tary petition  or  vice  versa,  filed  in  the  same  or  another  district, 
as  the  former  may  be  invalid  for  want  of  jurisdiction,  or  other 
creditors  may  justify,  or  even  make  desirable  a  subsequent 
petition,  and  the  question  of  jurisdiction  will  arise  on  each 
petition  and  be  determined  according  to  the  circumstances 
and  this  is  true  both  as  to  individual  bankruptcy  and  as  to 
luirtnership  cases.^^  In  such  case  it  would  seem  advisable  to 
give  creditors  filing  the  involuntary  petition  notice,  before  any 

A.  B.  R.  215,  92  F.  R.  594;  Robin-  56  in  re  Appel,  103  F.  R.  931,  2 
son  V.  White,  1  N.  B.  N.  513,  97  P.  N.  B.  N.  R.  907;  In  re  Lewis,  1 
R.  333,  A.  B.  R.  88.  N.  B.  N.  135,  556,   1  A.  B.  R.  458, 

53  In  re  Stevenson,  1  N.  B.  N.  91  F.  R.  632,  citing  In  re  Bear,  5, 
313,  2  A.  B.  R.  66,  94  F.  R.  110;  In     F.  R.  53. 

re  Von  Borcke,  1  N.  B.  N.  505,  2  A.         5?  in  re  Washburn,  99  F.  R.  84, 

B.  R.  322,  94  F.  R.  352.  3  A.  B.  R.  585. 

54  In  re  Stevenson,  supra;  In  re  ss  in  re  Waxelbaum,  2  N.  B.  N. 
Dupre,  1  N.  B.  N.  513,  97  F.  R.  28;  R.  228,  98  F.  R.  589,  3  A.  B.  R.  392; 
see  In  re  Bellah,  116  F.  R.  69,  8  A,  In  re  Steger,  113  P.  R.  978,  7  A.  B. 
B.  R.  310.  R.  665 ;  In  re  Dwyer,  112  F.  R.  777, 

55  In  re  Sykes,  106  F.  R.  669,  6  7  A.  B.  R.  532;  In  re  Canfield,  F. 
A.  B.  R.  264.  C.  2380;  In  re  Willarski,  4  N.  B.  R. 


300  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

adjudication  is  made  on  the  voluntary  petition,  and  then  such 
action  should  be  taken  as  appears  for  the  best  interests  of  the 
estate.  In  any  event  the  voluntary  petition  should  be  received 
and  filed.^9  A  voluntary  bankrupt,  who  has  contracted  new 
debts  since  filing  a  petition  on  which  a  discharge  was  refused, 
may  file  a  new  petition  f^  and,  where  two  creditors  each  file  a 
petition  against  their  debtor,  who,  pending  such  proceedings, 
files  a  petition  and  is  adjudged  bankrupt,  and  the  petitioning 
creditors  prove  their  claims  under  the  voluntary  petition,  they 
waive  their  right  to  continue  the  involuntary  proceedings.*^^ 

§  462.  Amendment  of  petition— by  whom  allowed.— The 
court,  or  referee,  may  allow  amendments  to  the  petition  and 
schedules;  but  such  amendments  must  be  printed  or  written, 
signed  and  verified,  like  the  original  petitions  and  schedules, 
and,  if  made  to  separate  schedules,  must  be  made  separately, 
with  proper  references;  and,  if  made  on  application  of  the 
petitioner,  the  cause  of  error  in  the  paper  originally  filed  must 
be  stated.^2 

§  463. Requires  special  showing. — Special  reasons  are 

required  for  amendments  to  sworn  petitions  or  other  pleadings 
required  to  be  verified  by  the  oath  of  the  party;  and,  where 
the  object  is  to  introduce  new  facts  or  to  change  essentially  the 
grounds  of  the  prosecution  or  defense,  the  courts  are  disin- 
clined to  allow  such  amendments  except  for  very  special  rea- 
sons, and  in  cases  where  they  are  clearly  required  in  the 
furtherance  of  justice,  and  are  applied  for  without  unreason- 
able delay  .^^ 

§  464. Objections  to. — Objections  can  only  be  made  to 

defects  which  have  not  been  waived,  expressly  or  by  proceed- 
ing regardless  of  them,  and  by  persons  who  have  not  acted  so 
as  to  estop  themselves.  A  creditor  who  joined  in  an  involun- 
tary petition  in  good  faith,  cannot  afterwards  object  to  an 

390,  F.  C.  17619 ;  In  re  Stewart,  3  ei  in  re  Noonan,  6  N.  B.  R.  579. 

N.    B.   R.    28,   F.    C.    13419;    In    re  62  G.  O.  XI;    In  re  Brumelkamp, 

Flanagan,   18  N.  B.   R.  439,  F.   C.  1  N.  B.  N.  360,  2  A.  B.  R.  318,  95  F. 

4850,  5  Sawy.  312.  R.  814;     In  re  Harris,  1  N.  B.  N. 

59  In  re  Dwyer,  112  F.  R.  777,  7  384,  2  A.  B.  R.  359;  In  re  Strait,  2 

A.  B.  R.  532.  A.  B.  R.  308,  1  N.  B.  N.  354. 

GO  In  re  Driske,  13  N.  B.  R.  112,  2  cs  in  re  Reed,  1  N.  B.  R.  137,  F. 

Lowell,  430,  F.  C.  4090;  In  re  Dris-  C.  11644;  In  re  Keiler,  18  N.  B.  R. 

CO.  14  N.  B.  R.  551,  F.  C.  4086.  10,  F.  C.  7647;  In  re  Wood,  13  N. 


Ch.  18  PLEADING— PETITION.  301 

aineiidnient  which  is  necessary  to  its  proseciition,*^^  but,  al- 
though no  objection  was  made  to  a  fault  contained  in  the 
original  petition,  it  may  be  objected  to  in  an  amended  peti- 
tion.*^^ 

§  465. Allowed  when.— The  general  orders  in  bank- 
ruptcy with  reference  to  amendments  were  not  intended  to 
abrogate  or  restrict  the  general  power  of  amendment  in  other 
respects  vested  in  courts.^*^  Where  two  or  more  petitions  are 
fded  against  the  same  individual,  the  petition  in  the  district  in 
which  the  debtor  has  his  domicile  may  be  amended  by  insert- 
ing an  allegation  of  an  act  of  bankruptcy  committed  at  an 
earlier  date  than  the  first  alleged,  if  such  earlier  act  is  charged 
in  either  of  the  other  petitions,  and  the  same  is  true  with 
reference  to  proceedings  against  a  partnership,  except  that  in 
such  a  case  the  petition  first  filed  may  be  amended.''^  In  view 
of  General  Orders  VI,  the  power  of  amendment  is  limited  to  the 
case  where  an  earlier  act  of  bankruptcy  is  sought  to  be  incor- 
porated.^^ The  right  to  amend  exists  at  any  stage  of  the 
proceeding,  if  otherwise  authorized,  regardless  of  the  time 
that  has  elapsed,  but  this  right  cannot  go  further  than  to 
bring  forward  and  make  effective  that  which  is  in  some  shape 
already  in  the  record.^® 

The  granting  or  not  granting  of  an  application  to  file  an 
amendment  to  the  pleadings  of  a  case  in  equity  or  at  law,  rests 
largely  within  the  judicial  discretion  of  the  court,  and  the  exer- 
cise of  that  discretion  will  not  be  interfered  with  by  a  review- 
ing court,  unless  it  appears  to  have  been  practically  abused. 
Where  the  facts  are  such  as  to  make  it  apparent  to  the  revis- 
ing court  that  the  right  to  amend  could  not  have  been  denied 
by  the  court  below  except  upon  such  a  mistaken  view  of  the 
facts  disclosed  by  the  record  as  would  amount  to  an  abuse  of 
the  discretion  exercised  by  the  court,  its  action  in  that  regard 
should  be  reversed  and  the  amendment  allowed.'^o 

B.  R.  96,  6  Ben.  339,  F.  C.  17935;  '- G.  0.  VI. 

White  V.  Bradley  Timber  Co.,  116  es  in  re  Sears,  117  F.  R.,  8  A.  B. 

F.  R.  768.  R.  713,  reversing  112   F.  R.  58,   7 

01  In  re  Sargent,  13  N.  B.  R.  144,  A.  B.  R.  279. 

F.  C.  12361.  69  In   re  Mercur,   116   F.  R.  655, 

65  In  re  W.  S.  Tr.  Co.,  17  N.  B.  8  A.  B.  R.  275. 

R.  413,  4  Sawy.  190,  F.  C.  17442.  to  in  re  Carley,  8  A.  B.  R.  720. 

06  In  re  Bellah,  116  F.  R.  69,  8 
A.  B.  R.  310. 


302  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

The  referee  may  require  a  petition  to  be  amended  because 
the  verification  failed  to  show  that  it  was  made  within  the 
jurisdiction  of  the  notary  taking  it,  was  indefinite  in  that  it 
stated  that  the  petitioner  was  "duly  sworn  or  affirmed"  and 
was  defective  and  unavailing  because  of  the  disqualification  of 
the  notary,  or  for  other  good  and  sufficient  reasons,  and  the 
judge  will  not  interfere  with  his  order  ;'^i  or  on  motion  he 
may  require  schedules  filed  prior  to  the  promulgation  of  the 
rules,  forms  and  orders  to  be  amended  and  supplemented  to 
conform  theretoJ^  Where  certain  persons  executed  a  peti- 
tion as  an  amended  petition  and  as  auxiliary  to  pending  pro- 
ceedings which  were  dismissed,  it  cannot  be  filed  as  an 
amended  petition  because  there  is  nothing  to  amend  nor  as  an 
original  petition  because  not  executed  as  such.'''^ 

The  petition  may  be  amended  to  specify  the  details  of  the 
alleged  act,  as  where  the  act  of  bankruptcy  relied  on  is  the 
suffering  creditors  to  obtain  a  preference  by  legal  proceed- 
ings ;'^*  or,  if  it  sets  forth  facts  which,  if  properly  alleged  and 
proved,  would  justify  an  adjudication,  but  the  allegations  are 
not  sufficiently  specific,  and  such  petition  is  verified  by  the  at- 
torney instead  of  the  creditors;'^"  or  with  respect  to  jurisdic- 
tional averments  as  to  the  residence  or  place  of  business  of 
the  bankrupt,  and  an  averment  as  to  residence  within  the 
judicial  district  for  a  period  of  more  than  six  months  prior 
to  the  filing  of  the  petition  substituted  for  one  inadvertently, 
but  erroneously,  made,  setting  forth  a  conduct  of  business  •,'^6 
or  nunc  pro  tunc  by  inserting  a  prayer  for  the  adjudication  of 
the  firm  in  a  petition  filed  by  all  the  members  in  the  form 
prescribed  for  partnership  cases  except  that  it  does  not  ask 
for  the  adjudication  of  the  firm  but  only  of  the  members  ;''^'^ 
or  where  the  petition  and  schedules  filed  by  one  member  of 
a  firm  seeking  to  be  discharged  from  both  firm  and  individual 

71  In  re  Brumelkamp,  1  N.  B.  N.  75  in  re  Nelson,  98  F.  R.  76,  1  N. 
360.  2  A.  B.  R.  318,  95  F.  R.  814.  B.  N.  567,  1  A.  B.  R.  63. 

72  In  re  Ogles,  1  N.  B.  N.  326,  93  76  In  re  Weinman,  2  N.  B.  N.  R. 
F.  R.  426,  1  A.  B.  R.  671;  In  re  51;  In  re  Blair,  2  N.  B.  N.  R.  364, 
Harris,  1  N.  B.  N.  384,  2  A.  B.  R.  99  F.  R.  76,  3  A.  B.  R.  588 ;  In  re 
359.  Vanderhoff.  18  N.  B.  R.  543,  F.  C. 

73  In  re  Hyde  &  Gload  Mfg.  Co.,  16841. 

2  N.  B.  N.  R.  1122,  102  F.  R.  617,         77  in   re  Meyers,   2  N.   B.  N.   R. 

4  A.  B.  R.  602.  Ill,  3  A.  B.  R.  260,  97  F.  R.  757; 

74  In  re  Cliffe,  1  N.  B.  N.  509,  see  In  re  McFaun,  96  F.  R.  592,  3 
2  A.  B.  R.  317,  94  F.  R.  354.  A.  B.  R.   66. 


Ch.  18 


PLEADING — AMENDMENTS— PETITION. 


303 


debts  did  not  originally  include  them,  to  include  petitioner's 
firm  as  well  as  individual  indebtedness,  the  names  of  the  mem- 
bers of  the  firm,  and  a  prayer  for  discharge  from  partnership 
debts,  the  schedules  to  contain  a  list  of  the  firm's  property 
and  debts  ;^^  or  to  insert  an  act  of  bankruptcy  before  the  ex- 
piration of  the  four  months'  period  or  a  more  particular 
description  of  the  claims  ;'^^  or  to  insert  allegations  of  other 
preferential  payments.  An  amendment  has  been  deemed  to 
have  been  made  in  several  cases  as  where  respondent's  testi- 
mony upon  the  trial  of  the  petition  disclosed  the  essential  facts 


78  In  re  Laughlin,  96  F.  R.  589, 
3  A.  B.  R.  1;  In  re  Hartman,  96 
F.  R.  593,  3  A.  B.  R.  65. 

79  In  re  Mercur,  1  N.  B.  N.  527, 
2  A.  B.  R.  626,  95  F.  R.  634;  see 
White  V.  Bradley  Timber  Co.,  8 
A.  B.  R.  671:  Under  the  act  of 
1867  the  following  amendments 
were  allowed  and  would  doubtless 
be  allowed  now:  Supplying  the 
residence  of  his  co-partner  omitted 
in  a  petition  by  one  partner 
against  his  co-partner  (In  re  Van- 
derhoof,  18  N.  B.  R.  543,  F.  C. 
16841;  In  re  Jersey  City  "Window 
Glass  Co.,  1  N.  B.  R.  113,  F.  C. 
7292)  ;  to  conform  to  proof  which 
differed  from  the  allegations  of 
the  petition  (In  re  Houghton,  1 
N.  B.  R.  121,  F.  C.  6223)  ;  to  sup- 
ply an  allegation  that  suffering 
property  to  be  taken  on  legal 
process  with  intent  to  give  a  pref- 
erence was  done  when  the  debtor 
was  insolvent  or  in  contemplation 
of  insolvency  (In  re  Craft.  1  N.  B. 
R.  89,  2  Ben.  214,  F.  C.  3316)  ;  to 
supply  the  amount  where  the  name 
of  a  creditor  is  stated  in  a  peti- 
tion asserting  a  claim  by  a  proper 
averment  but  the  amount  is 
omitted,  if  done  in  good  faith  (In 
re  Blair,  17  N.  B.  R.  492,  F.  C. 
1481);  to  supply  the  formal  asser- 
tion of  an  averment  which  ap- 
peared in  substance  in  the  petition 
and    of    which    evidence    was    re- 


ceived at  the  trial  without  objec- 
tion (In  re  Craft,  2  N.  B.  R.  44,  6 
Blatch.  177,  F.  C.  3317;  In  re  Mc- 
Kibben,  12  N.  B.  R.  97,  F.  C.  8859) ; 
after  adjudication  to  bring  in  his 
co-partner  so  as  to  effect  a  dis- 
charge of  partnership  debts  (In  re 
Little,  1  N.  B.  R.  74,  2  Ben.  86,  F. 
C.  6390)  ;  after  the  first  meeting 
of  creditors  to  bring  in  certain 
judgment  creditors  (In  re  Rat- 
cliffe,  1  N.  B.  R.  98,  F.  C.  11578). 
In  general,  petitioning  creditors 
may  amend  their  petition  on  the 
trial  (Hardy  v.  Bininger,  4  N.  B. 
R.  77,  F.  C.  6057)  ;  or  those  whose 
rights  accrue  after  admitted  proof 
of  claim  (In  re  Jones,  2  N.  B.  R. 
20,  F.  C.  7447) ;  or  after  argument 
and  before  judgment  (In  re  Waite, 
1  N.  B.  R.  84,  1  Lowell,  207,  F.  C. 
17044);  or  where  a  jury  has  been 
called  but  not  sworn  (May  v.  Har- 
per, 4  N.  B.  R.  156,  4  Brewst.  253, 
F.  C.  9333).  The  court  may  allow 
supplemental  affidavits  or  proofs  to 
be  filed,  if  the  affidavits  to  the  peti- 
tion or  the  depositions  as  to  in- 
debtedness and  acts  of  bankruptcy 
are  not  sufficient  (In  re  Hanibel, 
15  N.  B.  R.  233,  F.  C.  6023).  That 
justice  might  be  done  to  all  par- 
ties, great  latitude  of  amendment 
was  allowed  up  to  a  discharge  in 
bankruptcy  (In  re  Pierson,  10  N. 
B.  R.  193,  F.  C.  11154)  ;  but  a  new 
cause  of  action  would  not  be  per- 


304  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  IS 

as  to  other  preferential  payments,^^  or  to  include  an  act  of 
bankruptcy  testified  to  by  bankrupt,^^  but  not  if  four  months 
have  expired  since  the  commission  of  such  act. 

§  466. Denied  when. — The  same  principles  which  gov- 
ern the  allowance  of  amendments  in  similar  cases  in  other 
courts  control  the  matter  of  amendment  in  bankruptcy  cases; 
and  consequently  amendments  will  not  be  permitted  for  the 
purpose  of  introducing  new  acts  of  bankruptcy  into  the  peti- 
tion after  the  four  months'  period  has  expired ;^2  or  a  new 
cause  of  action  ;^^  nor  can  an  involuntary  petition  be  amended 
by  adding  a  new  party  after  all  the  testimony  has  been  taken 
and  the  case  is  on  hearing  before  the  court  ;^*  nor  will  credit- 
ors, who  have  recklessly  and  falsely  made  and  sworn  to  a  peti- 
tion, knowing  it  to  be  false,  be  permitted  to  have  others  join 
in  and  carry  it  on.^s 

§467.  'b.  Appearance  and  plea.— The  bankrupt,  or  any 
'creditor,  may  appear  and  plead  to  the  petition  within  five  days 
'  after  the  return  day,  or  within  such  further  time  as  the  court 
'may  allow. '^^'^ 

§  468.  Parties. — The  bankrupt  or  any  creditor, ^^  -tj^at  is  one 
having  a  provable  claim  which  may  be  established  at  this 
stage  by  affidavit  or  verified  pleadings  may  appear  and  plead ; 
and  there  is  nothing  in  the  act  to  prevent  him  though  he  may 
be  secured  or  have  been  given  a  preference  which  could  be 
avoided  by  the  adjudication.^'^  Anyone  whose  interests  may 
be  affected  should  be  allowed  to  do  so,  though  it  would 
seem  only  a  "creditor"  may  be  heard,  though  he  need  not 
be  the  original  petitioner.^s     But  a  creditor  cannot  oppose 

mitted  under  guise  of  amendment  «5  in  re  Keiler,  10  N.  B.  R.  10, 

(In  re  Leonard,  4  N.  B.  R.  182,  F.  F.  C.  7647. 

C.  8255;   In  re  Gallinger,  4  B.  R.  ssa  Subdivision  "b"  was  amended 

729.)  by  the  act  of  February  5,  1903,  by 

80  In  re  Lange,  2  N.  B.  N.  R.  85,  changing  the  time  for  pleading 
3  A.  B.  R.  231,  97  F.  R.  197.  from  10  to  5  days. 

81  In  re  Miller,  104  F.  R.  764.  «6  in  re   Ives,   113   F.  R.   911,   7 
'<2  White  V.  Bradley  Timber  Co.,     A.  B.  R.  692. 

116  F.  R.  768;  In  re  Reed,  1  N.  B.  sr  in  re  Jack,  13  N.  B.  R.  296,  1 

R.  137,  F.  C.  11164;  see  In  re  Bel-  Woods  549,  F.  C.  7119. 

lah,  116  F.  R.  69,  8  A.  B.  R.  310.  ss  in  re  Williams,  3  N.  B.  R.  74, 

S3  In  re  Leonard,  4  N.  B.  R.  182,  1  Lowell   406,  F.   C.  17703;    In  re 

F.  C.  8255.  Scrafford.   14   N.  B.   R.   184,   F.    C. 

84  In  re  Pitt,  14  N.  B.  R.  59,  8  12557;  In  re  Derby,  8  N.  B.  R.  106, 

Ben.  389,  F.  C.  11188.  6  Ben.  232;    In  re  Mendelsohn,  12 

N.  B.  R.  533,  3   Sawy.   342. 


Ch.  is  pleading— amendments— petition.  305 

an  adjudication  under  an  ordinary  voluntary  petition.^*^ 
An  attaching  creditor  may  contest  an  adjudication^^  on  the 
ground  that,  though  Hot  a  party  to  bankruptcy  proceedings, 
the  requisite  number  and  amount  of  creditors  did  not  join  in 
the  petition  ;'-^^  and  another  creditor  may  intervene  and  be  per- 
mitted to  prosecute  the  original  petition  where  the  court  is 
satisfied  that  the  original  petitioning  creditor  does  not  intend 
to  prosecute  further,  and  the  pending  application  of  the  orig- 
inal creditor  to  discontinue  the  proceedings  is  sufficient  evi- 
dence in  that  regard.^- 

§  469.  Appearance,  mode  of— personally.— In  bankruptcy 
proceedings  the  general  rule  that  a  party  may  appear  personal- 
ly prevails  and  provision  is  expressly^^  made  for  their  con- 
duct by  the  bankrupt  in  person  in  his  own  behalf,  or  by  a 
petitioning  or  opposing  creditor;  but  a  creditor  will  only  be 
allowed  to  manage  before  the  court  his  individual  interest.  In 
the  case  of  proceedings  against  a  lunatic,  if  there  be  no  regular 
guardian  or  committee,  a  guardian  ad  litem  should  be  ap- 
pointed to  protect  his  interests.^-^ 

§  470. By  attorney  or  agent.— Every  party  may  ap- 
pear and  conduct  the  proceedings  by  attorney ,^^  who  must  be 
an  attorney  or  counsel  authorized  to  practice  in  the  Federal 
courts,  and  the  right  and  power  of  an  attorney  in  good  stand- 
ing to  make  a  reasonable  request  or  motion  will  be  pre- 
sumed.''^ The  fact  that  the  bankrupt's  attorneys  had  not  been 
admitted  to  practice  in  the  Federal  courts  would  not  invali- 
date the  proceedings  when  the  petition  and  schedules  had  been 
duly  signed  and  verified  and  filed  in  the  clerk's  office,  the 
court  thereby  acquiring  jurisdiction  over  the  case  and  person 
of  the  bankrupt.^^  The  name  of  the  attorney  with  his  place 
of  business  must  be  entered  upon  the  docket,  which  the  clerk 
is  required  to  keep,i  with  the  date  of  entry,  and  all  papers  and 

89  In  re  Carleton,  115  F.  R.  246;  as  Leiter  v.  Payson,  9  N.  B.  R. 
In  re  Ives,  supra.  205,  F.  C.  8226. 

90  In  re  Jack,  13  N.  B.  R.  296,  1  se  In  re  Pauly,  1  N.  B.  N.  405, 
Woods  549,  F.  C.  7119.  2  A.  B.  R.  333 ;   In  re  Herzikopf, 

91  In  re  Hatje,  12  N.  B.  R.  548,  6  118  F.  R.  101;  In  re  Goldenberg, 
Biss.  436,  F.   C.   6215.  117  F.  R.  692,  9  A.  B.  R.  156;  G.  O. 

92  In  re  Buchanan,  10  N.  B.  R.  IV;  see  In  re  Gasser,  5  A.  B.  R.  32. 
97,  F.  C.  2073.  97  In  re  Kindt,  2  N.  B.  N.  R.  37a, 

93  G.  0.  IV.  98  F.  R.  867,  3  A.  B.  R.  546. 
9i  In    re   Burke,   107    F.   R.    674,         i  G.  O.  I. 

5  A.  B.  R.  843. 

20 


306  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  IS 

proceedings  offered  by  an  attorney  to  be  filed,  must  be  en- 
dorsed with  the  day  and  hour  of  filing  and  a  brief  statement 
of  their  contents.^  Orders  granted  on  motion  must  contain 
the  name  of  party  or  attorney  making  the  motion ;  and  notices 
and  orders,  not  required  by  the  act  or  the  orders  to  be  served 
on  the  party  personally,  may  be  served  on  the  attorney .^ 

The  petition  and  other  pleadings  may  be  signed  and  verified 
by  the  attorney  in  proper  cases,"*  and  if  duly  authorized  by 
power  of  attorney,  he  may  prove  his  client's  claim^  and  vote 
in  his  behalf.*'  Ordinarily  corporations  may  appear  by  at- 
torney, who  is  supposed  to  have  his  client's  confidence,  and 
who  is  presumed  to  act  within  the  scope  of  his  authority;  so 
that  it  is  not  necessary  to  give  him  authority  to  appear  and 
admit  the  alleged  acts  of  bankruptcy  or  that  the  corporators 
or  shareholders  should  previously  by  vote  authorize  or  direct 
him  to  do  so  ;^  and  a  duly  appointed  receiver  of  a  corporation 
is  its  proper  representative  in  bankruptcy  proceedings.^  It  is 
competent  for  a  corporation  or  an  individual  against  whom 
a  petition  was  filed,  whose  attorney  appeared  and  gave  any 
waiver  of  time  or  other  right  and  admitted  the  charge  brought 
against  it,  to  appear  within  a  reasonable  time  and  move  the 
court  to  have  the  proceedings  set  aside,  provided  there  has 
been  no  unreasonable  delay,  an  attorney's  authority  not  ex- 
tending to  a  waiver  of  his  client's  right.^*' 

§  471. Time  of. — The  requirement  of  five  days  as  the 

time  within  which  parties  may  appear  and  plead  is  man- 
datory ,^1  though  it  might  be  proper  to  waive  it  if  all  the  cred- 
itors of  the  bankrupt  consented ;  but  a  creditor  cannot  be  de- 
prived of  the  right  to  appear  and  plead  by  the  act  of  the  bank- 
rupt in  admitting  the  act  of  bankruptcy  and  consenting  to  the 
adjudication.^ 2  Nor  can  the  attorneys  for  the  petitioning  cred- 
itors and  for  the  bankrupt,  by  agreement  between  themselves, 
without  the  consent  of  other  creditors  or  the  leave  of  court, 

2  G.  O.  II.  9  In  re  Republic  Mfg.  Co.,  8  N.  B. 

3  G.  O.  IV.  R.  197.  F.  C.  11705. 

^  Sec.    18c,    act   of   1898;    §    479,  lo  in  re  Republic  Ins.  Co.,  8  N. 

post.  B.  R.  317,  F.  C.  11706. 

5  Sec.  57,  act  of  1898.  "  Day  v.   Beck   &   Gregg   Hard- 

6  Sec.  56,  act  of  1898.  ware  Co.,  114  F.  R.  834,  8  A.  B.  R. 
■s  Leiter   v.    Payson,   9    N.   B.   R.  175. 

205,  F.  C.  8226.  12  in  re  Elmira  Steel  Co.,  109  F. 

R.  546,  5  A.  B.  R.  484. 


Ch.  18  PRACTICE— APPEARANCE.  307 

extend  the  time  for  two  months  or  similar  period,  from  the 
return  daj^  especially  where  the  allegations  of  the  petition 
are  few  and  simple  and  easily  answered  and  the  court,  if  ap- 
plied to,  would  not  have  extended  the  time.  Where  the  plead- 
ing, technically  considered,  is  offered  too  late,  as  during  an 
extension  of  the  time  to  plead,  which  extension  the  court  found 
unauthorized,  it  is  within  the  sound  discretion  of  the  court  to 
allow,  or  not  to  allow,  its  filing ;  but,  if  it  contain  any  defense 
whatever,  that  discretion  should  be  exercised  toward  permit- 
ting such  defense  to  be  made.^^  If  the  five  days  has  expired 
and  the  time  has  not  been  extended,  a  creditor  would  not  be 
authorized  to  appear  and  file  an  answer  raising  new  issues, 
especially  if  the  matter  has  already  been  heard  on  the  issues 
already  framed.^  ^  Since  creditors  as  well  as  the  bankrupt 
have  the ,  right  to  appear  and  plead  to  the  petition  within 
five  days  after  the  return  day,  that  day  must  be  fixed  by  the 
issuance  of  a  subpoena  ;i^  so  where  a  subpoena  was  made  re- 
turnable and  served  December  1,  that  was  the  return  day 
and  an  answer  and  demand  for  a  jury  trial  filed  December  17 
were  too  late  and  the  adjudication  should  have  been  made  as 
on  a  default.i^  Good  reasons  should  be  presented  in  order  to 
justify  the  granting  of  a  request  for  the  delay  of  bankruptcy 
proceedings.^''' 

§  472.  Demurrer  to. — As  when  the  proceedings  are  equit- 
able, the  rules  of  equity  practice  established  by  the  Supreme 
Court  of  the  United  States  are  to  be  followed  as  near  as  may 
be,  and,  when  they  are  legal,  the  practice  and  procedure  in 
cases  at  law,^^  the  same  considerations  must  govern  the  pleader 
as  in  other  law  and  equity  cases.  A  petition  which  fails  to 
show  any  of  the  material  allegations  required  by  law  is  de- 
murrable.^^ The  sufficiency  of  an  answer  cannot  be  raised 
by  a  demurrer ;  but  only  by  setting  the  case  for  hearing  on 
bill  and  answer,  as  where  the  answer  admitted  the  transfer 
alleged  in  the  petition  as  preferential,  but  set  up  facts  to  show 

13  G.  0.  XXXVII.  16  Bray  v.  Cobb,  1  N.  B.  N.  209, 

14  In      re      Mutual      Mercantile  1  A.  B.  R.  153,  91  F.  R.  102. 
Agency,  111  F.  R.  152,  6  A.  B.  R.  i7  In  re  Heinsfurter,  1  N.  B.  N. 
607.  510,  3  A.  B.  R.  109. 

15  In  re  Humbert,  100  F.  R.  439,  i-  G.  O.  XXXVII. 

4  A.  B.  R.  76.  19  See  In  re  Taylor,  102  F.  R.  728, 

2  N.  B.  N.  R.  929,  4  A.  B.  R.  515. 


308  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

it  was  not  preferential,-"  though  if  a  demurrer  is  filed  and 
no  objection  is  raised,  it  should  be  treated  as  an  application 
to  set  the  case  for  hearing  on  bill  and  answer.^i  A  demurrer 
admits  the  facts  and  if  overruled  it  is  discretionary  with  the 
court  whether  to  allow  a  demurrant  to  plead  over. 

§  473.  Plea  or  answer. — The  forms  and  orders  prescribed  by 
the  Supreme  Court--  indicate  the  form,  in  substance,  of  the 
answer  to  be  filed  by  the  alleged  bankrupt,  but  the  respondent 
is  not  confined  to  that  particular  form  and  is  not  limited  in 
the  facts  he  may  set  out  in  his  answer  to  those  suggested  by 
the  order,  but  may  set  out  all  the  available  facts  with  all 
necessary  particularity.-^  The  answer  should  not  be  limited  to 
'a  general  denial  but  should  reply  to  each  allegation  of  the 
petitioner;  or  set  up  a  special  and  sufficient  defense  to  one  or 
more  of  the  material  facts  alleged  in  the  petition ;  nor  should  it 
be  a  simple  denial  of  "insolvency"  based  solely  on  opinion  as 
to  the  value  of  the  estate  and  not  a  bona  fide  issue  of  fact  as 
to  solvency  ;2^  nor  an  averment  of  solvency  on  July  12,  1898. 
in  an  answer  to  a  petition  based  on  a.  general  assignment  on 
July  13,  1898  ;-^  nor  an  averment  of  an  agreement  to  compro- 
mise which  had  not  been  carried  out;^^  nor  that  the  notes 
evidencing  the  petitioner's  claim  were  given  on  a  wagering 
contract,  in  the  purchase  of  stocks,  when  the  contract  and 
rules  of  the  board  of  trade  contradicted  respondent.-'^  But 
the  allegation  by  intervening  creditors  that  the  respondent 
is  engaged  "chiefly  in  farming  and  tillage  of  the  soil"  sets  up 
a  good  defense  to  a  petition  which  fails  to  show  respondent's 

20  Goldman  v.  Smith,  1  N.  B.  N.         22  Form  No.  6. 

160,  1  A.  B.  R.  266,  93  F.  R.  182,  23  in  re  Paige,  2  N.  B.  N.  R.  110, 

citing  Genther  v.  Wright,  23  C.  C.  99  F.  R.  538,  3  A.  B.  R.  678. 

A.  500;    Crouch  v.  Kerr,   38  F.  R.  2*  Bray  v.  Cobb,  1  N.  B.  N.  Zvd, 

549;   Banks  v.  Manchester,  128  U.  1  A.  B.  R.  153,  91  F.  R.  102. 

S.  244;    Travers  v.  Ross,  14  N.  J.  25  Leidigh  Car  Co.  v.  Stengel,  1 

E-..  254;  Winter  v.  Claiter,  54  Miss.  N.  B.  N.  387,  2  A.  B.  R.  383,  95  F. 

341 ;  Edwards  v.  Drake,  15  Florida  R.  637. 

666;    Barry    v.    Abbott,    100    Mass.  26  in  re  Simonson,  95  F.  R.  948, 

396;    Brown  v.   Mortgage  Co.,   110  s.  c.  1  N.  B.  N.  230,  1  A.  B.  R.  197, 

111.    235;    Stone   v.    Moore,    36    111.  92  F.  R.  904. 

Ibo.  27  Hill   V.    Levy,    2    N.    B.   N.   R. 

21  Goldman  v.  Smith,  1  N.  B.  N.  180,  98  F.  R.  94,  3  A.  B.  R.  374. 
160,  1  A.  B.  R.  266,  93  F.  R.  132; 

Barry  v.  Abbott,  100  Mass.  396. 


Ch.  18  PLEA    OR    ANSWER.  309 

business  or  that  he  was  not  within  the  excepted  classes.^s  If 
the  case  is  heard  on  the  petition  and  answer,  the  statements 
in  the  answer  must  be  taken  as  true.^^ 

An  informal  and  improper  answer  filed  before  the  promul- 
gation of  the  General  Orders  will  not  be  dismissed  but  will 
be  retained  and  amended  to  conform.^^  The  sufficiency  of  the 
answer  cannot  be  raised  by  a  demurrer  but  must  be  by  setting 
the  case  for  hearing  upon  the  petition  and  answer.^^  If  any 
allegation  is  to  be  taken  as  true  simply  because  it  is  not  denied, 
it  is  only  an  allegation  of  some  fact  which  is  presumed  to  bo 
within  the  knowledge  of  the  party  answering.^^  There  is  no 
provision  in  the  law  authorizing  a  creditor  to  file  an  answer  to 
a  petition  in  voluntary  bankruptcy .^^  If,  on  the  return  day 
of  the  rule  to  show  cause  why  a  person  should  not  be  adjudged 
a  bankrupt,  he  appears  and  obtains  a  continuance  but  does  not 
file  either  demurrer,  plea  or  demand  for  jury  trial,  he  is  not 
entitled  on  the  day  to  which  the  case  is  continued  to  demand 
such  trial  but  may  be  allowed  to  file  a  plea  and  have  the  issues 
tried  by  the  court.^*  The  default  of  the  respondent  to  a  peti- 
tion in  involuntary  bankruptcy,  through  failure  to  appear,  does 
not  convert  the  proceeding  into  a  voluntary  one.^^  A  motion 
to  set  aside  a  default  should  be  made  within  a  reasonable 
time  ■,^*^  and,  in  order  that  a  hearing  may  be  had  and  an  oppor- 
tunity given  to  determine  whether  there  has  been  inexcusable 
laches,  or  whether  reasons  appear  which  are  recognized  as  giv- 
ing authority  for  refusing  the  motion,  the  respondent  should 
apply  by  motion  for  leave  to  file  a  supplemental  answer,  and 
such  leave  must  be  granted  unless  the  papers  present  a  case 
in  which  the  court  may  exercise  a  discretion  as  to  granting  or 
withholding  it.^'^ 

§  474.     Replication.— If  the  petitioning  creditors  wish  to  con- 

2s  In   re  Taylor,   2  N.   B.   N.   R.  32  white  v.  Jones,  6  N.  B,  R.  175, 

929,  102  F.  R.  728,  4  A.  B.  R.  515.  F.  C.  17550. 

29  Jordan  v.  Downey,  12  N.  B.  R.  33  in  re  Jehu,  1  N.  B,  N.  509,  2 
427;    Hill  v.  Levy,   2  N.  B.  N.  R.  A.  B.  R.  498,  94  F.  R.  638. 

180,  98  F.  R.  94,  3  A.  B.  R.  374.  34  in  re  Sherry,  8  N.  B.  R.  142. 

30  In  re  Ogles,  1  A.  B.  R.  671,  93         35  in  re  Taylor,  2  N.  B.  N.  R.  929, 
F.  R.  426,  1  N.  B.  N.  326;  see  In  re  102  F.  R.  728,  4  A.  B.  R.  515. 
Kelly,  1  A.  B.  R.  306.  91  F.  R.  504.         sc  in  re  Neilson,  7  N.  B.  R.  505, 

31  Goldman  v.  Smith,  1  N.  B.  N.  F.  C.  10090. 

160,  1  A.  B.  R.  266,  93  F.  R.  182.  37  Holyoke  v.  Adams,  13  N.  B.  R. 

413. 


310  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

test  the  questions  raised  by  the  answer  they  should  file  a  repli- 
cation denying  the  allegations  of  the  answer,  and  have  a  trial 
before  an  adjudication  is  made.^^ 

§  475.  Defenses. — The  bankrupt  or  any  creditor,  and  prob- 
ably anyone  who  may  be  affected  may  interpose  any  defense 
that  exists  but  if  more  than  one  each  must  be  set  forth  sepa- 
rately;^^ and  any  defense  available  to  the  bankrupt  is  equally 
available  to  the  others,  and  it  may  be  shown  either  that  the 
petitioners  are  not  creditors  or  that  they  do  not  possess  prov- 
able claims  to  the  amount  required;"*^  which  latter  might  be 
done  by  showing  that  the  debtor  was  entitled  to  feet-offs  ;*i  that 
the  court  has  no  jurisdiction  ;'*2  that  no  act  of  bankruptcy  has 
been  committed  ;-^^  that  payments,  though  made  since  the  pro- 
ceedings began,  have  reduced  the  claims  below  the  necessary 
amount,  or  that  bankrupt's  debts  do  not  amount  to  the  re- 
quired sum  ;^^  but  not  that  tender  of  payment  of  the  petition- 
ing creditors'  debts  has  been  made,  as  an  insolvent  has  no 
right  to  make  such  tender.*^ 

As  to  the  plea  of  discharge,  see  Discharge,  ante  §§  386-387. 

§476.  'c.  Matters  of  fact  to  be  verified.— All  pleadings  set- 
'ting  up  matters  of  fact  shall  be  verified  under  oath.' 

§  477.  Verification  necessary.— The  provisions  of  the  act  as 
to  the  verification  of  all  pleadings  setting  up  matters  of  fact 
must  be  strictly  followed.  It  is  matter  of  substance  and  right 
and  is  not  to  be  dispensed  with  under  cover  of  an  apparent 
compliance  with  the  act;^^  and  when  several  join  in  a  peti- 
tion in  separate  and  distinct  rights,  each  stands  individually, 

38  In  re  Taylor,  102  F.  R.  728,  2  17706;    In  re  Quimette,  supra;   In 
N.  B.   N.  R.   929,   4  A.   B.  R.  515,  re  Scrafford,  14  N.  B.  R.  184. 
citing    Geo.    M.    West   Co.    v.    Lea         "  In  re  Osage  R.  R.  Co.,  9  N.  B. 
Bros.,     1  N.  B.  N.  409,  2  A.  B.  R.  R.  281. 

463,    178   U.    S.    590;    Leidigh   Car  42  in   re  Williams,    14   N.   B.   R. 

Co.  V.  Stengel,  1  N.  B.  N.  387,  2  A.  132,  F.  C.  17706. 

B.  R.  383,  95  F.  R.  637 ;  Simpson  -ts  in  re  Skelley,  5  N.  B.  R.  214, 

V.    Ready,    12     Mees.    &    W.    740;  3  Biss.  260. 

Grant   Co.   v.    Dawson,    151    U.    S.  **  In    re    Skelley,    supra;    In    re 

586 ;    Sturges   v.    Crownlnshield,   4  Quimette,  3  N.  B.  R.  140,  1  Sawy. 

Wheat.  122.  47,  F.  C.  10622. 

39  In  re  Quimette,  3  N.  B.  R.  140,  *^  In  re  Williams,  3  B.  R.  74,  1 
1  Sawy.  47,  F.  C.  10622.  Lowell  406,  F.  C.  17703, 

40  In  re  Cornwall,  6  N.  B.  R.  305,  46  in  re  Keller,  18  N.  B.  R.  10, 
9  Blatch.  114,  F.  C.  3250;  In  re  F.  C.  7647;  see  In  re  Bellah,  116 
Williams,  14  N.  B.  R.  132,  F.  C.  F.  R.  69,  8  A.  B.  R.  310. 


Ch.  IcS  PRACTICE— DEFENSES— VERIFICATION.  311 

and  a  verification  by  each  is  required  ;-*'^  and  the  petition  is  im- 
perfect if  the  name  of  a  petitioner  which  appears  in  the  peti- 
tion is  omitted  from  the  verification.^^  Where  the  petition 
is  verified  by  only  two  out  of  three  creditors,  a  motion  should 
be  made  for  a  rule  to  require  a  proper  verification,  and  if  it  is 
not  complied  with,  a  motion  to  dismiss  would  doubtless  lie.'*^ 
The  specifications  of  objections  to  a  discharge  should  be  veri- 
fied as  to  facts  alleged.^^ 

§478. Of  corporations.— The  verifications,  like  proof 

of  claim,  should  be  made  by  the  treasurer,  or,  if  there  be  no 
treasurer,  by  the  officer  whose  duties  most  nearly  correspond 
to  those  of  treasurer  :^i  though,  as  under  the  act  of  1867,  such 
verification  may  be  by  an  agent,^^  j^qi  ^^  officer  of  the  corpora- 
tion, or  by  an  attorney  personally  acquainted  with  the  facts,^^ 
but  his  authority  must  be  set  forth  in  the  affidavit  or  be  other- 
wise established. 

§  479. By  agent  or  attorney.— An  agent  or  attorney  if 

duly  authorized  and  the  facts  are  within  his  knowledge  may 
verifj^  pleadings,  though  if  the  allegations  are  those  of  the 
petitioning  creditors  and  are  in  positive  form,  the  presumption 
is  that  the  truth  of  the  allegations  is  within  their  knowledge 
and  they  should  verify  the  petition  in  person;  but  the  rule  is 
different  when  the  facts  are  within  the  attorney's  knowledge 
and  he  was  authorized  by  them  to  make  it.^*  Hence  while  it 
may  be  preferable  that  a  petition  be  verified  by  the  creditors 
personally,  neither  the  statute  nor  the  general  orders  makes 
this  obligatory,  consequently  the  verification  may  be  by  an 
agent  or  attorney  having  knowledge  of  the  facts.^^  No  other 
evidence  of  the  attorney's  authority  need  appear  than  the  fact 

47  In  re  Simmons,  10  N.  B.  R.  53  in  re  Chequasset  Lumber  Co., 
253,  F.  C.  12864;  In  re  Scull,  10  N.     112  F.  R.  56,  7  A.  B.  R.  87. 

B.  R.  165,  7  Ben.  371.  54  in  re  Neilson,  1  N.  B.  N.  577, 

48  In  re  Rosenfield,  11  N.  B.  R.  1  A.  B.  R.  63,  98  F,  R.  76;  In  re 
86,  F.  C.  12061.  Chequasset  Lumber  Co.,  supra;  see 

49  Green  River  Deposit  Bank  v.  In  re  Goldberg,  117  F.  R.  692,  9 
Craig,  110  F.  R.  137,  6  A.  B.  R.  381.  A.  B.  R.  156,  where  an  application 

BO  In   re  Brown,  112  F.  R.  49,  7  for  an  injunction  was  verified  by 

A.  B.  R.  252;  see  In  re  Baerncopf,  an  attorney. 

117  F.  R.  975,  9  A.  B.  R.  133;  In  re  55  in  re  Herzikopf,  118  F.  R.  101, 

Glass,  119  F.  R.  509.  9  A.  B.  R.  90;  Chequasset  Lumber 

51  G.  O.  XXI  (1).  Co.,  supra;   In  re  Hunt,  118  F.  R. 

52  In  re  Hannibal,  15  N.  B.  R.  282,  9  A.  B.  R.  251;  see  In  re 
233,  F.  C.  6023:  In  re  Bellah,  116  Simonson,  1  A.  B.  R.  197,  92  F.  R. 
F.  R.  69,  8  A.  B.  R.  310.  904. 


312  THE    NATIONAL    BANK|IUPTCY    LAW.  Ch.  18 

that  he  is  admitted  to  practice  in  the  Federal  court.^*^  Where 
the  verification  to  a  petition  by  an  agent  or  attorney  at  law 
is  good  upon  its  face,  but  in  fact  was  without  authority,  ob- 
jection should  be  made  before  answering  to  the  merits,  as 
otherwise  it  will  be  waived.^^  Such  verification  may  be  made 
before  one  of  the  attorneys  for  the  petitioning  creditors  as 
notaryi^s  and  a  petition  signed  by  the  creditor's  attorney  and 
not  verified  is  demurrable.^^ 

§  480. Defect  in— cure  of.— A  defect  in  the  verification 

is  a  mere  irregularity  and  may  be  cured  by  amendment  f^  and 
the  failure  to  verify  pleadings  may  be  supplied  nunc  pro 
tunc.^i 

§  481. Waiver  of.— Objection  to  the  form  of  the  verifi- 
cation must  be  seasonably  made  and  if  it  is  not  raised  until 
after  an  answer  on  the  merits  it  is  too  late  and  the  defect  is 
thereby  waived.^^  ^  ^j^se  is  pending  so  as  to  admit  of  the 
offer  of  composition  notwithstanding  a  defect  in  the  verifica- 
tion, such  defect  not  being  jurisdictional.^^ 

§482.  *d.  Decision  of  issue  with  or  without  jury.— If  the 
'bankrupt,  or  any  of  his  creditors,  shall  appear,  within  the  time 
'limited,  and  controvert  the  facts  alleged  in  the  petition,  the 
'judge  shall  determine,  as  soon  as  may  be,  the  issues  presented 
'by  the  pleadings,  without  the  intervention  of  a  jury,  except  in 
'cases  where  a  jury  trial  is  given  by  this  act,  and  makes  the 
'adjudication  or  dismiss  the  petition.'^* 

56  In  re  Herzikopf,  supra;  G.  O.  P.  R.  637;  In  re  Herzikopf,  supra; 
IV;  see  In  re  Gasser,  5  A.  B.  R.  32.  In  re  Baerncopf,  117  F.  R.  975;  In 

57  In  re  Herzikopf,  supra;  In  re  re  Simonson,  1  N.  B.  N.  230,  1  A. 
Simonson,  supra.  B.   R.   197,  92  F.  R.  904;    s.  c.  95 

58  In  re  Kindt,  2  N.  B.  N.  R.  339.  F.  R.  948;  following  In  re  Raynor, 

59  In  re  Carter,  1  N.  B.  N.  162,  1  7  N.  B.  R.  527,  11  Blatch.  43, 
A.  B.  R.  160.  F.    C.    11597;    In    re   McNaughton, 

60  In  re  Brumelkamp,  1  N.  B.  N.  8  N.  B.  R.  44,  F.  C.  8912;  In  re 
360,  2  A.  B.  R.  318,  95  F.  R.  814;  Simmons,  10  N.  B.  R.  254,  F.  C. 
In  re  Simonson  et  al.,  1  A.  B.  R.  12864;  and  disapproving  Hunt  v. 
197;  Green  River  Deposit  Bank  v.  Pooke,  5  N.  B.  R.  161,  F.  C.  6896; 
Craig  Bros.,  110  F.  R.  137,  6  A.  B.  In  re  Butterfield,  6  N.  B.  R.  257; 
R.  381;  In  re  Sargent,  13  N.  B.  R.  and  Moore  v.  Harley,  4  N.  B.  R. 
144,  F.  C.  12361.  71,  F.  C.  9764. 

61  In  re  Wolfstein,  1  N.  B.  N.  es  Ex  p.  Jewett,  11  N.  B.  R.  443, 
202.  2  Low  393,  F.  C.  7303. 

62  Leidigh  Car  Co.  v.  Stengel,  1  64  Analogous  provision  of  Act  of 
N.  B.  N.  296,  387,  2  A.  B.  R.  383,  95  1867.    "Sec.  41.    And  be  it  further 


Ch.  18  PRACTICE— DECISION    OF    ISSUE.  313 

§483.  Trial— Effect  of  appearance  and  plea.— Entering  a 
general  appearance  and  joining  issue  on  the  merits  waives  all 
formal  or  modal  defects,  and  all  questions  which  might  have 
been  raised  by  demurrer  or  plea  in  abatement.  Thereafter  it 
is  too  late  to  raise  the  objection  that  the  petition  does  not  state 
the  special  facts  constituting  an  alleged  preference  since  such 
defect  might  have  been  raised  by  motion  to  dismiss  or  answer 
and  is  amendable  ;^^  or  to  object  to  the  petition  for  any 
irregularity.®® 

§  484.  When  trial  by  jury  desired.— If  a  jury  trial  is  desired 
a  written  application  therefor  must  be  filed  at  or  before  the 
time  within  which  an  answer  may  be  filed ;  otherwise  it  is 
waived.®'^  Under  the  act  of  1867  if  the  respondent  desired  to 
controvert  the  petition  on  the  return  day  of  the  order  to  show 
cause,  he  had  to  appear  and  deny  the  facts  set  forth  in  the 
petition  and  demand  a  hearing  by  the  court,  or  a  trial  by  jury, 
and  it  was  held  that  the  court  should  make  a  record  of  such  ap- 
pearance, allegation  and  demand;  but  no  portion  of  this  pre- 
vious to  the  making  of  the  record  by  the  clerk  was  required  to 
be  in  writing,  except  the  demand  for  a  trial  bj^  jury,®^  which  is 
equally  true  under  the  act  of  1898  except  that  he  must  appear 
and  plead  within  five  days  after  the  return  day.  Where  the 
parties  to  bankruptcy  proceedings  appeared  on  the  return  day, 
or  the  adjourned  day,  and  joined  issue,  and  no  further  pro- 
ceedings or  adjournment  was  had,  the  case  was  considered  as 
pending  from  day  to  day  until  disposed  of.®^  The  adjourned 
day,  on  which,  if  the  petitioning  creditor  does  not  appear  and 
proceed  to  an  adjudication,  another  creditor  may  appear  and 
prosecute,  is  any  day  to  which  the  proceedings  on  the  order  to 

enacted.  That  on  such  return  day  of  the  court  at  which  a  jury  shall 

or  adjourned  day,  if  the  notice  has  be  in  attendance,  to  ascertain  the 

been  duly  served  or  published,  or  fact  of  such  alleged  bankruptcy." 

shall  be  waived  by  the  appearance         es  in  re  Cliffe,  1  N.  B.  N.  509,  2 

and    consent    of  the    debtor,    the  A.  B.  R.  317,  94  F.  R.  354. 

court  shall  proceed  summarily  to         ee  in  re  McNaughton,  8  N.  B.  R. 

hear    the   allegations   of    the    peti-  44,  F.  C.  8912. 

tioner    and    debtor,    and    may    ad-         67  See.  19a.  act  of  1898. 

journ   the   proceedings   from   time         es  in  re  Heydette,  8  N.  B.  R.  332, 

to  time,  on  good  cause  shown,  and  F.  C.  6444. 

shall,   if  the  debtor  on   the  same         69  In  re  Buchanan,  10  N.  B.  R. 

day  so   demand  in  writing,   order  97,  F.  C.  2073. 

a  trial  by  jury   at  the  first  term 


314  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

show  cause  may  be  adjourned  for  the  purpose  of  inquiring  into 
the  facts  as  to  the  acts  of  bankruptcy J<^ 

§  485.  Jurisdiction  over  creditors.— Unless  regularly  made 
parties  to  the  proceedings  and  given  proper  notice,  persons 
are  not  subject  to  the  jurisdiction  of  the  bankruptcy  court, 
and  will  not  therefore  be  deemed  guilty  of  contempt  of  its 
orders  unless  it  be  shown  that  they  have  notice  of  such  pro- 
ceedings.'^i  This  is  particularly  true  of  parties  in  proceedings 
in  a  state  court. 

§  486.  Burden  of  proof. — In  answer  to  an  order  to  show 
cause  the  burden  is  on  the  respondent  to  prove  that  the  facts 
set  forth  in  the  petition  are  not  true,  in  order  to  defeat  an 
adjudication.'^^  q^  ^  motion  to  vacate  an  adjudication  in  a 
voluntary  proceedings  because  of  want  of  residence,  while  the 
moving  creditor  is  required  to  introduce  evidence,  after  that 
is  in,  the  burden  of  proof  is  upon  the  bankrupt.'^^  Under  the 
former  act  the  petitioning  creditor  was  not  required  to  make 
full  proof  of  insolvency  but  might  offer  proof  tending  to  show 
it,  and  the  debtor  was  obliged  to  explain  it  as  being  best 
acquainted  with  his  own  affairs.'^'* 

§  487.  Dismissal  of  petition.— After  a  petition  in  involun- 
tary bankruptcy  has  been  filed  and  the  court  has  acquired 
jurisdiction  of  the  case,  it  should  not  be  permitted  to  be  made 
either  inept  or  inoperative  by  an  agreement  between  the 
bankrupt  and  the  attorneys  for  the  petitioning  creditors,  or 
by  dismissing  the  action  on  motion  of  the  petitioners,  unless 
all  the  creditors  agree  or,  after  due  notice,  fail  to  object.'^^ 
If  one  of  the  petitioning  creditors  insists  upon  an  adjudica- 
tion where  the  statutory  grounds  therefor  exist  and  there  is 
no  fraud,  oppression  or  mistake,  the  court  cannot  dismiss  the 
petition    although   it  would   be   for   the  best  interests   of  the 

70  In  re  Lacey.  10  N.  B.  R.  477,  N.  B.  R.  503,  F.  C.  10559.  See  also 
F.  C.  7965.  Sec.  3,  act  of  1898,  ante,  §§  86-91. 

71  In  re  Ogles,  1  N.  B.  N.  326,  93  75  in  re  Simonson,  1  N.  B.  N. 
F.  R.  426,  1  A.  B.  R.  671.  230,  1  A.  B.  R.  197,  92  F.  R.  904; 

72  In  re  Peirce,  8  N.  B.  R.  514,  In  re  Sheehan,  8  N.  B.  R.  353,  F.  C. 
F.  C.  11411.  12738;    In  re  Williams,  3  N.  B.  R. 

73  In  re  Scott,  111  F.  R.  144,  7  285 ;  In  re  Quimette,  3  N.  B.  R. 
A.  B.  R.  39;  Waxelbaum,  97  F.  R.  140,  F.  C.  10622;  In  re  Ind.  Gin. 
562,  3  A.  B.  R.  392.  and  LaFay.  R.  R.  Co.,  8  N.  B.  R. 

74  In  re  Ore.  Bui.  &  Pub.  Co.,  13  302,  F.  C.  7023. 


Ch.  18  PRACTICE.  315 

creditors  that  the  bankrupt  should  be  allowed  to  settle  with 
them  out  of  court  J  ^  When  there  are  no  creditors  who  have 
proved  their  claims  or  who  object,  a  voluntary  bankrupt  may 
withdraw  his  petition,  and  cannot  be  prevented  by  subsequent 
creditors  who  wish  to  prevent  new  proceedings.'^'^  A  petition 
otherwise  sufficient  confers  jurisdiction  and  will  not  be  dis- 
missed on  the  ground  that  it  was  filed  by  attorneys  who  had 
not  been  admitted  to  practice  in  the  United  States  courts;'''^ 
nor  is  the  pendency  of  proceedings  in  insolvency  under  a  state 
law,  on  the  debtor's  voluntary  petition,  begun  before  the 
passage  of  the  bankruptcy  act,  ground  for  dismissing  the 
debtor 's  subsequent  voluntary  petition  in  bankruptcy,  although 
he  has  contracted  no  new  debts,  and  it  appears  that  one  or 
more  of  the  creditors  scheduled  by  the  bankrupt  are  citizens 
of  states  other  than  that  in  which  the  insolvency  proceedings 
were  instituted.'^^ 

Where  it  appears  by  affidavit  or  otherwise  that  at  the  time 
the  petition  was  filed  the  creditors  who  filed  it  knew  they  did 
not  constitute  the  requisite  number,  the  court  must  dismiss 
the  petition."^*^  An  amended  petition,  executed  as  such  by  a 
creditor  to  be  filed  in  proceedings  previously  instituted,  can- 
not, after  such  execution,  and  after  the  proceedings  have  been 
dismissed  by  the  court,  be  converted  into  an  original  petition 
by  striking  out  the  word  "amended,"  and  be  made  the  basis 
of  a  new  and  independent  proceeding ;  and  where  it  has  been 
so  filed  it  will  be  dismissed  on  the  facts  being  made  to  appear 
to  the  court.^^  An  order  dismissing  a  petition  because  it 
stated  no  act  of  bankruptcy,  will  not  be  set  aside  and  the 
filing  of  an  amended  petition  be  permitted  setting  up  other 
acts  of  bankruptcy,  unless  good  excuse  be  shown  for  the 
omission  to  assign  them  in  the  original  petition.*^ 

§  488.     *e.    Adjudication  or  dismissal  on  failure  to  plead.— 

76  In  re  Cronin,  98  F.  R.  584,  3         79  in  re  Mussey,   2  N.   B.   N.   R. 

A.  B.  R.  552 ;  In  re  Heffron.  10  N.     113,  affmd.  99  F.  R.  71,  3  A.  B.  R. 

B.  R.  213,  F.  C.  6321;    In  re  Sar-     592. 

gent.  13  N.  B.  R.  144,  F.  C.  12361;  so  in  re  Scammon,  11   N.  B.   R. 

see  In  re  Ind.  C.  and  L.  R.  Co.,  5  280,  6  Biss.  195,  F.  C.  12429. 
Biss.  287,  F.  C.  7023;  contra,  In  re         si  in  re  Hyde  v.  Gload  Mfg.  Co., 

Miller,  1  N.  B.  R.  105,  F.  C.  9553.  103  F.  R.  617,  2  N.  B.  N.  R.  1122, 

77  In  re  Hebbert,  104  F.  R.  322.  4  A.  B.  R.  602. 

78  In  re  Kindt,  2  N.  B.  N.  R.  373,  82  White  v.  Timber  Co.,  116  F.  R. 
98  F.  R.  867,  3  A.  B.  R.  546.  768. 


316  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

*If  on  the  last  day  within  which  pleadings  may  be  filed  none 
'are  filed  by  the  bankrupt  or  any  of  his  creditors,  the  judge 
'shall  on  the  next  day,  if  present,  or  as  soon  thereafter  as 
'practicable,  make  the  adjudication  or  dismiss  the  petition.' 

§  489. Failure  to  plead.— In  a  case  of  failure  to  plead, 

or  of  a  plea  made  improperly  or  out  of  time,  it  is  the  im- 
perative duty  of  the  court  to  make  the  adjudication  as  soon 
as  practicable  after  five  days  from  the  return  day,  but  an 
adjudication  before  the  expiration  of  this  time  is  premature.^^ 
This  time  cannot  be  extended  by  agreement  between  counsel 
for  the  petitioning  creditors  and  the  bankrupt  without  leave 
of  the  court  and  without  the  consent  of  other  creditors,  espe- 
cially in  a  case  where  the  allegations  of  the  petition  are  simple 
and  easily  answered,  and  the  court,  if  applied  to  for  that 
purpose,  would  not  have  extended  the  time,^^  and  where  tht; 
answer  is  filed  after  the  time  specified,  the  case  should  be 
adjudicated  as  in  case  of  a  failure  to  plead.^^  The  fact  that 
the  subpoena  is  not  served  until  long  after  the  five  days,  but 
an  answer  is  made  within  the  time  by  a  creditor^  the  juris- 
diction is  not  lost  by  reason  of  the  delay  in  the  service  or  in 
the  adjudication.^^ 

A  judgment  by  default  is  as  conclusive  an  adjudication  be- 
tween parties  of  whatever  is  essential  to  support  the  judgment, 
as  one  rendered  after  answer  and  contest,  and  in  such  case 
facts  are  not  open  to  further  controversy  if  they  are  neces- 
saiily  at  variance  with  the  judgment  on  the  pleadings.^' 

§  490.  'f.  When  clerk  to  refer  involuntary  petition.— If 
*the  judge  is  absent  from  the  district,  or  the  division  of  the 
'district  in  which  the  petition  is  pending,  on  the  next  day 
'after  the  last  day  on  which  pleadings  may  be  filed,  and  none 
'have  been  filed  by  the  bankrupt  or  any  of  his  creditors,  the 
'clerk  shall  forthwith  refer  the  case  to  the  referee.' 

§491.     'g.    Action  on  voluntary  petition.— Upon  the  filing 

83  Day  V.  Beck  &  Gregg  Hard-  se  in  re  Freischberg,  8  A.  B.  R. 
ware  Co.,  114  F.  R.  834,  8  A.  B.  R.  607;  In  re  Stein,  105  F.  R.  749, 
175.  5  A.  B.  R.  288. 

84  In  re  Simonson,  1  N.  B.  N.  87  in  re  American  Brewing  Co., 
230,  92  F.  R.  904,  1  A.  B.  R.  197.  112  F.  R.  752,  7  A.  B.  R.  463;  Last 

85  Bray  v.  Cobb,  1  N.  B.  N.  153,  Chance  Min.  Co.  v.  Tyler  Min.  Co., 
91  F.  R.  102,  1  A.  B.  R.  153.  157  U.  S.  683. 


Ch.  18  DISMISSAL    ON    FAILURE    TO    PLEAD.  317 

'of  a  voluntary  petition  the  judge  shall  hear  the  petition  and 
'make  the  adjudication  or  dismiss  the  petition.  If  the  judge 
'is  absent  from  the  district,  or  the  division  of  the  district  in 
'which  the  petition  is  filed  at  the  time  of  the  filing,  the  clerk 
'shall  forthwith  refer  the  case  to  the  referee. '^^ 

§  492.  When  clerk  to  refer.— A  reference  to  the  referee 
may  be  made  by  the  clerk  only  when  the  judge  is  absent  from 
the  division  of  the  district  within  which  the  petition  is  filed, 
and  then  only  in  case  of  default  in  involuntary  cases.  The 
reference  cannot  be  made  by  the  deputy  clerk,  nor  by  the 
clerk  on  the  written  admission  by  the  respondent  of  the  acts 
of  bankruptcy  charged  and  a  waiver  of  service  and  of  the 
time  of  appearance,^''  but  an  order  made  by  the  judge  and 
attested  by  the  deputy  clerk  is  valid. 

Sometimes  it  is  necessary  for  the  court  to  refer  the  case  to 
the  referee  to  take  and  re7)ort  testimony,  as  where  answers 
are  filed  to  a  petition  in  involuntary  bankruptcy,  and  it  is  no 
objection  to  such  a  course  that  questions  of  law  are  involved, 
as  the  action  of  the  referee  is  in  all  respects  subject  to  the 
control  of  the  court.-'^ 

§  493.  Order  of  reference.— The  order  referring  a  case  to  a 
referee,  a  copy  of  which  nuist  be  forthwith  sent  by  mail,  or 
delivered  personally,  to  the  referee,  must  name  a  day  on  wdiich 
the  bankrupt  shall  attend  before  the  referee  and  from  that 
day  the  bankrupt  shall  be  subject  to  the  order  of  the  court 
in  all  matters  relating  to  the  bankruptcy  proceedings,  and 
thereafter  all  proceedings,  except  those  required  to  be  had 
before  the  judge,  must  be  had  before  the  referee ;    and  the 

88  Analogous  provision  of  Act  of  of  the  debtor  shall  be  taken  there- 

1867.     "Sec.    42.     ,     .     .     That   if  on,  and  shall  be  assigned  and  dis- 

the  facts  set  forth  in  the  petition  tributed  in  the  same  manner  and 

are  found  to  be  true,  or  if  default  with  similar  proceedings  to  those 

be  made  by  the  debtor  to  appear  hereinbefore  provided  for  the  tak- 

pursuant   to   the   order,   upon    due  ing    possession,    assignment,    and 

proof     of     service     thereof     being  distribution  of  the  property  of  the 

made,  the  court  shall  adjudge  the  debtor  upon  his  own  petition." 

debtor  to  be  a  bankrupt,   and,  as  so  Bray  v.  Cobb,  1  N.  B.  N.  209, 

such,  subject  to  the  provisions  of  1  A.   B.  R.   153,   91  F.  R.   102;    In 

this  act,  and  shall  forthwith  issue  re  L.  Humbert  Co.,  100  F.  R.  439, 

a  warrant  to  take  possession  of  the  4  A.  B.  R.  76. 

estate  of  the  debtor.     The  warrant  oo  Clark  v.  Am.  Man'g.  Co.,  101 

shall  be  directed,  and  the  property  F.  R.  962,  4  A.  B.  R.  351. 


318  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

referee  must  perforin  his  duties  at  such  times  and  in  such 
places  as  shall  be  fixed  by  special  order  of  the  judge  or 
referee.^^ 

§  494.  Adjudication  —  in  general.  —  Upon  adjudication 
whether  in  voluntary  or  involuntary  cases,  the  court  acquires 
complete  jurisdiction  for  all  purposes;-'^  and  an  adjudication 
on  default  is  as  conclusive  as  one  entered  upon  a  hearing.^^ 
The  only  issues  upon  which  a  bankruptcy  case  can  be  tried 
and  an  adjudication  had  are  those  presented  by  the  plead- 
ings; and  the  petitioner  cannot  be  permitted  to  prove  any 
other  act  of  bankruptcy  than  that  set  up  in  the  petition.^^ 
This  is  the  general  rule  and  applies  almost,  if  not,  universally, 
being  based  on  the  principle  that  the  opposite  party  is  entitled 
to  know  what  he  has  to  meet.^^ 

If  upon  the  hearing  of  a  petition  by  some  of  the  members  of 
a  firm,  the  non- joining  partners  appear  and  consent,  or  default, 
the  adjudication  will  be  proceeded  with  as  in  other  cases  of 
voluntary  bankruptcy;  but,  if  they  appear  and  plead  proper 
defenses,  the  adjudication  will  be  proceeded  with  as  in  other 
invohmtary  proceedings.^^  A  general  assignment  for  the 
benefit  of  creditors  justifies  an  adjudication  of  bankruptcy 
without  averment  or  proof  that  the  assignor  was  insolvent  at 
the  time  of  the  assignment  or  of  filing  the  petition.^''' 

§  495. Effect  of.— An  adjudication  of  bankruptcy  is 

not  a  conclusive  finding  of  a  fact  which  tends  to  defeat  the 
jurisdiction  of  the  court  over  the  alleged  bankrupt ;''''  but  it 
is  in  the  nature  of  a  statutory  execution,  for  all  the  creditors 
and  the  trustee,  as  their  representative,  may  enforce  against 
the  debtor  every  right  a  judgment  creditor  could  enforce,^^ 
and  it  terminates  the  right  of  the  bankrupt  to  dispose  of  his 

91  G.  O.  XIL  9"  Lea  v.  West,  174  U.  S.  590,  1 

92  In  re  Archenbrown,  11  N.  B.  N.  B.  N.  409,  2  A.  B.  R.  463,  aff' g  1 
R.  149,  F.  C.  504.  N.  B.  N.  79,  1  A.  B.  R.  261,  91  F. 

93  In  re  American  Brewing  Co.,  R.  237;  Leidigh  Car  Co.  v.  Stengel, 
112  F.  R.  752.  7  A.  B.  R.  463;  In  re  1  N.  B.  N.  387,  2  A.  B.  R.  383,  95 
Hatcher,  1  N.  B.  R.  91,  F.  C.  6210.  F.  R.  637. 

94  In  re  Sykes,  5  Biss.  113.  9,s  in  re  Goodfellow,  3  N.  B.  R. 

95  Doan  V.  Compton,  2  B.  R.  607;  114,  1  Lowell  510,  F.  C.  5536. 
James  v.   Alt.   Delaine  Co.,   11  N.         99  Barnwell  v.  Jones,  14  N.  B.  R. 
B.  R.  390.  278,  F.  C.  1027. 

90  In  re  Murray.  1  N.  B.  N.  570, 
96  F.  R.  600,  3  A.  B.  R.  601o 


Ch.  18  EFFECT    OF    ADJUDICATION.  319 

property.^  In  the  absence  of  fraud  or  mistake  the  adjudica- 
tion is  conclusive  on  all  creditors,  and  cannot  be  disputed  upon 
the  application  for  a  discharge  ;2  nor  can  it  be  assailed  in  a 
collateral  action.^ 

A  bankruptcy  proceeding  is  a  proceeding  in  rem  and  all 
persons  interested  in  the  res  are  regarded  as  parties  thereto, 
including  the  bankrupt  and  trustee  as  well  as  the  creditors, 
secured  and  unsecured,^  and  an  adjudication  which  is  neces- 
sarily an  implied  judgment  that  the  court  has  jurisdiction, 
follows  upon  the  filing  of  the  petition.  No  notice  is  necessary 
that  an  adjudication  will  be  made,  but  afterward  by  notice 
creditors  become  parties  and  if  they  do  not  they  are  pre- 
cluded from  thereafter  objecting  for  the  first  time  to  the  juris- 
diction over  the  person.^  The  adjudication  vests  in  the  trustee, 
or  temporary  receiver,  the  title  of  the  bankrupt 's  property  and 
stays  all  seizures  made  within  four  months.  Where  the  respon- 
dent in  a  petition  in  involuntary  bankruptcy  takes  issue  to  the 
validity  and  consideration  of  a  note  set  forth  in  a  petition 
and  the  court  makes  an  adjudication  it  is  conclusive  evidence 
of  the  validity  of  the  claim  when  the  note  is  presented  for 
allowance,  but  if  the  issue  was  on  a  collateral  question  the 
adjudication  would  not  be  conclusive  as  to  its  validity.^ 
Where  the  answer  filed  by  a  corporation  to  an  involuntary 
petition  which  waives  process,  admits  the  allegations  of  the 
petition,  and  declares  its  willingness  to  be  adjudged  bankrupt, 
is  signed  in  the  name  of  the  corporation  by  its  president,  an 
objection  that  he  was  acting  beyond  his  power  is  waived  by 
the  acquiescence  of  the  bankrupt  and  its  creditors  in  the 
adjudication,  and,  as  against  strangers,  is  concluded  by  the 
adjudication^ 

§  496. When  not  set  aside.— The    bankrupt  and  his 

creditors  who  have  provable  claims  against  his  estate  are  the 
only  persons  who  can  make  an  application  to  set  aside  an 

1  In  re  Dillard,  9  N.  B.  R.  8,  2  4  Carter  v.  Hobbs,  1  N.  B.  N.  191, 
Hughes  190,  F.  C.  3912;  Maxwell  v.  1  A.  B.  R.  215,  92  F.  R.  594. 
Faxton,  4  N.  B.  R.  60.  s  in  re  Mason,  2  N.  B.  N.  R.  425, 

2  In  re  Ordway  Bros.,  19  N.  B.  R.  99  F.  R.  256,  3  A.  B.  R.  599. 

171,  F.  C.  10552.  6  In  re  Ulfelder  Clothing  Co.,  98 

3  Sloan    V.    Lewis,    12    N.    B.    R.     F.  R.  409,  3  A.  B.  R.  425. 

173,  22  Wall.  150;  Wilson  v.  Parr,  Tin  re  Columbia  Real  Estate 
8  A.  B.  R.  230.  Co.,  101  F.  R.  965,  4  A.  B.  R.  411. 


330  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

adjudication,**  while  any  person  affected  by  an  adjudication 
and  interested  in  sustaining  it  may  oppose  such  application, 
as  the  receiver  of  a  corporation  adjudged  bankrupt  on  a 
trustee's  petition,^  and  it  will  be  so  set  aside  on  grounds 
similar  to  those  which  authorize  the  review  or  vacation  of  a 
judgment;  though  if  the  ground  is  want  of  jurisdiction  it  is 
in  the  court's  discretion  to  allow  a  stranger  to  be  heard  as 
amicus  curiae.^*^  The  petition  of  a  creditor  to  set  aside  an 
adjudication  on  a  voluntary  petition,  will  not  be  entertained.!^ 
An  adjudication  made  where  respondent  waived  process,  en- 
tered appearance  and  admitted  the  alleged  acts  of  bankruptcy 
will  not  be  set  aside  for  want  of  jurisdiction  on  the  applica- 
tion of  a  stranger  when  neither  the  bankrupt  nor  any  of  his 
creditors  object  to  the  decree  ;!2  j^or  on  the  ground  that  the 
petition  and  schedule  were  not  filed  for  two  months  after 
verification;!^  nor  on  the  application  of  one  guilty  of  laches ;!* 
nor  on  the  ground  that  the  proper  proportion  of  creditors  did 
not  unite  in  the  petition,  unless  there  be  fraud,  bad  faith  or 
collusion  in  obtaining  it;!^  nor  because  of  the  co-operation  of 
the  debtor  in  securing  creditors,  by  lawful  means,  to  unite 
in  an  involuntary  petition;!*^  nor  for  the  reason  that,  on  the 
filing  of  an  involuntary  petition,  debtor  defaulted;!'^  but,  upon 
the  after  discovery  of  a  dormant  partner,  an  adjudication 
against  the  nominal  firm  would  permit  the  opening  of  the 
proceedings  and  bringing  in  the  dormant  partner  without 
requiring  a  new  petition  to  be  filed.^^ 

§  497. When  set  aside. — The  court  has  jurisdiction  to 

consider  an  application  to  set  aside  an  adjudication  at  any 
time  until  the  estate  is  closed,  although  the  actual  term  of  the 

8  In  re  Columbia  Real  Estate  i^  In  re  Ives,  113  F.  R.  911,  7  A, 
Co.,  112  F.  R.  643,  7  A.  B.  R.  441.  B.   R.   692;    In  re  Bait.  Co.   Dairy 

9  In  re  Atlantic  Mutual  Ins.  Co.,  Ass'n,  11  N.  B.  R.  253,  2  Hughes 
16  N.  B.  R.  541,  9  Ben.  280,  F.  C.  250,  F.  C.  8281;  In  re  Griffith,  18 
628.  N.  B.  R.  510,  F.  C.  5820. 

10  In  re  Columbia  Real  Estate  i^  In  re  Funkensteln,  14  N.  B.  R. 
Co.,  101  F.  R.  965,  4  A.  B.  R.  411.  213,  3  Sawy.  605,  F.  C.  5158. 

11  In  re  Ives,  113  F.  R.  911,  7  A.  i6  In  re  Duncan,  14  N.  B.  R.  18, 
B.  R.  692;    In  re  Carleton,  115  F.  8  Ben.  365,  F.  C.  4131. 

R.  246,  8  A.  B.  R.  270.  i7  In    re    Hopkins,    18    N.   B.   R. 

12  In    re    Columbia   Real    Estate     396,  F.  C.  6684. 

Co.,  101  F.  R.  965,  4  A.  B.  R.  411.  is  In  re  Scott,  1  N.  B.  N.  327. 

13  In  re   Berner,   2   N.   B.   N.   R. 
330,  3  A.  B.  R.  325. 


Ch.  18  ADJUDICATION— WHEN    SET    ASIDE.  331 

court  has  passed.^"  Where  two  of  four  members  of  a  firm 
file  a  petition  for  the  adjudication  of  the  firm  bankrupt  and 
no  notice  is  given  the  other  partners  and  they  do  not  appear, 
the  adjudication  should  be  set  aside,  notwithstanding  a  con- 
sent signed  by  such  other  partners'  attorneys  and  filed  after 
the  adjudication ;-°  or  if  made  against  an  infant  who  did  not 
appear  by  guardian  ad  litem  ;^^  or  where  a  proceeding  is 
reinstated  without  notice  to  or  appearance  of  the  debtor  ;22 
or  where  the  debtor  failed  to  comply  with  the  requirements 
of  an  act  passed  the  day  the  petition  was  filed  ■,-^  or  where  it 
subsequentl.y  develops  in  a  voluntary  proceedings  that  there 
are  no  dischargeable  debts.^* 

§  498. Appeal.— The  general  rule  that  every  one,  who 

may  be  a  party  to  the  proceedings  or  whose  rights  may  be 
affected  by  the  decision,  may  appeal,  applies  to  an  adjudica- 
tion in  bankruptcy ;  and  creditors  who  appear  in  opposition 
to  a  petition  in  involuntary  bankruptcy  against  their  debtor, 
and  contest  the  adjudication  thereon,  as  authorized  by  the 
bankruptcy  act,  have  therefore  the  right  to  appeal  from  a 
decree  making  the  adjudication.^^  There  would  be  no  appeal, 
however,  from  an  order  dismissing  a  petition  for  intervention, 
in  view  of  the  fact  that  it  is  not  such  a  final  order  as  is 
contemplated  by  the  law.-*^ 

§  499.  Change  of  venue.— In  courts  of  bankruptcy  as  in 
other  courts  the  facts  may  be  such  as  to  make  a  change  of 
venue  desirable  and  proper,  and  in  such  cases  it  lies  within 
the  sound  discretion  of  the  court  to  allow  or  refuse  the  re- 
quest, and  to  warrant  its  allowance  the  same  showing  would 
have  to  be  made  as  in  other  cases.^"^  Where  several  petitions 
are  filed  in  courts  in  difl'erent  districts  against  the  same  part- 
nership, each  of  whom  having  jurisdiction,  the  court  in  which 
the  petition  is  first  filed  will  retain  jurisdiction,  but  if  such 

19  In  re  Ives,  supra;  reversing  -*  In  re  Maples,  105  F.  R.  919, 
111  F.  R.  495,  6  A.  B.  R.  653.  5  A.  B.  R.  426. 

20  In  re  Altman,  1  N.  B.  N.  358,  25  in  re  Meyer,  98  F.  R.  976,  3  A. 
1  A.  B.  R.  689.  B.  R.  559. 

21  In  re  Derby.  8  N.  B.  R.  106,  26  in  re  Columbia  Real  Estate 
F.  C.  3815.  Co.,  112  F.  R.  643,  7  A.  B.  R.  441. 

22  Gage  V.  Gage,  15  N.  B.  R.  145.         27  See  Bray  v.  Cobb,  1  N.  B.  N. 
2-.  In  re  Carrier,  13  N.  B.  K.  208,     209.  91  F.  R.  102,  1  A.  B.  R.  153. 

F.  C.  2443. 


322  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  18 

court  is  satisfied  that  it  is  for  the  greatest  convenience  of  the 
parties  in  interest  that  another  of  said  courts  should  proceed 
with  the  case,  it  will  order  it  to  be  transferred  to  such  other 
court.28 

28  G.    O.    VI. 


CHAPTER  XIX. 
JURY    TRIALS. 

§500.   (19a)   Jury  trials.  507.  c.  Rule     governing    submis- 

501.  When  allowable.  sion  to  jury. 

502.  Time   of   making  appli-  508.  Difference     between     sub-di- 

cation  mandatory.  visions  "a"  and  "c." 

503.  On  insufficient  petition.  509.  Issues  of  fact  generally  tria- 

504.  Conduct  of  the  trial.  ble  by  jury. 

505.  b.  When  jury  not  in  attend-       510.  In  what  cases  jury  trial  al- 

ance.  lowed. 

506.  Early  trial.  511.  Contempt.. 

§  500.  '  (Sec.  19a)  Jury  trials.— A  person  against  whom 
'an  involuntary  petition  has  been  filed  shall  be  entitled  to 
'have  a  trial  by  jury  in  respect  to  the  question  of  his  in- 
'  solvency,  except  as  herein  otherwise  provided,  and  any  act 
'of  bankruptcy  alleged  in  such  petition  to  have  been  commit- 
'ted,  upon  filing  a  written  application  therefor  at  or  before 
'the  time  within  which  an  answer  may  be  filed.  If  such 
'application  is  not  filed  within  such  time,  a  trial  by  jury  shall 
'be  deemed  to  have  been  waived.'^ 

§  501.  When  allowable.— In  a  case  of  involuntary  bank- 
ruptcy, a  jury  trial  may  be  had  as  to  the  commission  of  the 
acts  of  bankruptcy  alleged  and  the  fact  of  insolvency,-  as  a 
matter  of  right  and  cannot  be  denied  if  seasonably  demanded.-^ 

In  this  respect  it  differs  from  the  trial  of  an  issue  out  of 
chancery  which  the  court  of  equity  is  not  bound  to  grant  nor 
bound  by  the  verdict  if  such  trial  be  granted.  The  court  can- 
not, as  the  chancellor  may,  enter  judgment  contrary  to  the 
verdict,  but  the  verdict  may  be  set  aside  or  the  judgment  may 
be  reversed  for  error  of  law  as  in  common  law  cases.^'* 

§  502.  Time  of  making  application  mandatory.— In  a  case 
of  involuntary  bankruptcy,  a  demand  for  a  trial  by  jury,  as 

1  Analogous  provision  of  Act  of  ascertain  the  fact  of  such  alleged 

1867.     "Sec.  41.     .     .     .     The  court  bankruptcy." 

shall    proceed    summarily   to   hear  -  Bray  v.  Cobb.  1  N.  B.  N.  209,  1 

the    allegation    of    the    petitioner  A.  B.  K.  153,  91  F.  R.  102;  Day  v. 

and    debtor,    and  may  adjourn  the  Beck  &  Gregg  Hardware  Co.,  114 

proceedings  from  time  to  time,  on  F.  R.  834,  8  A.  B.  R.  175;  but  see 

good  cause  shown,  and  shall,  if  the  Sub.  c,  this  chapter,  post,  §  507. 

debtor  on  the  same  day  so  demand  ^'  Duncan    v.    Landis,    106   F.   R. 

in  writing,  order  a  trial  by  jury  at  839,  5  A.  B.  R.  649. 

the  first  term  of  court  at  which  a  •''a  Elliott  v.  Toeppner,  187  U.  S. 

jury    shall    be    in    attendance,    to  327,  9  A.  B.  R.  50. 

323 


324  THE    NATIONAL    BANKRUPTCY    LAW  ClI.  19 

to  the  commission  of  the  alleged  acts  of  bankruptcy  and  the 
fact  of  insolvency,  must  be  in  writing  and  made  by  the  debtor 
at  or  before  the  expiration  of  the  time  allowed  for  answer, 
which  is  five  days  after  the  return  day,  or  within  such  further 
time  as  the  court  may  allow,*  the  subpoena  which  is  issued 
at  the  time  the  petition  is  Hied  being  returnable  in  fifteen 
days,  unless  the  time  is  extended  by  the  judge/''  This  provision 
is  mandatory  and  must  be  strictly  observed  and,  if  the  demand 
is  not  made  within  such  time,  it  is  deemed  to  be  waived;*^  or 
if  the  debtor  fails  to  appear  on  the  return  day  he  cannot 
afterwards  demand  a  jury  trial ;"  nor,  if  he  appear  by  attorney 
but  neither  files  an  answer  or  other  plea  nor  demands  trial  by 
jury,  and  secures  a  continuance,  can  he  demand  a  trial  by 
jury^  on  the  adjourned  day,  the  continuance  being  general 
and  no  enlargement  of  the  time  for  filing  the  demand  having 
been  granted.  Where  a  petition  is  filed  by  some  of  the  mem- 
bers of  a  firm  and  referred  by  the  clerk  to  a  referee,  thus 
being  in  its  inception  a  voluntary  proceeding,  but  the  non- 
petitioning  partners  contest  the  adjudication,''  the  case  must 
be  certified  to  the  judge  for  hearing  and  a  jurj-  trial  will  be 
had  if  a  written  demand  therefor  was  filed  with  the  referee 
at  or  before  the  time  fixed  for  the  hearing.^^ 

§  503.  On  insufficient  petition.— The  insufficiency  of  a  peti- 
tion may  be  taken  advantage  of  by  motion  to  dismiss  or 
answer;  but,  if  the  defect  is- amendable,  it  is  waived  by  de- 
manding an  issue  on  the  merits  and  requiring  the  petitioner 
to  prepare  for  trial  on  the  disputed  facts,  and  objection  is  too 
late  at  the  trial,  or  later,  so  that  a  debtor  may  waive  such 
defect  and  demand  a  jury  trial  on  such  petition." 

^  504.  Conduct  of  the  trial.— The  trial  by  jury  of  an  issue  as 
to  the  existence  of  grounds  for  adjudication,  must  be  accord- 
ing to  the  course  of  the  common  laAv.    In  case  a  debtor  denies 

4  Forms  6  and  7,  sec.  18b,  act  of  '  In  re  Gebhardt,  3  N.  B.  R.  63, 

1898;   Day  v.  Beck  &  Gregg  Hard-  F.  C.  5294. 

ware  Co.,   supra;    Duncan   v.   Lan-  >*  In  re  Sherry,  8  N.  B.  R.  142. 

dis,  supra.  »  G.  0.  VIII. 

■>  Sec.  18a,  act  of  1898.  lo  In  re  Murray,  1  N.  B.  N.  570, 

'•■  Bray  v.  Cobb.  1  N.  B.  N.  209,  1  96  F.  R.  600,  3  A.  B.  R.  601. 

A.  B.  R.  153.  91  F.  R.  102;   In  re  n  In  re  Cliffe,  1  N.  B.  N.  509,  2 

Heydette,    8    N.    B.    R.    332,    F.    C.  A.  B.  R.  317,  94  F.  R.  354. 

6444;  In  re  Sherry.  8  N.  B.  R.  142; 

Clinton  v.  Mayo,  12  N.  B.  R.  39,  F. 

C.  2899. 


('11.19  JURY    TRIALS.  325 

the  allegation  of  insolvency,  he  must  appear  and  submit  to  ex- 
amination, and,  if  he  fails  to  do  so,  the  burden  of  proving 
his  solvency  rests  on  him.^-  The  coui't's  instructions  are 
entitled  to  a  reasonable  construction,  and,  if  correct,  when 
applied  to  the  facts  submitted  to  the  jury,  will  be  sustained 
in  an  appellate  court,  though,  if  standing  alone,  they  would 
be  incomplete  in  respect  to  some  matter  sufficiently  explained 
in  the  evidence  ;^^  and  it  is  not  error  to  direct  the  jury's 
attention  to  the  distinction  between  reasonable  cause  to  be- 
lieve and  actual  belief.^ ^  If  the  nature  of  the  debt  is  set 
forth  in  the  petition  with  the  averment  that  it  is  provable 
under  the  act,  the  question  whether  it  is  so  provable  is  a 
question  of  law  and  not  of  fact.^^  The  court  has  the  same 
power  over  verdicts  rendered  in  bankruptcy  cases,  whether 
for  or  against  the  debtor,  as  courts  of  common  law,  and  may, 
on  proper  cause  shown,  set  them  aside  and  order  a  new  trial.^" 

§  505.  'b.  When  jury  not  in  attendance.— If  a  jury  is  not 
'in  attendance  upon  the  court,  one  may  be  specially  sum- 
'moned  for  the  trial,  or  the  case  may  be  postponed,  or,  if  the 
'case  is  pending  in  one  of  the  district  courts  within  the 
'jurisdiction  of  a  circuit  court  of  the  United  States,  it  may  be 
'certified  for  trial  to  the  circuit  court  sitting  at  the  same 
'place,  or  by  consent  of  parties  when  sitting  at  any  other 
'place  in  the  same  district,  if  such  circuit  court  has  or  is  to 
'have  a  jury  first  in  attendance.' 

§  506.  Early  trial.— This  provision  is  in  line  with  the  gen 
eral  purpose  of  the  act  which  is  to  secure  a  prompt  settlement 
of  a  bankrupt's  estate.  It  provides  for  a  special  venire,  if 
necessary,  or  in  case  no  advantage  is  to  be  gained  by  post- 
ponement until  there  is  a  jury  in  attendance,  or  for  trial  in 
the  circuit  court  sitting  at  the  same  place  on  certificate,  or 
by  consent  of  parties  sitting  at  another  place  in  the  district, 
if  such  circuit  court  has  a  jury  in  attendance,  so  that  the 
earliest  possible  trial  may  be  had.  So  great  is  the  desire  for 
promptness  in  these  proceedings  that,  though  the  act  of  18G7 
made  no  express  provision  therefor,   the  courts  nevertheless 

12  Sec.    3d,   act    of   1898;    Elliott  i- Sigsby  v.  Willis,  3  N.  B.  R.  51. 

V.  Toeppner,  187  U.  S.  327,  9  A.  B.  3  Ben.  371,  F.  C.  12849. 

R.  50.  1"  In  re  Corse,  F.  C.  3254;   In  re 

IS  Willis  V.   Carpenter,  14  N.   B.  Deforrest.    9    N.    B.    R.    278,    F.   C. 

R.  521,  F.  C.  17770.  3745. 

1*  Lawrence  v.  Graves,  5  N.  B.  R. 
279.  F.  C.   8138. 


336  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  19 

held  that  a  special  venire  might  issue  at  any  date  to  try  an 
issue,^"  even  during  the  vacation  of  the  district  court  proper.^** 

^507.  'c.  Rule  governing  submission  to  jury.— The  right 
*to  submit  matters  in  controversy,  or  an  alleged  offense  under 
'this  Act,  to  a  jury  shall  be  determined  and  enjoyed,  except 
*as  provided  by  this  Act,  according  to  the  United  States  laws 
'now  in  force  or  such  as  may  be  hereafter  enacted  in  relation 
*to  trials  by  jury.' 

§  508.  Difference  between  subdivisions  a  and  c— It  should 
be  observed  that  subdivision  "a"  provides  for  a  jury  trial  as 
to  the  commission  of  the  alleged  acts  of  bankruptcy,  or  the 
fact  of  insolvency,  if  a  demand  therefor  is  made  in  writing 
within  the  time  for  tiling  an  answer;  but  this  subdivision, 
"c,"  provides  that  the  right  to  submit  matters  in  controversy' 
or  offenses  under  the  act  to  a  jury  shall  be  determined,  except 
as  provided  in  the  act,  by  the  laws  of  the  United  States. 

§  509.  Issues  of  fact  generally  triable  by  jury.— All  issues 
of  fact,  in  cases  in  the  circuit  and  district  courts,  except  as 
otherwise  provided  in  bankruptcy  proceedings,  must  be  tried 
by  jury,^^  but  issues  of  fact  in  civil  cases  in  a  circuit  court 
may  be  tried  by  the  court  without  a  jury,  whenever  the 
parties  file  a  stipulation  in  writing  waiving  the  jury.  In  such 
case  the  finding  of  the  court,  which  may  be  either  general  or 
special,  will  have  the  same  effect  as  the  verdict  of  a  jury,-*^ 
the  appellate  court  being  confined  in  the  latter  case  to  ques- 
tions of  law,  except  that,  on  a  special  finding,  the  sufficiency 
of  the  facts  to  support  the  judgment  may  be  inquired  into. 
There  is  no  similar  provision  as  to  waiver  in  the  district 
court  r^  but,  if  the  parties  agree  on  a  statement  of  facts,  they 
can  together  waive  a  jury;^"-  and  judgment  in  either  event 
may  be  reviewed  by  writ  of  error.-^ 

§  510.  In  what  cases  jury  trial  allowed.— The  district 
courts,  as  courts  of  bankruptcy,  have  jurisdiction  both  at  law 

17  In  re  Findlay,  9  N.  B.  R.  83.  5  21  Blair  v.  Allen.  3   Dill.  101,  F. 

Biss.  480,  F.  C.  4789;  In  re  Hawk-  C.  1483;  Kearney  v.  Case,  12  Wall, 

eye  Smelting  Co.,  8  N.  B.  R.  385.  275,  R.  S.  sec.  700. 

1"  Lehman     v.     Strassberger,     2  22  Supervisors   v.    Kennicott,  103 

Woods,  554.  F.  C.  8216.  U.  S.  554. 

i!i  U.  S.  Rev.  Stat.,  sees.  648,  649,  s.i  Campbell  v.  Boyreau,  21  How. 

566.  223;  Rogers  v.  U.  S..  141  U.  S.  548, 

^"U.    S.     Rev.    Stat.,    sec.    649;  556;    Perego   v.    Dodge,    163   U.    S. 

Packer  v.  Whittier,  1   A.  B.  R.  621.  160. 


Ch.  19  WHEN    JURY    TRIAL    ALLOWED.  337 

and  in  equity  ;-^  and  so  it  would  seem  that,  under  the  present 
act,  if  the  matter  in  controversy  is  of  legal  cognizance,  the 
fact  that  it  is  in  a  bankruptcy  proceeding  will  not  prevent 
the  rule  as  to  a  jury  trial  from  applying,  and  that  the  holding 
under  the  former  act  that  bankruptcy  proceedings  were  of 
equitable  cognizance  and  a  jury  trial  not  allowable^^  does  not 
now  apply  unless  the  matter  in  controversy  is  of  equitable 
cognizance.  This  distinction  seems  to  have  been  overlooked 
in  one  case.-^  Unless  the  act  otherwise  provides,  therefore, 
all  questions  of  fact  of  legal  cognizance  are  triable  by  jury. 
The  act  itself  in  some  parts  seems  to  require  this,  as  in  the 
provision  that  a  composition  may  be  set  aside  "if  upon  a 
trial,"-"  and  that  the  judge  may  revoke  a  discharge  "upon 
a  trial  if  it  shall  appear, "-^  h^q  ^^q  of  ^j^g  word  "trial" 
implying  a  jury. 

A  stranger  to  the  bankruptcy  proceeding  asserting  an  ad- 
verse title  to  property  claimed  by  the  trustee  is  entitled,  if 
the  matter  is  of  legal  cognizance,  to  a  jury  trial,-^  though,  if 
the  property  is  in  the  trustee's  possession,  the  proceeding  may 
be  in  the  court  of  bankruptcy  before  a  jury;^*^  and  a  jury 
trial  is  proper  to  try  issues  of  fact  raised  in  summary  pro- 
ceedings^^ to  determine  the  amount  of  rent  due  which  accrued 
while  the  assignee  occupied  the  premises  ;32  qj.  whether  a 
partnership  existed  which  might  be  submitted  instead  of 
charged  as  matter  of  law;^^  to  determine  if  a  creditor  took 
an  assignment  of  property  from  the  debtor  with  knowledge 
or  reason  to  know  of  latter 's  insolvency  ;3*  to  weigh  inad- 
equacy of  price  as  an  evidence  of  fraud  in  a  sale  by  an 
insolvent  vendor i^^  and,  in  the  court's  discretion,  but  not  as 
matter  of  right,  to  determine  the  amount  to  be  allowed  as  a 
fee  to  the  attorney  of  a  creditor  out  of  such  creditor's  dis- 
tributive share,^^  or  any  question  of  fact  arising  on  specifi- 
cations in  opposition  to  discharge  ;3"  or  if  a  creditor's  claim 

24  Sec.  2,  act  of  1898.  ■'52  Buckner  v.  Jewell.  14  N.  B.  R. 

25  Barton  V.Barbour,  104  U.S.  126.        286,  2  Woods  220,  F.  C.  3060. 

2c  In  re  Christensen,  101  F.  R.  33  in  re  Jelsh,  9  N.  B.  R.  412,  F. 
243,  4  A.  B.  R.  99.  C.  7257. 

27  Sec.  13,  act  of  1898.  3*  Ecker  v.  McAllister,  17  N.  B. 

28  Sec.  15,  act  of  1898.  R.  42. 

29  In  re  Baudouine,  101  F.  R.  35  Rhoads  v.  Blatt.  16  N.  B.  R. 
574,  3  A.  B.  R.  65.  32. 

30  In  re  Russell,  101  F.  R.  248,  3  so  in  re  Rude,  101  F.  R.  805,  4  A. 
A.  B.  R.  658.  B.  R.  319. 

31  Bill  V.  Beckwith.  2  N.  B.  R.  "7  Morgan  v.  Thornhill.  5  N.  B. 
82.  F.  C.  1406.  K.  1,  11  Wall.  65. 


328  THE    NATIONAL    BANKR[JPTCY    LAW.  Oil.  11) 

is  contested.^*  It  would  seem  that  a  jury  trial  should  be 
allowed  to  decide  if  debts  included  in  the  petition  to  make  up 
the  requisite  number  and  amount  of  creditors  are  fraudulent, 
since  it  is  a  question  of  fact,  and  on  it  depends  the  important 
question  whether  the  debtor  is  to  be  ruined  by  a  petition  filed 
by  trumped  up  creditors;  and  this  is  especially  true  if  the 
question  of  insolvency  is  involved,  as  a  man  is  only  insolvent 
when  the  aggregate  value  of  his  property  is  not  equal  to  his 
bona  fide  debts-^*^  The  right  of  trial  by  jury  extends  to  cases 
in  which  the  defendant  is  charged  with  committing  an  offense 
in  violation  of  the  act,^<*  but  not  to  contempts.^^ 

A  jury  trial  should  not  be  allowed  to  try  the  issues,  raised 
by  a  general  answer  and  a  denial  of  all  the  acts  of  bankruptcy 
alleged,  on  defendant's  demand,  after  a  demurrer  filed  by  such 
defendant  to  the  whole  petition  is  overruled  ;^-  nor  to  try  the 
question  of  preference  where  a  bankrupt  had  allowed  creditors 
to  take  goods  from  his  store  and  had  made  a  general  assign- 
ment for  the  benefit  of  creditors  just  preceding  his  bankruptcy 
and  no  explanations  of  such  acts  were  offered,  the  preference 
being  conclusively  presumed;'*-'^  nor  the  question  whether  a 
judgment  is  or  is  not  rendered  for  fraud,  that  being  a  question 
to  be  determined  by  an  inspection  of  the  record.^^ 

§  511.  Contempt.— The  constitutional  guaranty  of  the  right 
to  a  trial  by  jury  in  all  common  law  actions  is  not  applicable 
to  statutory  proceedings  in  which  the  court  exercises  the 
powers  of  a  special  tribunal,  as  when  acting  as  a  court  of  bank- 
ruptcy, and  such  court  has  power  and  jurisdiction,  on  the 
petition  of  the  trustee  without  a  jury  trial,  to  punish  a  bank- 
rupt or  others  for  failure  to  obey  an  order  requiring  him  to 
surrender  property  in  his  possession  belonging  to  his  estate  in 
bankruptcy,^^  and  the  like.  Punishment  for  contempt  is  a 
summary  proceeding  to  be  dealt  with  by  the  court  in  the  first 
instance  without  the  intervention  of  a  jury.'**' 

38  Ex  p.  Foster,  F.  C.  4959.  ^*  Flanagan  v.  Pearson,  14  N.  B. 

39  Consult  In  re  Rogers,  10  N.  B.     R.  37. 

R.  444.  F.  C.  12003.  ^■'  Ripon       Knitting      Wks.       v. 

40  Sec.  29.  act  of  1898;  Boyd  v.  Schreiber,  2  N.  B.  N.  R.  899,  101 
Glucklich,   116   F.   R.   131,   8   A.   B.     F.  R.  810,  4  A.  B.  R.  299. 

R.  393.  4c  Hendricks  v.  Fitzpatrick,  19  F. 

41  See  heading  Contempt,  post,  R.  810;  Cooley's  Const.  Lim.  6th 
§  511.  Ed.  389. 

42  In  re  Benham,  8  N.  B.  R.  94. 
4:i  In  re  Seeley,  19  N.  B.  R.  1,  F. 

C.  12628. 


CHAPTER  XX. 

OATHS    AND    AFFIRMATIONS. 

§512.   (20a)  Who  may   administer       515.  Form  of  oath. 

oaths.  516.  Administration    of    oath    by 

513.  In  general.  counsel. 

514.  Seal.  517.  b.  Affirmations. 

§  512.     '  (Sec.  20a)      Who   may    administer    oaths.— Oaths 

required  by  this  Act,  except  upon  hearings  in  court,  may  be 
administered  by  (1)  referees;  (2)  officers  authorized  to  ad- 
minister oaths  in  proceedings  before  the  courts  of  the  United 
States  or  under  the  laws  of  the  state  where  the  same  are  to 
be  taken;  and  (3)  diplomatic  or  consular  officers  of  the 
United  States  in  any  foreign  country. '^ 

§  513.  Who  may  administer  oaths— in  general.— In  addition 
to  the  referees,  and  officers  specified,  the  federal  courts,  their 
clerks,-  United  States  Commissioners^  and  Justices  of  the 
Peace,  and  Notaries  Public^  of  the  various  states  and  terri- 
tories and  of  the  District  of  Columbia-''  are  authorized  to 
administer  oaths,  take  affidavits  and  depositions.  Acknowl- 
edgments or  depositions  abroad  should  be  taken  before  diplo- 
matic or  consular  officers  of  the  United  States,  although  no 
provision  is  made  therefor  in  the  general  orders  prescribed  by 
the  Supreme  Court.*'  In  the  case  of  proof  of  debt  where  it 
appears  on  its  face  to  have  been  taken  by  a  proper  officer  and 

1  Analogous     provision,     Act    of  proper    register    or    commissioner. 

1867.     "Sec.  11.     .     .     .     And  shall  .     .     ." 

annex  to  his  petition  a  schedule,  2  u.  S.  Rev.  Stat.,  Sec.  725,  Act 

verified  by  oath  before  the  court,  of  May  28.  1896,  2  Supp.  R.  S.  486. 

or  before  a  register  in  bankruptcy  ••'  In  re  Sheppard,  1  N.  B.  R.  115; 

or  before  one  of  the  commissioners  F.   C.   53,   Act  of  May   28,   1896,   2 

of  the  circuit  court.     .     .     .  Supp.  R.  S.  486. 

"Sec.    22.     .     .     .     To    entitle    a  *  In   re   Bailey,   15   N.  B.   R.   48. 

claimant   against  the   estate   of   a  F.  C   727. 

bankrupt  to  have  his  demand   al-  ■'  U.  S.   Rev.   Stat.,   Sec.   1778 ;   1 

lowed,    it   must   be   verified    by    a  Supp.  R.  S.  123. 

deposition   in   writing  on   oath   or  «  In  re  Sugenheimer,  1  N.  B.  N. 

solemn      affirmation,      before     the  59,   135,   1  A.  B.  R.   425,  91  F.  R. 

744. 
329 


330  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  20 

to  be  correct  in  form  and  substance  the  court  has  no  discretion 
as  to  receiving  and  filing  it/ 

§  514.  Seal.— When  a  deposition  or  proof  of  debt  is  taken 
before  an  officer  authorized  to  administer  oaths,  he  must 
authenticate  the  same  by  his  seal  as  well  as  his  signature, 
provided  he  is  required  to  have  one  by  law,  and  a  seal  used 
in  common  with  others  will  not  answer.^  In  those  cases  where 
the  party  administering  the  oath  is  not  required  by  law  to 
have  a  seal,  his  signature  should  be  certified  to  by  the  proper 
officer.  The  requisites  of  the  seal  are  fixed  by  the  laws  of  the 
power  making  the  appointment  and  unless  expressly  required 
his  name  need  not  appear  on  it  since  it  is  the  seal  and  not  its 
composition  or  character  of  words  and  devices  which  raises 
the  presumption  of  the  official  character  of  which  the  courts 
take  notice,  the  presumption  being  that  it  is  the  seal  of  the 
person  it  purports  to  be  and  who  signed  the  jurat." 

§  515.  Form  of  oath— Venue.— The  form  of  oath  or  ac- 
knowledgment prescribed  by  the  general  orders  and  forms 
should  be  carefully  followed,  and  under  tha  former  law  pro- 
visions as  to  the  verification  of  the  petition  were  held  to  be 
matters  of  substance  to  be  strictly  followed  and  could  not  b(; 
dispensed  with,i^  though  the  form  of  oath  prescribed  for 
proving  debts  need  not  be  followed  in  voting  upon  resolutions 
for  compositions.^^ 

A  notary's  certificate  of  acknowledgment  is  sufficient  al- 
though it  contains  no  venue  where  his  official  character  appears 
in  his  certificate,  and  this  is  specially  true  in  the  case  of  a 
power  of  attorney  to  vote  as  a  proxy  at  a  creditor's  meeting, 
where  it  follows  the  form  prescribed  by  the  Supreme  Court.^^ 

§  516.     Administration  of    oath  by  counsel.— While  in  the 

strict  equity  practice  the  general  rule  is  that  affidavits  taken 
before  an  attorney  of  record  will  be  deemed  defective,  in  the 
majority  of  cases  it  is  held  to  apply  only  to  attorneys  of 
record,  that  is,  the  person  who  at  the  time  the  affidavit  was 

7  In  re  Merrick,  7  N.  B.  R.  459.         n  Ex  p.  Morris,  12  N.  B.  R.  170. 

8  In  re  Nebe,  11  N.  B.  R.  289,  P.  12  In  re  Henschel.  113  F.  R.  443. 
C.  10073.  ■  7  A.  B.  R.  662,  reversing  109  F.  R. 

!>  In  re  Phillips,  14  N.  B.  R.  219,  861,  6  A.  B.  R.  305;  Carpenter  v. 
F.  C.  11098.  Dexter,  8  Wall.  513. 

10  In  re  Keeler,  18  N.  B.  R.  10, 
F.  C.  7647. 


(  H. -iO  AFFIRMATIONS.  331 

taken  before  him  then  appeared  as  attorney  of  record  for  the 
litigant  in  whose  interest  the  affidavit  was  made, and,  therefore, 
would  not  be  applicable  to  an  affidavit  taken  preparatory  Lo 
the  commencement  of  proceedings,  as  in  the  swearing  to  a 
bankrupt's  petition  and' schedules ;^3  ^or  does  it  apply  to  the 
case  of  proof  of  debt  sworn  to  before  the  creditor's  attorney.^-* 
A  letter  of  attorney  appointing  three  substitutes  acknowledged 
before  one  of  them  would  be  irregular  as  to  the  one  taking 
the  acknowledgment,  but  would  doubtless  be  valid  as  to  the 
other  two.^-'"' 

i;  517.  'b.  Affirmations.— Any  person  conscientiously  op- 
'  posed  to  taking  an  oath  may,  in  lieu  thereof,  affirm.  Any 
'person  who  shall  affirm  falsely  shall  be  punished  as  for  the 
'making  of  a  false  oath.'^*"' 

13  In  re  Kindt,  2  N.  B.  N.  R.  306,  289,  F.  C.  10073;  in  re  Keyser.  9 
339,  98  F.  R.  403,  3  A.  B.  R.  443;      Ben.  224,  F.  C.  7748. 

contra,  In  re  Brumelkamp,  1  N.  B.  "  in  re  Sugenheimer,  1  N.  B.  N. 

N.  360,  2  A.  B.  R.  318,  95  F.  R.  814.  59,  135,  1  A.  B.  R.  425,  91  F.  R.  744. 

14  In  re  Kiiliball,  2  N.  B.  N.  R.  le  Analogous  provision,  Act  of 
46,  100  F.  R.  777,  4  A.  B.  R.  144;  1867.  "Sec.  48.  .  .  .  The  word 
McDonald  v.  Willis,  143  Mass.  542;  'oath'  shall  include  'affirmation.'  " 
contra,   In   re  Nebe,  11  N.  B.  R. 


CHAPTER  XXI. 


EVIDENCE. 


518. 

(21a)  Compulsory  attendance 

541. 

Right  to  counsel. 

of  witnesses. 

542. 

Fees  and  compensation. 

519. 

Application  for  examination; 

543. 

Evidence — Rule  as  to. 

who  may  make. 

544. 

In     opposition     to     dis- 

520. 

When  and  how  made. 

charge. 

521. 

Scope  of  examination. 

545. 

Of  fraud. 

522. 

Competency  of  witnesses. 

546. 

Books  of  account. 

523. 

Bankrupt  may  be  examined; 

547. 

Privileged  communications. 

nature  of  examination. 

548. 

Power  of  referee. 

524. 

Notice  and   summons. 

549. 

Revenue  law  establishes  rule 

525. 

Attendance     of    impris- 

of evidence. 

oned. 

550. 

b.  Rules  governing  taking  of 

526 

Time  of  examination. 

depositions. 

527. 

Manner  of  examination. 

551. 

Federal  law  governs. 

528. 

Subject  of  examination. 

552. 

Depositions  de  bene  esse. 

529. 

Answers  compulsory. 

553. 

Irregularity  or  defect  in 

530. 

When  not  subject  of. 

taking. 

531. 

Competent  witness. 

554. 

Original  exhibits. 

532. 

Admissibility      of      evi- 

555. 

c.  Notice    of    taking    deposi- 

dence. 

tions. 

533. 

Second  examination. 

556. 

By  attorneys. 

534. 

Effect  of  incomplete  ex- 

557. 

d.  Certified  copies  of  records. 

amination. 

558. 

Practice. 

535. 

Bankrupt's    wife — When    ex- 

559. 

e.  Copy   of   order   approving 

amined. 

trustee's  bond. 

536. 

Subject  of  examination. 

560. 

Evidence  of  title. 

537. 

Trustee    or    assignee,    exam- 

561. 

f.  Copy  of  order  of  composi- 

ination of. 

tion  or  discharge. 

538. 

Other  persons. 

562. 

Certificate    of    discharge    as 

539. 

Subject  of. 

evidence. 

540. 

Refusal  to  appear,  be  sworn 

563. 

g.  Order  confirming  composi- 

or testify — Penalty. 

tion — Evidence  of  title. 

§518.     '(Sec.  21a)      Compulsory  attendance  of  witnesses. — 

'A  conrt  of  bankruptcy  may,  upon  application  of  any  officer, 
'bankrupt,  or  creditor,  by  order  require  any  designated  person, 
'including  the  bankrupt  and  his  wife,  to  appear  in  court  or 
'before  a  referee  or  the  judfje  of  any  State  court,  to  be  ex- 
'amined  eoncerninjsr  the  acts,  conduct,  or  property  of  a  bank- 
'rupt  whose  estate  is  in  process  of  administration  under  this 
'Act:    Provided.  That  the  wife  may  be  examined  only  touching 

332 


Ch.  21 


EVIDENCE— EXAMINATION. 


333 


'business  transacted  by  her  or  to  which  she  is  a  party,  and 
'to  determine  the  fact  whether  she  has  transacted  or  been  a 
'party  to  any  business  of  the  bankrupt.'^ 


1  By  the  act  of  February  5,  1903, 
section  21a  of  the  act  of  1898  was 
amended  by  the  insertion  of  the 
matter  in  the  text  for  the  follow- 
ing: 'A  court  of  bankruptcy  may, 
upon  application  of  any  officer, 
'bankrupt,  or  creditor,  by  order  re- 
■quire  any  designated  person,  in- 
'cluding  the  bankrupt,  who  is  a 
'competent  witness  under  the  laws 
'of  the  state  in  which  the  proceed- 
'ings  are  pending,  to  appear  in 
'court  or  before  a  referee  or  the 
'judge  of  any  state  court,  to  be 
'examined  concerning  the  acts, 
'conduct,  or  property  of  a  bank- 
'rupt  whose  estate  is  in  process  of 
'administration  under  this  Act.' 

Analogous  provision  of  Act  of 
1867.  "Sec.  7.  .  .  .  Parties  and 
witnesses  summoned  before  a 
register  shall  be  bound  to  attend 
in  pursuance  of  such  summons  at 
the  place  and  time  designated 
therein,  and  shall  be  entitled  to 
protection,  and  be  liable  to  process 
of  contempt  in  like  manner  as 
parties  and  witnesses  are  now 
liable  thereto,  in  case  of  default 
in  attendance  under  any  writ  of 
subpoena.     .     .     . 

"Sec.  22.  .  .  .  The  court  may, 
on  the  application  of  the  assignee, 
or  of  any  creditor,  or  of  the  bank- 
rupt, or  without  any  application, 
examine  upon  oath  the  bankrupt, 
or  any  person  tendering  or  who 
has  made  proof  of  claims,  and  may 
summon  any  person  capable  of 
giving  evidence  concerning  such 
proof,  or  concerning  the  debt  to  be 
proved.     .     .     . 

"Sec.  26.  .  .  .  That  the  court 
may,  on  the  application  of  the  assig- 
nee in  bankruptcy,  or  of  any  credi- 


tor or  without  any  application,  at 
all  times  require  the  bankrupt,  up- 
on reasonable  notice,  to  attend  and 
submit  to  an  examination,  on  oath, 
upon   all   matters   relating  to   the 
disposal  or  condition  of  his  prop- 
erty,   to    his    trade     and     dealings 
with  others,  and  his  accounts  con- 
cerning the  same,  to  all  debts  due 
to  or  claims  from  him,  and  to  all 
other  matters  concerning  his  prop- 
erty and  estate  and  the  due  settle- 
ment   thereof    according    to    law, 
which     examination    shall     be     in 
writing,  and  shall  be  signed  by  the 
bankrupt  and  filed  with  the  other 
proceedings;     and   the  court  may, 
in  like  rnanner,  require  the  attend- 
ance  of   any   other   person     as    a 
witness,  and  if  such  person  shall 
fail  to  attend,  on  being  summoned 
thereto,  the  court  may  compel  his 
attendance  by  warrant  directed  to 
the   marshal,  commanding  him  to 
arrest  such  person  and  bring  him 
forthwith  before  the  court,  or  be- 
fore a  register  in  bankruptcy,  for 
examination   as   such   witness.     If 
the  bankrupt  is  imprisoned,  absent, 
or   disabled    from    attendance,    the 
court    may    order    him    to   be   pro- 
duced by  the  jailor,  or  any  officer 
in   whose   custody    he   may   be,   or 
may  direct  the  examination  to  be 
had,  taken,  and   certified   at  such 
time  and  place  and  in  such  man- 
ner as  the  court  may  deem  proper, 
and  with  like  effect  as  if  such  ex- 
amination had  been  had  in  court. 
The  bankrupt   shall   at  all  times, 
until  his  discharge,  be  subject  to 
the  order  of  the  court. 

"Sec.  38.  .  .  .  Evidence  or 
examinations  in  any  of  the  pro- 
ceedings  under   this   act   may   be 


334  THE    NATIONAL    BANKRUPTCY    LAW.  ClL  21 

§  519.     Application  for  examination— who  may  make.— This 

subdivision  expressly  provides  that  the  application  for  the 
examination  of  persons  in  bankruptcy  proceedings  may  bc 
made  by  the  bankrupt,  a  creditor  or  any  officer,  the  latter  term 
including  the  clerk,  marshal,  receiver,  referee  and  trustee,- 
and  also  gives  full  opportunity  to  all  parties  concerned  in 
bankruptcy  proceedings  to  obtain  desired  testimony.  If  the 
witnesses  cannot  appear  before  the  court  or  referee  having 
jurisdiction  of  the  case,  they  may  be  required  to  appear  before 
a  referee  or  judge  of  a  state  court  where  they  may  for  the 
time  be  residing.  During  the  examination  of  the  bankrupt  or 
other  proceedings,  the  referee  may  authorize  the  employment 
of  stenographers,  upon  the  application  of  the  trustee,  at  the 
expense  of  the  estate,  at  a  compensation  not  to  exceed  ten 
cents  per  folio  for  reporting  and  transcribing  the  testimony.-'- 
The  examination  of  a  witness  by  the  trustee  under  this  pro- 
vision is  taken  solely  for  his  information  to  enable  him  to  act 
intelligently  in  the  premises  and  to  take  such  steps  as  may 
be  necessary  for  the  protection  and  preservation  of  the  estat<', 
and  the  bankrupt's  attorney  has  no  right  to  take  part  therein.' 
A  receiver,  whether  appointed  under  the  express  grant  of 
authority  contained  in  the  bankrupt  law^  or  in  the  exercise  of 
the  general  equity  powers  possessed  by  the  court  of  bank- 
ruptcy^ to  take  charge  of  the  property  of  a  person  against 
whom  a  petition  in  bankruptcy  has  been  filed,^  or  any  person 
who  shows  that  he  is  actually  a  creditor  of  the  bankrupt,  as 
by  being  so  named  m  the  schedule,  or  by  any  other  satisfac- 

taken  before  the  court,  or  a  regis-  <  In  re  Cobb,  7  A.  B.  R.  104;  see 

ter  in  bankruptcy,  viva  voce  or  in  In  re  Fixar,  1  N.  B.  N.  568,  2  A.  B. 

writing,  before  a  commissioner  of  R.  822. 

the  circuit  court,  or  by  affidavit,  or  •'"'  In  re  Etheridge  Fur.  Co.,  92  F. 

on  commission,  and  the  court  may  R.  329,  1  N.  B.  N.  139,  1  A.  B.  R. 

direct  a  reference  to  a  register  in  112;    In  re  Sievers,   91  F.  R.  .366, 

bankruptcy,  or  other  suitable  per-  1  N.  B.  N.  68,  1  A.  B.  R.  117;  affd. 

son,  to  take  and  certify  such  ex-  in  Davis  v.  Bohle,  34  C.  C.  A.  372, 

amination,   and   may    compel    the  92  F.  R.  325. 

attendance  of  witnesses,  the   pro-  «  Blake  v.  Francis-Valentine  Co., 

duction  of  books  and  papers,  and  89  F.  R.  691,  1  N.  B.  N.  47,  1  A. 

the   giving   of   testimony    in    the  B.  R.  372;  see  Keenan  v.  Shannon, 

same  manner  as  in  suits  in  equity  F.  C.  7640;  Lansing  v.  Manton,  Id. 

in   the  circuit   court."  8077. 

2  Sec.  1  (18),  act  of  1898.  "In  re  Fixen  &  Co.,  1  N.  B.  N. 

3  Sec.  38,  act  of  1898.  568.  2  A.  B.  R.  822,  96  F.  R.  748. 


Oh. -^1  APPLICATION    P^OR    EXAMINATION.  335 

tory  evidence  is  entitled  to  au  ordv^'  for  the  examination  ol 
the  bankrupt,  although  he  has  not  formally  proved  his  claim,*^ 
or  one  creditor  has  already  examined  him;-*  or  objection  has 
been  made  to  the  claim  ;^*^  or  that  bankrupt  claims  an  offset 
thereto.^* 

A  creditor's  right  to  an  examination  is  suspended  when 
opposed  on  the  ground  that  a  resolution  of  composition  has 
been  confirmed  after  adoption  by  the  requisite  number  of  cred- 
itors.^- A  party  in  interest,  objecting  to  a  composition^^  or 
to  a  claim  proved  against  a  bankrupt's  estate,  is  entitled  in 
support  of  his  objection  to  examine  claimant  and  other  wit- 
nesses if  their  attendance  can  be  procured  without  embarrass- 
ing delay,  but  the  proceeding  should  not  be  suspended  to 
obtain  the  evidence  of  witnesses  beyond  the  court's  jurisdic- 
tion, unless  it  is  satisfied  that  the  objection  is  interposed  in 
good  faith  and  that  the  evidence  desired  is  of  substantial 
value  and  necessary  to  a  just  determination  of  the  case.^^ 

§  520. When  and  how  made.— The  application  for  an 

order  of  examination  should  be  addressed  to  the  court  of 
bankruptcy  or  to  the  referee,  and  as  a  rule  to  the  latter  after 
the  case  has  been  referred,^^  and  no  notice  thereof  need  be 
given.16  It  is  usually  made  by  petition  or  motion,  no  par- 
ticular form  being  prescribed  therefor,  and  need  not  be  in 
writing  or  under  oath,  nor  show  the  questions  to  be  asked,  or 
the  particular  facts  to  be  proven,  nor  any  cause  whatever,^ '^ 
nor  be  supported  by  the  referee 's  certificate  as  to  the  propriety 

sin  re  Jehu,  1  N.  B.  N.   509,   2  C.  14032;   s.  c.  17  N.  B.  R.  550,  F. 

A.  B.  R.  498,  94  F.  R.  638;    In  re  C.  14030. 

Walker,  1  N.  B.  N.  510,  3  A.  B.  R.         i3  In  re  Ash,  17  N.  B.  R.  19,  F. 

35,  96  F.  R.   550;     see  also  In  re  C.  571. 

Smith,  F.  C.  12977;  In  re  Murdock,         i*  In  re  Sumner,   101  F.  R.  224, 

Id.   9939;     In    re   Price,    91    F.    R.  2  N.  B.  N.  R.  681,  4  A.  B.  R.  123. 
635,  1  A.  B.  R.  419.  is  See.    38,    act    of    1898;     Form 

9  In  re  Lanier,  2  N,  B.  R.  59,  F.  No.  28. 

C.  8070.  16  In  re  Mclntyre,  1  N.  B.  R.  11, 

10  In  re  Belden,  4  N.  B.  R.  57,     1  Ben.  277,  F.  C.  8811. 

F.  C.  1241 ;  In  re  Ray,  1  N.  B.  R.  "  In  re  Fixen,  1  N.  B.  N.  568, 

203,  2  Ben.  53,  F.  C.  11589;  see  also  96  F.  R.  748.  2  A.  B.  R.  822;  In  re 

In   re   Schwab,   8  Ben.   353,  F.   C.  Howard,  1  N.  B.  N.  488,  95  F.  R. 

12499.  415,  2  A.  B.  R.  582;  In  re  McBrien, 

11  In  re  Kingsley,  7  N.  B.  R.  558,  2  N.  B.  R.  73,  2  Ben.  513.  F.  C. 
6  Ben.  300.  F.  C.  7818.  8665;   In  re  Lanier,  2  N.  B.  R.  59, 

12  In  re  Tifft,  18  N.  B.  R.  177,  F.  F.  C.  8070;   In  re  Solis,  4  N.  B.  R. 


336  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  31 

therefor  where  made  to  the  judge. i**  It  may  be  granted  al- 
though the  bankrupt  has  applied  for  his  discharge,^ ^  or  has 
already  obtained  his  discharge,-^  since  the  right  of  examination 
continues  for  one  year  thereafter,-'  but  not  after  the  expiration 
of  that  period,^-  although  this  right  may  be  lost  by  laches.^^ 
An  order  of  the  referee  for  the  examination,  reciting  that 
it  is  made  on  the  ai)plication  of  a  party  claiining  to  be  inter- 
ested in  the  estate,  is  in  correct  form  ;-*  and  is  in  the  nature 
of  a  summons.-^ 

§  521.  Scope  of  examination. — The  examinations  provided 
for  in  this  subdivision  are  intended  as  means  of  obtaining  full 
information-^'  touching  the  bankrupt's  estate,  in  order  that 
necessary  steps  may  be  taken  for  its  possession  and  preserva- 
tion.-'' A  large  latitude  of  inquiry  should  be  allowed  in  the 
examination  of  persons  closely  connected  with  the  bankrupt 
in  business  dealings,  or  otherwise,  for  the  purpose  of  discover- 
ing assets  and  unearthing  frauds,  upon  any  reasonable  surmise 
that  they  have  property  of  the  bankrupt.  The  examination 
is  largely  for  the  purpose  of  discovery,  and  its  extent  must  be 
determined  by  the  sound  judgment  of  the  officer  before  whom 
it  is  taken,  and  the  exercise  of  such  court's  discretion  is  not 
to  be  interfered  with  in  an  appellate  court  unless  clearly 
abused.  Unreasonable  discursiveness  may  be  checked  by 
making  the  examining  party  pay  for  it;  and,  if  plainly  frivo- 
lous, prolix,  to  gratify  malice  or  mere  curiosity,-^  it  should 

18,    F.    C.    13165;     contra,     In     re  -'*  Vetterlein,  4  N.  B.  R.  194,  F. 

Adams,  2  N.  B.  R.  33,  2  Ben.  503,  C.  16926. 

F.  C.  39.  -■'  In  re  Bellamy,  1  N.  B.  R.  64, 

i«  In  re  Brands,  2  N.  B.  R.  109,  1  Ben.  390,  F.  C.  1266. 

F.  C.  1813.  ■-"  In  re  Carley,  106  F.  R.  862,  5 

19  In  re  Soils,  4  N.  B.  R.  18,  F.  A.  B.  R.  554. 

C.  13165.  -"  In  re  Horgan,   2  N.  B.  N.  R. 

20  In   re  Westfall  Bros.  &  Co..  8     233,  3  A.  B.  R.  253,  98  F.  R.  414; 

A.  B.  R.  431.  affg.  2  N.  B.  N.  R.  53,  97  F.  R.  319; 
-'1  In  re  Peters,  1  N.  B.  N.  165,     In  re  Fixen  &  Co.,  1  N.  B.  N.  568, 

1  A.  B.  R.  248;    In  re  Heath,  7  N.     2  A.  B.  R.  822,  96  F.  R.  748;  In  re 

B.  R.  448,  F.  C.  6304;  In  re  West-     Earle,  F.  C.  4244;    In  re  Kreuger, 
fall,  supra;    see  In  re  Dean,  3  N.     Id.  7942;   In  re  Lathrop,  Id.  8106; 

B.  R.  188,  F.  C.  3701.  In    re   Stuyvesant   Bk.,    Id.   13582; 
22  In  re  Dole,  7  N.  B.  R.  538,  F.  In  re  Mendenhall.  Id.  9423. 

C.  3965.  2s  In  re  Salkey.  9  N.  B.  R.  107, 
2:!  In  re  Isador,  1  N.  B.  R.  33,  2  5  Biss.  486,  F.  C.  12252. 

Ben.  123,  F.  C.  7105. 


Ch.  21         EVIDENCE— EXAMINATION    OF    BANKRUPT.  337 

be  stopped.  Where  questionable  proceedings  are  disclosed, 
greater  latitude  should  be  allowed.-**  Unless  a  foundation  is 
laid  for  the  belief  that  property  of  the  bankrupt  was  withheld 
by  him  at  the  time  of  making  an  assignment  long  before  the 
bankruptcy  proceedings,  and  was  still  held  by  him  at  the 
time  of  the  enactment  of  the  bankruptcy  law,  an  inquiry  into 
the  circumstances  under  which  such  assignment  was  made  is 
not  material  or  proper  ;3'*  but  the  inquiry  is  not  limited  to 
facts  and  transactions  occurring  within  four  months  prior  to 
the  bankruptcy  and  may  be  directed  to  matters  anterior  to 
that  if  so  doing  will  throw  light  on  the  issues  involved.^^  He 
may  be  thoroughly  examined  as  to  property  acquired  during 
the  pendency  of  the  bankruptcy  proceedings  and  cannot  refuse 
to  give  information  as  to  such  suddenly  acquired  wealth.^^ 

§  522.  Competency  of  witnesses.— Before  the  amendment 
the  competency  of  witnesses,  other  than  the  bankrupt  who 
was  required^^  to  submit  to  examination,  was  determined  by 
the  laws  of  the  state  in  which  the  proceedings  were  pending, 
provided  the  state  laws  were  not  repugnant  to  the  constitution 
of  the  United  States,^^  but  now  any  officer,  bankrupt  or 
creditor,  including  the  bankrupt's  wife,  are  made  competent 
witnesses. 

§523.    Bankrupt's  examination— Incriminating  Evidence.— 

As  under  this  subdivision  the  bankrupt  is  a  competent  wit- 
ness, it  becomes  necessary  to  determine  how  far  he  may  be 
compelled  to  testify.  Lord  Eldon  tersely  said:  "It  is  one  of 
the  most  sacred  principles  in  the  law  of  this  country  that  no 
man  can  be  called  on  to  criminate  himself,  if  he  choose  to 
object  to  it;  but  I  have  always  understood  that  proposition 
to  admit  of  a  qualification  with  respect  to  the  jurisdiction  in 
bankruptcy,  because  a  bankrupt  cannot  refuse  to  discover  his 
estate  and  effects,  and  the  particulars  relating  to  them,  though 
in  the  course  of  giving  information  to  his  creditors  or  assignees 
of  what  his  property  consists,  that  information  may  tend  to 

29  In  re  Foerst,  1  N.  B.  N.  258,  ;ii  In  re  Brundage,  100  F.  R.  613, 

1  A.  B.  R.  259;    In  re  Horgan.  2  4  A.  B.  R.  47;  In  re  Pursell,  114  F. 

N.   B.  N.  R.   233,  3   A.  B.  R.   253,  R.  371,  8  A.  B.  R.  96. 

98  F.  R.  414;   In  re  Pittner,  2  N.  32  in  re  Walton,  1  N.  B.  N.  533. 

B.  N.  R.  915.  M  Sec.  7  (9),  act  of  1898. 

'■0  In  re  Hayden,  1  N.  B.  N.  265,  ■''*  In  re  Jefferson,  1  N.  B.  N.  558, 

1  A.  B.  R.  670,  96  F.  R.  199.  3  A.  B.  R.  174,  96  F.  R.  826. 


338  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  21 

show  he  has  property  which  he  has  not  got  according  to  law; 
as  in  the  case  of  smuggling  and  the  case  of  a  clergyman 
carrying  on  a  farm,  and  the  case  of  persons  having  the  pos- 
session of  gunpowder  in  unlicensed  places.  "^•'"^  On  the  same 
subject,  Erskine,  C.  J.,  said:  ''You  could  not  ask  a  man 
whether  he  had  not  robbed  another  of  a  sum  of  money, 
because,  if  he  had  so  robbed,  the  money  would  not  be  the 
property  of  the  assignees  but  of  the  party  robbed;  it  would 
be,  in  fact,  no  discovery  of  the  estate  of  the  bankrupt.  But 
I  can  see  no  objection  to  this  question  (unless  it  might  be 
regarded  as  a  chain  in  evidence  to  convict  the  party  of  rob- 
bery), namely,  Had  you  not,  on  such  a  day  and  at  such  a 
place,  one  hundred  pounds?  and,  according  to  the  answer,  you 
might  then  interrogate  what  he  had  done  with  it."^^  That 
was  the  rule  under  the  act  of  1867.^" 

Although  the  present  law  expressly  provides^^  that  "no 
testimony  given  by  the  bankrupt  shall  be  offered  in  evidence 
against  him  in  any  criminal  proceeding,"  he  cannot  be  com- 
pelled to  answer  any  question  propounded  on  such  examina- 
tion where  his  answer  would  tend  to  criminate  him,  for  the 
statutory  provision  is  not  so  broad  as  the  constitutional  privi- 
lege,^^ unless  the  question  asked  is  clearly  cross-examination 
on  matter  volunteered  in  his  petition  or  schedules  or  in  his 
previous  testimony.^^  Accordingly  as  this  statute  does  not 
afford  complete  immunity  from  prosecution  it  does  not  take 
away  the  witness'  privilege  of  refusing  to  answer  a  question 
having  a  tendency  to  expose  him  to  a  penal  liability.^^     While 

35Cossens,     Buck's     Cas.     531;  N.    361,    2    A.    B.    R.    298;    In    re 

Archb.  Bank.  277.  Sapiro,   1   N.   B.   N.   136,   92   F.   R. 

36  Heath,  2  Dea.  &  Ch.  214.  340,  1  A.  B.  R.  296;    In  re  Shera, 

37  In  re  Browley,  3  N.  B.  R.  169;  114  F.  R.  207,  7  A.  B.  R.  552;  In 
In  re  Richards,  4  N.  B.  R.  25,  F.  re  Henschel,  7  A.  B.  R.  207;  con- 
C.  11769;  In  re  Koch,  1  N.  B.  R.  tra  Mackel  v.  Rochester,  2  N.  B.  N. 
153,  F.  C.  7916.  R.  880,  4  A.  B.  R.  1,  102  F.  R.  314, 

38  Sec.  7,  act  of  1898.  In  re  Sapiro.  1  A.  B.  R.  296. 

39  Thorington  v.  Montgomery,  *o  In  re  Walsh,  2  N.  B.  N.  R. 
147  U.   S.  490;    In  re  Roser,   1  N.  1031,  104  F.  R.  518. 

B.  N.  469,  2  A.  B.  R.  755.  96  F.  R.         4i  In  re  Henschel.  supra;    In  re 

305;  In  re  Scott,  1  N.  B.  N.  265,  95  Feltstein,   4    A.   B.   R.    321;    In   re 

F.   R.   815,  1   A.  B.  R.   49;     In  re  Nachman,  114  F.  R.  995,  8  A.  B.  R. 

Gilbert,  2  N.  B.  N.  R.  378;    Coun-  180;  In  re  Shera,  114  F.  R.  297;  7 

selman    v.    Hitchcock.    142   U.    S.  A.  B.  R.  552;   In  re  Glassner,  8  A. 

547;  comp.  In  re  Hathorn,  1  N.  B.  B.  R.  184. 


Ch.  -21        EVIDENCE— EXAMINATION    OF    BANKRUPT.  339 

this  right  to  decline  to  testify  is  conceded,  yet  in  a  case  where 
it  clearly  appears  to  the  court  that  a  party  from  whom  evi- 
dence is  sought  contumaciously  or  mistakenly  refuses  to  testify 
or  furnish  documents  and  papers  which  cannot  possibly  injure 
him,  he  will  not  be  permitted  to  shield  himself  behind  the 
privilege.^-  While  this  privilege  might  under  circumstances 
possibl}'  extend  to  the  bankrupt's  books  and  papers,  yet  the 
courts  will  scrutinize  with  great  care  the  objection  to  their 
production  and  only  in  the  most  extreme  cases  will  the  bank- 
rupt be  excused  from  turning  the  same  over  to  the  trustee.'*^ 
A  bankrupt  may  be  ordered  before  a  referee  for  examination 
whenever  reasonably  required  by  creditors  to  establish  their 
objections  to  his  discharge ;  and  his  attendance  and  examina- 
tion on  the  return  of  the  order  to  show  cause,  which  is  required 
to  enable  creditors  to  form  their  specifications,  will  not  excuse 
him  from  undergoing  a  further  examination,  on  the  applica- 
tion of  objecting  creditors,  if  the  referee  shall  deem  it  reason- 
able and  necessary.*^  The  bankrupt  must  plead  his  privilege, 
if  any  privilege  legally  exist  to  the  particular  questions  pro- 
pounded, and  the  proper  rulings  can  then  be  made.^-'' 

§  524. Notice  and  summons.— At  least  ten  days'  notice 

by  mail  must  be  given  to  creditors  of  the  bankrupt's  examina- 
tion,^'' though  this  is  not  necessary  if  the  purpose  is  limited 
to  obtaining  information  to  make  up  the  schedules.'*" 

In  lieu  of  the  subpoena  or  summons  an  order  of  examination 
signed  by  the  referee*^  should  be  delivered  forthwith  to  the 
bankrupt,  proof  of  service  being  made  by  affidavit  or  written 
acceptance  of  the  bankrupt. 

§  525. Attendance  of  imprisoned  bankrupt.— An  im- 
prisoned bankrupt  may  be  produced  for  examination  on  a 
writ  of  habeas  corpus  ad  testificandum  made  by  a  judge,  pos- 
sibly by  a  referee.^^ 

42  In  re  Kanter.  117  F.  R.  356,  9         46  Sec.  58a.  act  of  1898. 

A.  B.  R.  104.  47  In  re  Franklin  Syndicate,  2  N. 

43  In  re  Franklin  Syndicate,  114  B.  N.  R.  522,  101  F.  R.  402,  4  A.  B. 
F.  R.  205;  In  re  Kanter,  supra;  R.  511;  In  re  Bromley,  3  N.  B.  R. 
see  People  v.  Swartz,  8  A.  B.  R.  169;  In  re  Salkey,  9  N.  B.  R.  107, 
487.  5    Biss.    486,    F.    C.    12252;      In    re 

44  In  re  Kingsley,  16  N.  B.  R.  Patterson,  1  N.  B.  R.  100,  1  Ben. 
301.  F.  C.  7820.  448,  F.  C.  10814. 

4-  In  re  Mellen,  2  N.  B.  N.  R.  69,         4.s  Form  No.  28. 
3  A.  B.  R.  226,  97  F.  R.  326.  4n  in   re   Gilbert.    2   N.    B.    N.    R. 

378. 


340  THE    NATIONAL    BANKRUPTCY    LAW.  CiL  31 

§  526. Time  of  examination.— A  person  duly  adjudged 

bankrupt  may  be  ordered  before  the  referee  for  examinatioii 
before  the  first  meeting  of  creditors  in  order  to  obtain  infor- 
mation to  make  up  the  schedules/''*^  or  at  the  first  meeting  of 
creditors^^  or  at  any  time  during  the  pendency  of  the  proceed- 
ings. If  the  application  therefor  is  made  on  the  return  day  of 
the  notice  of  the  debtor's  application  for  discharge,  and  no 
such  examination  has  been  previously  had,  to  avoid  delay, 
notice  of  the  application  for  discharge  should  contain  notice 
of  the  examination,  and  only  one  such  examination,  as  regards 
discharge,  should  ordinarily  be  had;  though  if  necessary  such 
examination  may  be  adjourned  from  time  to  time.^^  While 
bankrupt  may  be  examined  when^"*^  in  attendance  at  a  meeting 
to  show  cause  against  his  discharge,  a  new  examination  will 
not  be  allowed  on  the  filing  of  amended  specifications  when 
abundant  opportunity  has  been  previously  had.^*  This  right 
to  examine  bankrupt  extends  for  a  year  after  his  discharge  for 
the  purpose  of  ascertaining  whether  he  has  concealed  any  of 
his  property  from  his  trustee.-''^ 

The  bankrupt  may  be  examined  on  an  adjourned  day,  not- 
withstanding the  creditor  failed  to  appear  on  the  day  origi- 
nally fixed  for  the  examination,-''^  and,  if  he  has  been  examined 
at  several  adjourned  meetings,  further  examination  may  be 
refused/'^  The  register  was  not  allowed  under  the  former  act 
to  fix  beforehand  the  time  within  which  the  examination  of  the 

r>o  In  re  Franklin  Syndicate.  2  N.         •'•■<  In   re   Brandt,   2  N.  B.  R,  76, 

B.  N.  R.  522,  101  F.  R.  402,  4  A.  B.     F.   C.   1812. 

R.  511;    In  re  Bromley,  3  N.  B.  R.  •''*  In  re  Isador,  1  N.  B.  R.  33,  2 

169;  In  re  Salkey,  9  N.  B.  R.  107,  5  Ben.  123,  F.  C.  7105. 

Biss.  486,  F.  C.  12252 ;  In  re  Patter-  s.%  in  re  Westfall  Bros.  &  Co..  8 

son,  1  N.  B.  R.  100,  1  Ben.  448,  F.  A.  B.  R.  431;   In  re  Peters,  1  N.  B. 

C.  10814.  N.  165,  1  A.  B.  R.  248,  citing  In  re 
■-'1  Sec.  55b,  act  of  1898.  Heath,  7  N.  B.  R.  448,  F.  C.  6304; 
52  In  re  Price,  1  N.  B.  N.  131,  91  In  re  Soils,  3  N.  B.  R.  186,  4  Ben. 

F.  R.  635,   4  A.  B.  R.   419;     In   re  143,  F.  C.  13165;  and  holding  In  re 

Baum,   1   N.   B.   R.   7,   1   Ben.   274,  Dole,  7  N.  B.  R.  538,  F.  C.  39645; 

F.  C.  1116;   In  re  Brandt.  2  N.  B.  In  re  Jones,  6  N.  B.  R.  386,  F.  C. 

R.  109,  F.  C.  1813;   In  re  Mawson,  7449;  In  re  Dean,  3  N.  B.  R.  188. 

1  N.  B.  R.   271,  F.  C.  9320;    In  re  F.  C.  3701;  In  re  Witkowski,  10  N. 

Seckendorf,  1  N.  B.  R.  185,  2  Ben.  B.  R.  209,  F.  C.  17290,  inapplicable. 

462,  F.  C.  12,  600;   In  re  Vogel,  5  •'■'«  in  re  Robinson,  2  N.  B.  R.  162. 

N.   B.  R.   396,   F.   C.   16984;    In   re  F.  C.  11942. 

Sherwood,    1    N.    B.    R.    74,    F.    C.  "•-  In  re  Proby,  17  N.  B.  H.  175, 

12774.  F.  C.  11439. 


Ch.21      evidence— examination  of  bankrupt.  341 

debtor  must  be  concluded  without  regard  to  the  nature  of  the 
(iuestions  or  the  interest  in  which  they  were  propounded,'^*^ 
which  is  doubtless  true  under  the  present  law.  If  the  bank- 
rupt is  in  court  there  seems  to  be  no  reason  why  he  may  not 
be  examined  without  further  notice,^^  or  if  in  attendance  at  a 
meeting  to  show  cause  against  his  discharge,*^^  or  upon  sum- 
mons as  a  witness  in  respect  to  the  hearing  of  a  motion  to 
expunge  proof  of  claim,^^  or  where  it  is  desired  to  discover  his 
estate  in  proceedings  to  satisfy  a  lien  established  prior  to 
bankruptcy.*^^  There  is  no  reason  why  a  witness  may  not  be 
examined  prior  to  the  bankrupt.**^ 

§  527. Manner  of  examination.— The  examination  be- 
fore the  referee  may  be  conducted  by  the  party  in  person  or 
his  attorney,  by  direct  and  cross-examination  according  to  the 
mode  adopted  in  courts  of  law,  and  be  taken  down  in  writing 
by  him,  or  under  his  direction,  in  narrative  form,  unless  he 
decides  it  shall  be  by  question  and  answer ;  and,  when  com- 
pleted, shall  be  read  over  to  and  signed  by  the  witness  in  the 
referee's  presence,  who  shall  note  on  the  deposition  any  ques- 
tion objected  to,  with  his  decision  thereon.  The  court  has 
power  to  deal  with  the  costs  of  incompetent,  immaterial  or 
irrelevant  testimony.*^^  The  referee  may  authorize  the  employ- 
ment of  a  stenographer  for  the  purpose  of  taking  testimony^'^ 
and  depositions  so  taken  and  afterwards  transcribed  may  be 
suppressed  when  not  read  to  and  signed  by  the  witness.''*^  As 
to  whether  or  not  the  bankrupt  should  be  permitted  to  consult 
his  attorney  during  the  examination  rests  in  the  referee's  dis- 
cretion.*^'^ It  has  been  held  that  one  creditor  has  no  right  to 
intervene  and  interpose  objections  to  questions  put  in  the 
bourse  of  the  examination  by  another  creditor.^^ 

See  also  Referee's  powers  over  examination,  post  §679. 

§  528. Subject  of  examination.— The    escape    of    the 

58  In   re  Tifft.  17   N.   B.   R.   421,  '^i  In  re  Fredenberg,  1  N.  B.  R. 

F.  C.  14036.  34,  2  Ben.  133.  F.  C.  5075. 

5'j  In  re  Bromley,  supra.  "^  G.  0.  XVII;    In  re  Proby,  17 

•i«»  In   re   Brandt,   2  N.   B.  R.  76,  N.  B.  R.  175,  F.  C.  11439. 

F.  C.  1812.  >■■■'  Sec.  38  (5),  act  of  1898. 

til  Canby  v.  McLear,  13  N.  B.  R.  «6  In  re  Gary,  9  F.  R.  754. 

22,  F.  C.  2378.  «"  In  re  Lord,  3  N.  B.  R.  58.  F. 

62  Ex  p.  Tayler,  16  N.  B.  R.  40,  C.  8502. 

1  Hughes  617,  F.  C.  13773.  '•><  In  re  Stuyvesant  Bk.,  7  N.  B. 

R.  445,  6  Ben.  33.  F.  C.  13582. 


3  [2  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  21 

bankrupt's  examiuation  is  the  same  as  that  with  reference  to 
witnesses  generally  in  bankruptcy  proceedings.*'''  He  may  be 
examined  as  to  a  transaction  which  may  vest  in  him  an  equi- 
table interest  in  property  or  the  like  for  the  purpose  of  estab- 
lishing such  interest  ■/'^  or  as  to  valuable  property  acquired 
pending  the  bankruptcy  proceedings;  or  where  he  evidences 
the  possession  of  money,  he  may  be  examined  fully  as  to  it, 
though  generally  property  acquired  or  business  done  after  the 
filing  of  the  petition  in  bankruptcy  is  not  a  proper  subject  for 
examination,  provided  the  bankrupt  states  that  the  same  has 
no  connection  with  or  reference  to  his  estate  or  business  prior 
to  such  filing.'^^  The  examination  of  the  bankrupt  is  not  lim- 
ited to  facts  and  transactions  occurring  within  four  months  of 
the  bankruptcy,  but  may  be  directed  to  matters  anterior  to 
that  time  if  the  circumstances  in  question  will  throw  any  light 
upon  the  facts  or  issues  pertinent  to  the  proceedings.'^- 

§  529. Answers  compulsory.— The  bankrupt  must  an- 
swer all  proper  questions  on  his  examination,"^^  even  though 
they  were  asked  at  his  previous  examination  by  another 
creditor  ;'^*  or  if  asked  by  the  referee ■,''^'  or  as  to  whatever  may 
concern  parties  interested,  in  reference  to  his  debts,  business 
or  estate,"*''  but  he  need  not  answer  questions  that  on  their 
face  relate  to  property  that  does  not  belong  to  him,'^'^  though 
he  should  those  relating  to  his  wife's  property ."^^  He  need 
not  answer  when  his  response  might  be  incriminating,  though 
in  such  case,  his  discharge  may  be  denied  for  such  refusal. 
While  the  referee  cannot  compel  a  witness  to  answer,  he  can 
report  his  refusal  to  the  judge,  who  will  punish  for  contempt.'''^ 

69  See  ante,   §  521.  -■'  In  re  Holt,  3  N.  B.  R.  58,  F.  C. 

TO  In  re  Bonesteel.  2  N.  B.  R.  106,  6646. 

F.  C.  1628.  ■*  In   re  Vogel,   5   N.   B.   R.   393, 

71  In  re  Walton,  1  N.  B.  N.  533;  F.  C.  13984. 

In   re  McBrlen,   3   N.    B.   R.   90,   3  ^5  in  re  Brundage,  100  F.  R.  613, 

Ben.  481,  F.  C.  8666;   In  re  Rosen-  4  A.  B.  R.  47. 

field,  1  N.  B.  R.  60,  F.  C.  12059.  ^e  in  re  Jay  Cooke,  10  N.  B.  R. 

72  In  re  Brundage,  100  F.  R.  613;  126,  F.  C.  3168. 

4  A.  B.  R.  47;  see  also  In  re  Hay-  '~  In  re  Van  Seryl,  1  N.  B.  R. 
den,  1  N.  B.  N.  265.  1  A.  B.  R.  670,  193,  F.  C.  16880. 

96  F.  R.  199 ;  In  re  Headley,  2  N.  78  in  re  Craig,  4  N.  B.  R.  50,  F. 
B.  N.  R.  250,  3  A.  B.  R.  272,  97  C.  3323;  In  re  Clark,  4  N.  B.  R. 
F.   R.   765;    contra.   In  re  Barker,     70,  F.  C.  2805. 

2  N.  B.  N.  R.  353.  79  Sec.   41b.   act  of  1898;     In   re 

Koch,  1  N.  B.  R.  153,  F.  C.  4916. 


Cu.  21        EVIDENCE— EXAMINATION    OF    BANKRUPT.  343 

§  530. When  not  subject  of.— An  examination  of  bank- 
rupt should  not  be  allowed  when  it  is  sought  for  the  purpose 
of  gratifying  curiosity,  or  prying  into  the  business  of  the 
debtor,  or  any  purpose  other  than  the  furtherance  of  justice 
and  the  protection  of  the  rights  of  creditors  ;^o  nor  on  the  ap- 
plication of  creditors  opposing  a  discharge,  after  previous 
full  examination,  unless  the  first  examination  was  elusive  or 
deficient  in  material  and  specified  particulars.^^ 

§  531. Competent  witness.— The  bankrupt  is  a  com- 
petent witness  as  to  all  matters  relating  to  his  estate,  and  no 
objection  can  lie  to  his  testimony  save  as  to  its  credibility,^- 
and  if  disposed  to  comply  with  the  law  and  candidly  account 
for  his  property  he  should  have  fair  consideration;  but,  if  he 
is  contumacious  and  fails  to  testify  fully,  fairly  and  truth- 
fully, his  testimony  should  only  be  accepted  when  corrobo- 
rated by  other  evidence,  and,  if  at  any  point  found  unworthy 
of  credit,  may  be  rejected  altogether.*^  The  bankrupt  is  not, 
however,  a  competent  witness  in  a  criminal  proceeding  against 
himself.*^ 

§  532. Admissibility  of    evidence  of.— A  letter    from 

debtor  admitting  his  inability  to  pay  his  debts,*^  or  his  letters 
written  to  third  parties  admitting  payment  of  certain  claims 
to  the  prejudice  of  others,^^  or  his  admission  before  bank- 
ruptcy in  support  of  a  set-off  pleaded  by  defendant  in  an  action 
by  a  trustee  to  foreclose  a  mortgage  given  to  the  bankrupt,*'^ 
has  been  held  admissible.  But  a  copy  of  bankrupt's  statement 
to  a  commercial  agency  cannot  be  admitted  to  prove  conceal- 
ment of  assets,^^  nor  will  his  statement  as  to  his  condition  at 
the  time  of  borrowing  money  be  admissible  to  show  that  his 
creditors  had  reasonable  cause  to  believe  him  insolvent  on  a 

80  In  re  Salkey,  9  N.  B.  R.  107,  Kamsler,  2  N.  B.  N.  R.  97,  97  F.  R. 
5   Biss.  486,  F.  C.  12252.  194. 

81  In  re  Frisbie,  13  N.  B.  R.  349.  «<  U.  S.  v.  Black,  12  N.  B.  R.  340, 
F.   C.  5131;    In  re  Frizzelle,   5   N.  1  Hask.  570,  F.  C.  14602. 

B.  R.  119,  F.  C.  5132;  In  re  Isador,  ss  in  re  Lange,  2  N.  B.  N.  R.  85. 

1   N.   B.  R.   33,   2  Ben.   123,   F.   C.  97  F.  R.  197,  3  A.  B.  R.  231. 

7105.  •*«  In  re  Hatje.  12  N.  B.  R.  548. 

82  In  re  Campbell,  17  N.  B.  R.  4,  6  Biss.  436,  F.  C.  6215. 

3  Hughes  276,  F.  C.  2348.  "  Von  Sachs  v.  Kretz,  19  B.  R. 

83  In  re  Tudor,  2  N.  B.  N.  R.  168,     83. 

100  F.  R.  796,  4  A.  B.  R.  78;  In  re         ss  In  re  Hunter,   2  N.  B.  N.  R. 

490. 


344  THE    NATIONAL    BANKRUPTCY    LAW.  Cu.  ll 

subsequent  day.^^  The  testimony  of  bankrupt  as  to  the  num- 
ber of  his  creditors  will  be  accepted.^"  It  has  been  held  that 
testimony  taken  at  any  time  during  the  proceedings  may  be 
admitted  in  subsequent  proceedings,"^  but  this  would  not  bo 
true  where  the  proceedings  in  which  the  testimony  was  taken 
w^ere  dismissed,  unless  it  be  by  stipulation  of  the  parties.-^^ 

§533. Second  examination.— Since  the  law  places  no 

limit  upon  the  number  of  times  a  witness  or  the  bankrupt  may 
be  examined,  the  frequency  rests  in  the  discretion  of  the  officer 
to  whom  application  is  made,  so  that  although  a  witness  may 
be  examined  by  one  creditor,  he  may  still  be  examined  by 
another.^3  Where  an  examination  has  terminated,  there  would 
seem  to  be  no  reason  why  a  new  application  might  not  be 
made,^*  though  cause  therefor  would  have  to  be  shown."'^ 

§  534. Effect  of  incomplete  examination.— Whether  an 

incomplete  examination  of  banlvjrupt  can  be  used  against  him 
is  not  a  question  arising  in  the  course  of  his  examination,  and 
must  be  decided  by  the  judge  before  whom  the  examination 
may  be  offered."^  No  vote  can  be  taken  on  a  composition,  if 
a  creditor  objects,  until  bankrupt's  examination  is  complete, 
and  which  should  be  confined  to  a  true  exhibit  of  his  aflPairs."^ 

§  535.  Bankrupt's  wife  —  When  examined.  —  Under  the 
amendment  of  1903,  the  Avife  may  be  examined  only  touching 
business  transacted  by  her  or  to  which  she  is  a  party,  and 
also  for  the  purpose  of  determining  the  fact  whether  she  has 
transacted  or  been  a  party  to  any  business  of  the  bankrupt. 
Under  the  act  of  1867,  for  good  cause  shown,  the  wife  of  any 
bankrupt  might  be  examined  as  a  witness  and,  if  she  failed  to 
attend  when  ordered,  he  was  refused  a  discharge,  unless  he 
proved  his  inability  to  secure  her  attendance,  while  she  was 
liable  to  punishment  for  contempt.     In  the  event  she  did  ap- 

89  Goodrich  v.  Wilson,   14  N.  B.  »*  In  re  Van  Tuyl,  2  N.  B.  R.  35, 

R.  555.  F.  C.  1688L 

so  Clinton  v.  Mayo,  12  N.  B.  R.  o-  In   re  Gilbert,   3   N.   B.   R.  37, 

30,  F.  C.  2899.  1    Lowell    340,    F.    C.    5410;    In   re 

91  In  re  Bard,  108  F.  R.  208.  5  Isador,  1  N.  B.  R.  33,  2  Ben.  123, 
A.  B.  R.  810.  F.  C.  7105. 

92  In  re  Rosenberg,  116  F.  R.  96  in  re  Noyes,  11  N.  B.  R.  Ill, 
402.  2  Lowell  352,  F.  C.  10370. 

93  In  re  Adams,  2  N.  B.  R.  92,  97  in  re  Holmes,  12  N.  B.  R.  86, 
3  Ben.  7.  F.  C.  40;   In  re  Vogel,  5  8  Ben.  74,  F.  C.  6632. 

N.  B.  R.  393,  F.  C.  16984. 


Ch.  21  EVIDENCE— EXAMINATIONS.  345 

pear  and  was  examined,  she  was  not  at  liberty  to  decline  to 
answer  because  the  matters  inquired  of  were  her  private  busi- 
ness.' Prior  to  the  amendment  of  1903  there  was  no 
specific  provision  requirincc  or  permitting  a  wife  to  attend  as 
a  witness  either  for  or  against  her  husband  in  any  bankruptcy 
proceeding,  but  the  matter  was  to  be  determined  by  the  laws 
of  the  state  in  which  the  proceedings  were  pending,-  thus  in 
^Yisconsin,3  Washington,^  Tennessee^  and  Missouri,*^  among 
other  states,  she  was  held  in  contempt  for  refusing  to  testify^ 

§  536. Subject  of— Examination.— The  evident  intent 

of  the  amendment  of  1903,  is  to  restrict  the  scope  of  the  ex- 
amination to  business  relations  of  the  wife  with  the  bankrupt, 
though  the  law  as  worded  is  not  clear  upon  this  point. 

§  537.  Examination  of  trustee  or  assignee.— Under  the  act 
of  1867,  an  assignee  might  be  subpoenaed  and  required  to  tes- 
tify in  the  same  manner  as  any  other  witness,  but  he  was  not 
subject,  as  of  course,  to  an  examination  by  any  creditor  when- 
ever the  latter  might  desire  it,  but  was  protected  from  un- 
necessary annoyance  by  the  refusal  of  an  application  for  his 
examination,  unless  upon  some  issue  regularly  referred  to  the 

1  In  re  Anderson,  23  F.  R.  482.  lee  v.  Fenwick,  103  Mo.  420 ;  Mc- 
s.  c.  9  N.  B.  R.  360,  2  Hughes  378,     Kee  v.  Spiro,  107  Mo.  452. 

F.   C.  351 ;   In  re  Campbell,  17  N.  ^  Under     the     act     before     the 

B.  R.  4,  3  Hughes  276.  F.  C.  2348;  amendment   of   1903,    it    was    held 

In   re   Woodford,   3   N.   B.  R.   113,  that  where  the  wife  was  a  creditor 

4  Ben.  9,  F.  C.  18029 ;  In  re  Bellis,  of   the    bankrupt   and    a    party   to 

3  N.   B.   R.   65,   F.  C.   1276;    In   re  the  proceedings,  though  she  might 

Craig,  4  N.  B.  R.  50,  F.  C.  3323';  not   be    compelled   as   the   wife   of 

In   re  Van   Tuyl,   2   N.  B.  R.   177,  the  bankrupt  to  testify  as  to  the 

3  Ben.   237,  F.   C.  16879.  property   obtained    directly    or   in- 

2  In  re  Jefferson,  1  N.  B.  N.  558,  directly  from  her  husband,  as  a 
3  A.  B.  R.  174,  96  F.  R.  826.  creditor    she   could     be     fully    ex- 

3  In  re  Fowler,  1  N.  B.  N.  265,  amined  as  to  her  claim  (In  re 
93  F.  R.  417,  A.  B.  R.  555;  In  re  Post,  1  N.  B.  N.  527;  In  re  Gil- 
Mayer.  3  A.  B.  R.  222,  97  F.  R.  bert,  3  N.  B.  R.  37,  1  Lowell  340, 
328.  F.  C.  5410;    In  re  Richards,  17  N. 

4  In  re  Jefferson,  1  N.  B.  N.  558,  B.  R.  562,  F.  C.  11770).  If  she 
3  A.  B.  R.  174,  96  F.  R.  826.  were   not   a   creditor    or    did     not 

5  In  re  Griffith,  1  N.  B.  N.  546.  file   any   claim    against  the   estate 

6  In  re  Cohn,  104  F.  R.  328,  con-  or  was  not  competent  as  a  wit- 
tra.  In  re  Lynch,  1  N.  B.  N.  182,  ness  under  the  laws  of  the  state. 
1  A.  B.  R.  245;  citing,  Steffen  v.  the  proper  proceeding  was  for  the 
Bower,  70  Mo.  399;  Landy  v.  Kan-  trustee  to  file  a  bill  of  discovery, 
sas  City,  58  Mo.  App.  141;  Brown-  under   which   she   could    be    com- 


346  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  21 

register. ^  The  trustee  is  a  competent  witness  under  the  present 
law  and  the  foregoing  rule  with  reference  to  the  course  of  the 
register's  examination  would  doubtless  now  apply  to  the 
trustee  with  equal  propriety.  A  trustee  might  decline  to  an- 
swer with  reference  to  a  bankrupt's  estate  where  his  answer 
may  tend  to  incriminate  him.^ 

§  538.  Other  persons  examined.— Under  the  law  as  enacted 
in  1898,  any  person  who  was  a  competent  witness  under  the 
laws  of  the  state  in  which  the  petition  was  pending  might  be 
examined  in  the  bankruptcy  proceedings;  and  an  order  made 
by  a  referee  requiring  such  person  to  appear  and  be  exam- 
ined as  a  witness  concerning  the  acts,  conduct  and  property 
of  the  bankrupt,  was  valid  without  a  formal  application  show- 
ing what  questions  were  to  be  asked  upon  the  examination,  or 
as  to  what  particular  facts  the  witness  was  to  be  interrogated, 
the  simple  application  or  demand  for  such  an  order  being  all 
that  was  required  to  support  it.^^  The  trustee  may  examine 
a  receiver  appointed  by  a  state  eourt,^^  a  trustee  in  insolvency 
appointed  more  than  four  months  prior  to  bankruptcy^-  or 
any  competent  witness  concerning  the  bankrupt's  acts,  con- 
duct or  property,^ ^  although  he  may  be  a  party  to  the  pro- 
ceedings instituted  or  to  be  instituted  by  the  trustee  to  set 
aside  liens  procured  by  him,  or  preferential  transfers  made 
to  him.i* 

§  539.  Subject  of  examination.— The  trustee  may  examine  a 
creditor,  whose  claim  he  disputes,  concerning  the  extent  and 
nature  of  the  bankrupt's  indebtedness  to  him;i^  or  as  to  the 
location,  situation  and  condition  of  the  bankrupt's  property, 
and  its  fraudulent  disposition  ;i^   and,  if    he    has    purchased 

pelled  to  testify  when  the  purpose  Blake,  2  N.  B.  R.  10,  F.  C.  1492. 

was  to  secure  her  evidence  as  to  n  In  re  Hulse,  7  Ben.  40,  F.  C. 

property  fraudulently  conveyed  to  9864. 

her  (In  re  Fowler,  1  N.  B.  N.  265,  12  in  re  Pursell,   114   F.   K.   371, 

93  F.  R.  417,  1  A.  B.  R.  555;  In  re  8  A.  B.  R.  96. 

Post,  1  N.  B.  N.  527).  i^  in  re  Cliffe.  97  F.  R.  540,  3  A. 

8  In  re  Smith,  14  N.  B.  R.  432,  B.  R.   257. 

F.  C.   12988;    contra.  In  re  Hicks,  i*  In  re  Feinberg,  2  N.  B.  R.  137, 

19  N.  B.  R.  449,  F.  C.  6457.  3  Ben.  162,  F.  C.  4716. 

0  In  re  Smith,  112  F.  R.   509,  7  is  in  re  Cliffe,  97  F.  R.  540,  3  A. 

A.  B.  R.  213.  B.  R.  257. 

10  In  re  Howard,  1  N.  B.  N.  488,  10  in  re  Blake,  2  N.  B.  R.  2,  F. 

2  A.  B.  R.  582,  95  F.  R.  415;  In  re  C.  1492. 


Cn.  21  EVIDENCE.  347 

claims  against  the  bankrupt's  estate,  he  is  bound  on  pain  of 
contempt  to  state  where  he  obtained  the  money  paid  therefor, 
though  he  may  say  it  did  not  come  from  the  bankrupt.^ '^  He 
may  be  examined  as  to  bankrupt's  riglit  and  possible  interest 
in  property  at  the  time  of  filing  his  petition  in  bankruptcy;^* 
but  he  is  not  compelled  to  testify  for  his  surety  on  a  note  in  a 
suit  by  an  administrator  against  him  as  principal  and  his 
surety,^ ^  nor  can  he  be  compelled  to  testify  as  to  his  private 
affairs  which  have  no  relation  to  the  acts,  conduct  or  property 
of  the  bankrupt.^o 

§  540.  Refusal  to  appear,  be  sworn  or  testify— Penalty.— 
The  refusal  of  one  to  appear  after  being  subpoenaed,  to  bo 
sworn  after  appearing,^!  or  to  testify  after  being  sworn  ren- 
ders such  an  one  liable  to  contempt  proceedings  and  punish- 
ment ;22  since  courts  of  bankruptcy  may  punish  contempts 
whether  committed  by  failing  to  obey  their  lawful  orders  or 
those  of  referees  ;-^  but  a  witness  cannot  be  required  to  at- 
tend at  a  place  outside  of  the  state  of  his  residence  or  more 
than  a  hundred  miles  therefrom.  The  failure  of  a  party  to 
produce  a  witness  within  his  power  raises  a  presumption  that 
the  testimony  would  be  unfavorable.^-^  See  also  Contempts, 
post,  §§  712-720. 

§  541.  Right  to  counsel.— The  bankrupt,  or  a  creditor,  is 
entitled  to  be  represented  by  an  attorney,  but  not  a  mere  wit- 
ness undergoing  examination  unless  he  is  made  a  party  to  a 
new  collateral  proceeding  by  being  cited  to  answer  for  an  al- 
leged contempt.-^  An  attorney  at  law  appearing  before  a 
referee  is  to  be  recognized  unless  put  to  the  proof  by  a  rule 
therefor ;  all  others  must  produce  formal  powers  of  attorney  f^ 

IT  In  re  Lathrop,  4  N.  B.  R.  93,  24  in  re  Kellogg,   113  F.  R.  120, 

F.  C.  8106.  7  A.   B.   R.   623;    Graves  v.   U.   S., 

18  In  re  Dole,  7  N.  B.  R.  538,  F.  150  U.  S.  118;  Runkle  v.  Burnham, 
C.  3965.  153  U.  S.  217. 

19  Jenks  V.  Opp,  12  N.  B.  K.  19.  25  in  re  Howard,  1  N.  B.  N.  488. 

20  In  re  Carley,  106  F.  R.  862,  5  2  A.  B.  R.  582,  95  F.  R.  415;  In  re 
A.  B.  R.  554.  Comstock,  13  N.  B.  R.  193,  3  Sawy. 

21  In  re  Scott,  1  N.  B.  N.  161,  1  517,  F.  C.  3080;  In  re  Stuyvesant 
A.  B.  R.  49,  95  F.  R.  815.  Bk.,  6  Ben.  33.  F.  C.  13582;   In  re 

22  Sec.  41,  act  of  1898.  Cobb.  7  A.  B.  R.  104;  In  re  Freden- 
2s  Sees.   2    (13),    2    (16),   act  of     burg,  1  N.  B.  R.  268. 

1898;  In  re  Howard,  1  N.  B.  N.  20  in  re  Scott,  15  N.  B.  R.  73, 
488,  2  A.  B.  R.  582,  95  F.  R.  415.         F.  C.   12519. 


348  THE    NATIONAL    BANKRUPTCY    LAW.  Cn.  21 

but  which  need  not  he  acknowledged.^"  Whether  the  bank- 
rupt shall  be  allowed,  during-  his  examination,  to  consult  with 
his  counsel  must  be  determined  by  the  referee  according  to  the 
circumstances  of  the  case,-'*  and  of  which  the  referee  should  be 
the  judge.29  He  may  be  cross-examined  by  his  own  counsel  ;3" 
or  may  appear  as  a  witness  in  his  own  behalf  and  be  so  exam- 
ined.^^ 

\  §  542.  Fees  and  compensation.— A  bankrupt  when  ordered 
to  appear  for  examination  in  reference  to  his  bankruptcy  is 
not  entitled  to  any  fees  or  compensation  therefor  ;32  nor  will 
petitioning  creditors  be  reimbursed  for  attorneys'  fees  on  such 
examinations  after  the  trustee  is  appointed,  such  services  be- 
ing either  for  the  trustee  or  the  creditors  individually.^^ 
Where  an  examination  is  unreasonably  discursive,  the  party 
making  it  may  be  required  to  pay  the  expense  of  the  same.^* 

When  the  wife  of  a  bankrupt  is  a  competent  witness  in 
bankruptcy  proceedings,  she  is  entitled  to  mileage  and  witness 
fees  the  same  as  any  other  witness,  payment  thereof  for  at 
least  one  day's  attendance  being  necessary  at  the  time  of  ser- 
vice of  the  order  for  her  examination  to  insure  her  attend- 
ance.^^ 

See  also  as  to  fees,  post,  §  717. 

§  543.  Evidence— Rule  as  to.— The  general  rule  applies 
with  reference  to  the  weight  to  be  given  to  the  evidence  of  the 
bankrupt  and  others,  and  a  witness  may  be  as  thoroughly  dis- 
credited by  the  inherent  improbability  of  his  testimony  as  b}^ 
the  direct  testimony  of  other  witnesses.^^  The  general  rule 
that  the  proofs  must  agree  with  the  allegations  applies  equally 
to  proceedings  in  bankruptcy.^'^ 

27  In  re  Powell,  2  N.  B.  R.  17,  F.  C.  8907;  In  re  O'Kell,  1  N.  B.  R. 
F.  C.  11354.  52,  F.  C.  10474. 

28  In  re  Lord,  3  N.  B.  R.  58.  F.  as  in  re  Silverman.  2  N.  B.  N.  R. 
C.  8502;    In  re  Collins,  1  N.  B.  R.  18,  3  A.  B.  R.  97,  F.  R.  325. 

153,  P.  C.  3008.  34  In  re  Foerst,  1  N.  B.  N.  258. 

-'!»  In  re  Tanner,   1   N.   B.  R.  59,  1  A.  B.  R.  259,  93  F.  R.  190. 

1  Lowell  215,  F.  C.  13745.  ss  in  re  Post,  1  N.  B.  N.  527;   In 

30  In  re  Leachman,  1  N.  B.  R.  re  Griffin,  1  N.  B.  R.  83,  2  Ben.  209, 
91,  F.  C.  8157.  F.  C.  5810. 

31  In  re  Witkowski,  10  N.  B.  R.  36  in  re  Leslie,  119  F.  R.  406. 
209,  F.  C.  17920.          •  37  in    re   Musto,    2   N.    B.    N.   R. 

32  In  re  McNair.   2  N.  B.  R.  77,  577;   In  re  Devoe,  2  N.  B.  R.  27,  1 

Lowell  251,  F.  C.  3843. 


Ch. -.'1  EVIDENCE.  349 

§544. In  opposition  to  discharge.— While  the  testi- 
mony of  the  baDkrupt  cannot  be  offered  against  him  in  a  crim- 
inal proceeding,  yet  if  intentionally  false  it  would  be  grounds 
for  refusing  a  discharge.^^  Evidence  cannot  be  introduced  by 
objecting  creditors  without  first  having  filed  a  specification  of 
objections,  which  must  charge  a  scienter  and  all  the  essential 
facts  though  not  necessarily  with  the  technical  certainty  re- 
quired in  an  indictment.  The  referee  should  not  disregard 
such  specification  but  should  confine  the  evidence  to  the  ma- 
terial facts  alleged  therein.^^  The  evidence  of  creditors  and 
others  taken  at  examinations  restricted  to  no  issues  and  gov- 
erned by  no  precise  rules  of  evidence  cannot  be  applied  as 
proof  to  the  exceedingly  definite  issues  presented  by  specifi- 
cations in  opposition  to  a  discharge,  such  examinations  being 
largely  for  purpose  of  discovery,  while  the  filing  of  specifica- 
tions in  opposition  to  a  discharge  is  equivalent  to  the  com- 
mencement of  an  action  against  the  bankrupt  by  the  objectors, 
and  the  principles  of  procedure  must  be  logically  applied  to 
that  fact.-'^ 

It  has  been  held  that  testimony  given  by  the  bankrupt  on 
a  hearing  under  a  state  insolvency  law  cannot  be  offered  to 
prove  that  he  swore  falsely  though  his  counsel  had  agreed 
that  it  might  be  used  before  the  referee  with  the  same  force 
and  eft'ect  as  if  taken  before  him,  on  the  ground  that  the  bank- 
rupt took  no  oath  before  the  referee  that  his  former  testimony 
was  true,  and  that  therefore  he  was  not  bound  by  his  counsel 's 
stipulation.^ 2  r^-^^  affidavit  of  a  former  partner  of  the 
bankrupt,  contradicting  the  recitals  in  an  agreement 
signed  by  the  affiant,  may  be  used  to  show  that  the  recitals 
are    designed   to    cover    a   fraudulent    concealment    by    the 

3s  In   re   Leslie.   119   F.   R.   406;  In  re  Hixen,  1  N.  B.  N.  326.  556; 

In  re  Gaylord,  112  F.  R.  668,  7  A.  1  A.   B.   R.  610,  93  F.  R.  440;    In 

B.  R.  1.  re  Holman,  1  N.  B.  N.  552,  1  A.  B. 

39  In  re  McGivin,  2  N.  B.  N.  R.  R.  600,  92  F.  R.  512;  In  re  Kaiser, 

877,  4  A.  B.  R.  459,  102  F.  R.  743;  2  N.  B.  N.  R.  123,  99  F.  R.  689. 
In   re  Frice,   96  F.   R.  611 ;    In   re         -to  See  in  re  Penney,  2  N.  B.  N.  R. 

Adams,  2  N.  B.  N.  R.  1034,  104  F.  1001;    In  re  Marah.  2  N.  B.  N.  R. 

R.  72;   In  re  Marsh,  2  N.  B.  N.  K.  649;    Creditors   v.    Williams,   4    N. 

649;    In    re   Hirsh,    96   F.    R.    468.  B.  R.  187,  F.  C.  3379. 
2   A.   B.   R.   715;    In   re  Smith,   16         42  in  re  Goldsmith,  2  N.  B.  N.  R. 

F.  R.  465;   In  re  Fry,  9  F.  R.  376;  1013,  101  F.  R.  570,  4  A.  B.  R.  234. 


350  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  '^1 

bankrupt  of  an  interest  in  his  former  business.'*^  While 
evasive  and  disingenuous  testimony  by  a  bankrupt  is  not 
ground  for  refusing  a  discharge,  it  is  a  material  considera- 
tion in  determining  his  credibility  when  testifying  as  to  what 
became  of  certain  property.^^ 

See  also  When  Evidence  Admissible  in  opposition  to  a  dis- 
charge, ante  §  354. 

§  545. Of  fraud. — A  charge  of  fraud  in  the  conceal- 
ment of  a  bankrupt's  estate  from  which  the  badges  and  indicia 
of  fraud  are  deducible  must  be  overborne  by  positive  testi- 
mony;^-^ and  to  defeat  a  conveyance  for  a  present  considera- 
tion the  proof  must  show  that  the  party  to  whom  or  for 
whose  benefit  it  was  made  knew  or  had  reasonable  cause  to  be- 
lieve the  grantor  insolvent  and  a  fraud  on  the  act  intended, 
which  knowledge  may  be  established  by  circumstantial  evi- 
dence.**' Alleged  fraudulent  conveyances  cannot  be  shown  in 
evidence,  unless  charged  in  the  specifications,  except  so  far  as 
that  might  be  used  to  show  the  intent  of  certain  acts  specified 
in  the  petition.'*'^  It  is  prima  facie  evidence  of  fraud  for  an  in- 
solvent debtor  to  make  a  transfer  of  property  outside  of  the 
usual  course  of  business;-*^  but  this  presumption  may  be  re- 
butted by  evidence  aliunde  to  be  produced  by  the  vendee.'*'' 

It  is  inadmissible  to  introduce  in  opposition  to  a  discharge 
as  evidence  of  fraud  the  dying  declarations  of  a  fraudulent 
grantee  in  a  proceeding  to  set  aside  a  bankrupt's  discharge ;'^i 
to  use  the  answer  to  the  petition  as  evidence  at  a  hearing 
on  a  petition  to  expunge  proof  of  claim  ;^2  or  to  introduce 
the  evidence  of  misrepresentations  made  to  a  stockholder, 
when  he  subscribed  for  stock,  by  an  agent  of  the  corporation, 
in  an  action  by  the  trustee  to  collect  an  assessment  made  on 
unpaid  subscriptions.^^ 


43  In  re  Plager,  2  N.  B.  N.  R.  10.  lo  Babbitt  v.  Walbrun,  4  N.  B.  R. 

•44  In  re  Leslie,  119  F.  R.  406.  30,  F.  C.  694. 

45  In   re   Goodridge,   2   N.   B.    R.  si  in  re  Marrioneaux,  13  N.  B.  R. 

105,  F.  C.  5547.  222,  1  Woods,  37,  F.  C.  9088. 

40  Gattman  v.  Honea,  12  N.  B.  R.  •'■>2  Canby  v.  McLear,  13  N.  B.  K. 

493,  F.  C.  5271.  22,  F.  C.  2378. 

47  Tenney  v.  Collins,  4  N.  B.  R.  ^'^  Michener  v.  Payson,  13  N.  B. 
156.  F.  C.  13833.  R.  49,  F.  C.  9524. 

48  Webb   V.    Sachs,    15    N.    B.   R. 
168,  4  Sawy.  158,  F.  C.  17325. 


Ca.2i  EVIDENCE.  351 

vj  546.  Books  of  account.— It  has  been  held  that  by  filing  a 
voluntary  petition  the  bankrupt  elects  to  place  his  books  of 
account,  at  the  disposal  of  the  court,  and  such  petition,  oper- 
ates as  a  waiver  of  any  privilege  he  would  otherwise  have  to 
withhold  them  on  the  ground  that  they  contain  incriminating 
evidence,^^  but  this  does  not  seem  tenable.  The  court  will  not, 
however,  permit  him  to  shield  himself  behind  the  privilege 
when  it  is  clear  that  the  party  mistakenly  or  contumaciously 
refuses  to  furnish  that  which  cannot  possibly  injure 
him,^^**  or  because  they  may  disclose  concealed  assets 
to  supply  evidence  in  a  civil  suit  by  the  trustee.^^ 
An  application  for  a  subpoena  duces  tecum,  based 
on  an  affidavit  of  counsel  that  he  expects  to  show  facts  perti- 
nent to  the  hearing  by  the  books  asked  for,  should  be  granted 
and  if  they  are  the  property  of  a  person  or  corporation  within 
the  jurisdiction  of  the  court,  the  fact  that  the  books  are  be- 
yond the  jurisdiction  is  immaterial  and  they  should  neverthe- 
less be  produced.^^  The  exercise  of  this  power  of  compelling 
the  production  of  books  necessarily  involves  a  wide  discretion 
which  should  not  be  interfered  with  by  an  appellate  court 
unless  manifestly  abused.^'^ 

Where  fraud  is  charged  against  the  purchaser  from  the 
bankrupt,  any  books  or  documents  of  such  purchaser  showing 
or  tending  to  show  the  receipt  and  disposition  of  the  property 
purchased,  or  in  any  other  way  relating  thereto,  are  subject 
to  examination ;  and  the  custodian  of  such  books  and  docu- 
ments cannot  refuse  to  produce  them,  or  to  answer  questions 
relating  tliereto,  on  the  ground  that  they  contain  nothing  relat- 
ing to  the  bankrupt's  property,  since  that  is  not  left  to  the 
opinion  of  the  witness  but  is  to  be  determined  by  the  court.^^ 
But  the  assignee  under  a  general  assignment  made  more  than 
four  months  before  the  bankruptcy  should  not  be  required 
to  produce  bankrupt's  books  unless  a  foundation  is  laid  for 
the  belief  that  the  latter  withheld  property  at  the  time  of  the 

54  In  re  Sapiro,  1  N.  B.  N.  136.  s.  c.  2  N.  B.  N.  R.  53,  97  F.  R.  319. 
1  A.  B.  R.  296,  92  F.  R.  340.  ■-<■■  In  re  Dews,  1  N.  B.  N.  140. 

54a  In  re  Kanter,  117  F.  R.  356,  ■'"  In  re  Horgan,  supra. 

9  A.  B.  R.  104.  5s  In  re  Fixen,   1   N.   B.   N.   568, 

55  In  re  Horgan,  1  N.  B.  N.  233,  2  A.  B.  R.  822,  96  F.  R.  748. 
3  A.  B.  R.  253,  98  F.  R.  414;   affg. 


352  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  21 

assignment  and  still  had  it  long  subsequently ,5^  though  this 
should  not  be  confounded  with  the  case  where  an  assignment 
is  made  within  the  four  months,  which  is  subsequently- 
avoided,  in  which  event  the  books  should  be  produced. 

§  547.  Privileged  communications.— While  a  bankrupt's 
communications  to  his  attorney  are  privileged  and  cannot  be 
brought  out  in  evidence,  counsel  may  be  required  to  testify  as 
to  acts  and  things  which  have  come  to  his  knowledge  by  rea- 
son of  his  position  as  counsel,  which  were  not  communicated 
to  him  by  the  bankrupt  or  by  some  one  through  his  direction.^*^ 
An  attorney  cannot  decline  to  testify  concerning  his  own  acts 
done  in  behalf  of  his  client,^^  nor  refuse  to  be  sworn  on  the 
ground  that  he  had  acted  as  counsel  for  the  bankrupt  and  is 
still  his  legal  advisor  ;62  hence  he  may  be  compelled  to  answer 
questions  concerning  a  conveyance  to  him  by  the  bankrupt  of 
land  and  a  subsequent  conveyance  by  the  former  of  the  same 
land  to  the  wife  of  the  latter.^^ 

§  548.  Power  of  referee.— The  referee  has  authority  to  make 
an  order,  requiring  any  designated  person,  including  the  bank- 
rupt, to  appear  and  be  examined^^  and  must  note  upon  the 
deposition  any  question  objected  to,  with  his  decision  there- 
on.^^  This  clearly  implies  that  he  must  pass  upon  any  objec- 
tions that  may  be  made  on  an  examination  before  him,  and 
a  witness  would  have  no  right  to  refuse  to  answer  a  question 
on  the  ground  of  irrelevancy,  since  the  question  of  relevancy 
and  materiality  are  for  the  court.^'''  Furthermore,  his  author- 
ity is  not  limited  to  the  taking  and  reporting  of  the  testimony 
and  ruling  as  to  its  admissibility,  but  he  has  authority  to  rule 
upon  the  sufficiency  of  specifications  of  objections  and  should 
n©t  take  evidence  on  such  as  are  clearly  insufficient.^^ 

59  In  re  Hayden,  1  N.  B.  N.  265,  oe  G.  O.  XXII;  In  re  DeGottardi. 
1  A.  B.  R.  670,  96  F.  R.  199.  114  F.  R.  328. 

60  In  re  Aspinwall,  10  N.  B.  N.  67  Peoples  Bank  of  Buffalo  v. 
448,  P.  C.  591.  Brown,  112   F.   R.   652,  7  A.  B.   R. 

61  In  re  O'Donohoe,  3  N.  B.  R.  59,  475. 

F.  C.  10435.  68  In  re  Kaiser,  2  N.  B.  N.  R.  123. 

62  In  re  Woodward,  3  N.  B.  R.  99  F.  R.  689,  3  A.  B.  R.  1767;  see 
477,  4  Ben.  102,  F.  C.  17999.  also   In   re   Lyon.   1  N.   B.  R.  111. 

63  In   re  Bellis,  3  N.   B.  R.  49,  3  F.  C.  8643. 

Ben.  386,  F.  C.  1274.  See  also  post,  §  679  for  referee's 

'■>''•  In  re  Lanier,  2  N.  B.  R.  59,  F.     power  over  examinations. 
C.  8070;  In  re  Pioneer  Paper  Co., 
7  N.  B.  R.  250,  F.  C.  17178. 


Ch.  -n  EVIDENCE.  353 

§  549.    Revenue  law  of  1898  establishes  rule  of  evidence.— 

The  court  of  bankruptcy  is  essentially  a  federal  institution. 
The  revenue  law  of  1898  is  essentially  federal  also.  The  laws 
laid  down  by  Congress  regarding  what  may  or  may  not  be  evi- 
dence "in  any  court"  must,  in  the  nature  of  things,  be  pecul- 
iarly applicable  to  courts  existing  under  federal  statutes. 
Hence  unstamped  notes  while  that  law  was  in  force  will  not  be 
received  in  bankruptcy  proceedings.*'^ 

§550.  'b.  Rules  governing  taking  of  depositions.— The 
'right  to  take  depositions  in  proceedings  under  this  act  shall 
'be  determined  and  enjoyed  according  to  the  United  States 
'laws  now  in  force,  or  such  as  may  be  hereafter  enacted  relat- 
'ing  to  the  taking  of  depositions,  except  as  herein  provided.' 

§  551. Federal  law  governs.— Very  detailed  provi- 
sions are  made  in  the  laws  of  the  United  States  for  taking  tes- 
timony,^^ which,  in  addition  to  the  other  provisions,  authorize 
the  taking  of  depositions  of  witnesses  in  cases  pending  at  law 
or  in  equity  in  the  district  or  circuit  courts  of  the  United 
States,  in  the  mode  prescribed  by  the  laws  of  the  state  in 
which  the  court  is  held."i  If  a  non-resident  creditor,  whose 
claim  is  contested,  cannot  personally  appear,  without  hard- 
ship, an  order  will  be  made  to  take  his  testimony  before  one 
of  the  officers  authorized  to  do  so  in  his  neighborhood.'^^ 

§  552. Depositions  de  bene   esse.— Testimony   of   any 

witness  may  be  taken  in  any  civil  cause  pending  in  a  district  or 
circuit  court  of  the  United  States  by  deposition  de  bene  esse, 
when  the  witness  lives  at  a  greater  distance  from  the  place 
of  trial  than  one  hundred  miles,  or  is  bound  on  a  voyage  to 
sea,  or  is  about  to  go  out  of  the  United  States,  or  out  of  the 
district  in  which  the  case  is  to  be  tried,  and  to  a  greater  dis- 
tance than  one  hundred  miles  from  the  place  of  deposition, 
before  the  time  of  trial  or  when  he  is  ancient  and  infirm. 
The  deposition  may  be  taken  before  any  judge.  United  States 
commissioner,  clerk  of  a  district  or  circuit  court,  or  any  chan- 
cellor, justice  or  judge  of  a  supreme  court  or  superior  court, 
mayor,  or  chief  magistrate  of  a  city,  judge  of  a  county  court 

69  In  re  Dobson,   2  N.  B.  N.  R.  7i  2  Supp.  Rev.  Stat.  4. 

514.  72  In  re  Kyler,  2  N.  B.  R.  649,  2 

TO  Sees.  858-879,  1778  U.  S.  Rev.  Ben.  414,  F.  C.  7956. 
Stat..  1  Supp.  Rev.  Stat.  123. 

23 


354:  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  21 

or  court  of  common  pleas  of  any  of  the  United  States,  or  any 
notary  public  not  being  of  counsel  or  attorney  to  either  of 
the  parties,  nor  interested  in  the  event  of  the  eauseJ^ 

§  553. Irregularity  or  defects  in  taking.— A  deposition 

taken  before  a  referee  authoiized  to  administer  oaths,  no 
objection  being  made,  and  the  witness  being  examined  and 
cross-examined,  is  properly  taken  and,  the  deposition  being 
subsequently  placed  on  file,  the  party  at  whose  instance  it  was 
taken  cannot  object  to  its  being  read  by  the  opposite  party, 
on  the  ground  of  irregularity  or  informality.'^  If  the  officer, 
administering  the  oath,  fails  to  sign  the  jurat  in  a  deposition, 
the  omission  may  be  supplied  if  he  recollects  the  fact  of  the 
creditor  signing  and  verifying  in  his  presence,  otherwise  the 
party  may  be  sworn  and  the  deposition  filed  nunc  pro  tunc  f^ 
and  the  jurat  need  not  contain  a  venue  when  it  appears  from 
the  deposition  that  the  oath  was  administered  where  the  offi- 
cer resides.'^^  A  deposition  which  has  been  altered  to  correct 
an  error  must  be  resworn  before  it  can  be  filed.^'^ 

§  554. Original  exhibits.— Original  papers  exhibited  to 

the  court  and  annexed  to  depositions,  and  marked  and  referred 
to  therein  as  exhibits,  become  a  part  of  the  depositions,  and 
cannot  be  withdrawn  and  a  copy  substituted  therefor,  except 
upon  the  application  of  a  party  who  can  show  a  proper  use 
therefor.'''^ 

§555.  'c.  Notice  of  taking  depositions.— Notice  of  the 
'taking  of  depositions  shall  be  filed  with  the  referee  in  every 
'case.  When  depositions  are  to  be  taken  in  opposition  to  the 
'allowance  of  a  claim  notice  shall  also  be  served  upon  the 
'claimant,  and  when  in  opposition  to  a  discharge  notice  shall 
'also  be  served  upon  the  bankrupt.' 

§  556. By  attorneys. — The  requirement  that  all  notices 

be  given  by  the  referee  unless  otherwise  ordered  by  the  judge, 
does  not  seem  to  comprehend  notices  for  the  taking  of  deposi- 
tions, but  such  notices  should  be  given  by  the  attorney. 

7H  u.  S.  Rev.  Stat,  Sec.  863.  t6  in  re  Hill,  F.  C.  6485;  see  also 

74  Lawrence  v.  Graves,  5  N.  B.  R.     §  21. 

279,  F.  C.  8138.  ^7  Walther  v.  Walther,  14  N.  B. 

75  In  re  McKibben,   12  N.  B.  R.     R.  273,  F.  C.  17126. 

97,  F.  C.  8859.  78  in  re  McNair,  2  N.  B.  R.  109, 

F.  C.  8908. 


Ch.  "il  EVIDENCE.  355 

§557.  'd.  Certified  copies  of  records.— Certified  copies  oi 
'proceedings  before  a  referee,  or  of  papers,  wlien  issued  by  the 
'clerk  or  referee,  shall  be  admitted  as  evidence  with  lil^e  force 
'and  effect  as  certified  copies  of  the  records  of  district  courts 
'of  the  United  States  are  now  or  may  hereafter  be  admitted  as 
*  evidence. ''^^ 

§  558.  Practice.— A  record  cannot  be  impeached  without 
previous  notice  by  proper  form  of  pleading.*^*^  The  referee  is 
an  officer  of  the  court  and  will  take  judicial  notice  of  its  judg- 
ments and  decrees;^!  and  to  prove  what  proceedings  have 
taken  place  before  him,  his  entries  may  be  used  as  evidence; 
but  as  to  the  number  of  days  that  a  witness  was  in  attendance 
before  him  the  clerk's  certificate  would  be  prima  facie  evi- 
dence.^2 

§  559.  'e.  Copy  of  order  approving  trustee's  bond.— A  cer- 
'  tilled  copy  of  the  order  approving  the  bond  of  a  trustee  shall 
'constitute  conclusive  evidence  of  the  vesting  in  him  of  the 
'title  to  the  property  of  the  bankrupt,  and  if  recorded  shall 
'impart  the  same  notice  that  a  deed  from  the  bankrupt  to  the 
'trustee  if  recorded  would  have  imparted  had  not  bankruptcy 
'proceedings  intervened. '^^ 

§  560.  Evidence  of  title.— A  trustee's  representative  charac- 
ter need  not  be  averred  in  the  pleadings,  and  it  is  not  neces- 
sary to  prove  all  the  steps  in  the  proceedings  if  a  duly  certi- 
fied copy  of  the  order  approving  the  bond,  which  is  the  equiv- 
alent of  "assignment"  under  former  act,  be  put  in  evidence,^* 
as  the  court  is  bound  to  take  judicial  notice  that  all  the  bank- 
rupt's property  and  effects  are  vested,  by  operation  of  law,  in 

■9  Analogous  provision  of  Act  of  seal  of  the  court,  shall  in  all  cases 

1867.       "Sec.     14.     .     .     .     And    a  be   prima   facie    evidence    of    the 

copy  duly  certified  by  the  clerk  of  facts  therein  stated." 

the  court,  under  the  seal  thereof,  .    so  Sloan  v.   Lewis,   12   N.   B.  R. 

of    the    assignment    made    by    the  173,  22  Wall.  150. 

judge  or  register,  as  the  case  may  si  in   re   Scott,   15   N.   B.  R.   73, 

be,   to   him   as   assignee,    shall   be  F.  C.  12519. 

conclusive  evidence  of  his  title  as  s^  In  re  Crane,  15  N.  B.  R.  120, 

such   assignee   to   take,    hold,    sue  F.  C.  3352. 

for,   and   recover  the   property   of  §3  See    analogous    provisions    of 

the  bankrupt,  as  hereinbefore  men-  Act  of  1867  under  subd.  d. 

tioned.  «*  Dambmann  v.  White,  12  N.  B. 

"Sec.  38.     .     .     .     Copies  of  such  R.  438. 
records,   duly   certified    under   the 


356  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  21 

the  trustee,  after  it  is  shown  that  the  defendant  has  been  de- 
clared a  bankrupt.^^  A  certified  copy  of  tlie  order  approving 
the  bond  of  the  trustee,  no  one  opposing,  must  be  recorded 
when  presented  ;^^  but  a  record  is  not  necessary  to  give  force 
or  validity  to  the  transfer  to  the  trustee,  ^"  though  since  the 
amendment  of  1903  the  trustee  is  required  to  file  a  copy  of  the 
decree  of  adjudication  in  the  proper  record  office  of  the  county  ^ 
where  the  bankrupt  owned  real  estate.^"*^ 

§561.  'f.  Copy  of  order  of  composition  or  discharge.— A 
'certified  copy  of  an  order  confirming  or  setting  aside  a  com- 

*  position,  or  granting  or  setting  aside  a  discharge,  not  revoked, 

*  shall  be  evidence  of  the  jurisdiction  of  the  court,  the  regu- 
*larity  of  the  proceedings,  and  of  the  fact  that  the  order  was 
'made.'^s 

§  562.  Certificate  of  discharge  as  evidence.— A  certificate  of 
discharge  in  bankruptcy,  signed  by  the  judge,  and  attested  by 
the  clerk  under  the  seal  of  the  court,  is  the  means  by  which 
the  bankrupt  is  to  prove  and  have  the  benefit  of  his  dis- 
charge ;^^  and  is  conclusive  evidence  of  the  jurisdiction  of  the 
court  and  of  the  fact  and  the  regularity  of  the  discharge,  but 
is  not  conclusive  evidence  in  favor  of  other  parties  seeking  to 
use  it.^*^  Since  it  is  conclusive  of  the  regularity  of  the  pro 
ceedings,  it  can  only  be  attacked  in  the  court  granting  it  upon 
proper  proceedings.^^ 

§  563.  'g.  Order  confirming  composition  evidence  of 
'title. — A  certified  copy  of  an  order  confirming  a  composition 
'shall  constitute  evidence  of  the  revesting  of  the  title  of  his 
'property  in  the  bankrupt,  and  if  recorded  shall  impart  the 
'same  notice  that  a  deed  from  the  trustee  to  the  bankrupt  if 
'recorded  would  impart.' 

85  Morris  v.  Davidson,  11  N.  B.  on  any  sucli  debts,  claims,  liabiii- 
R.  454.                                                   .  ties    or   demands,   and    the   certifi- 

86  In  re  Neale,  3  N.  B.  R.  43,  F.  cate  shall  be  conclusive  evidence 
C.  10066.  in  favor  of  such  bankrupt  of  the 

87  Davis  V.  Anderson,  6  N.  B.  R.  fact  and  [the]  regularity  of  such 
146,  F.  C.  3623.  discharge." 

87a  Post,  §  769.  89  Miller  v.  Chandler.  \7  N.   B. 

88  Analogous    provision,    Act    of     R.  251. 

1867.       "Sec.     34.     ...     A     dis-  so  Dewey  v.  Meyer,  18  N.  B.  R. 

charge  duly  granted     .     .     .     may  114;  Palmer  v.  Hussy,  119  U.  S.  96. 

be  pleaded     ...     as  a  full  and  »i  In  re  Witkowski,  10  N.  B.  R. 

complete  bar  to  all  suits  brought  209;  F.  C.  17920. 


CHAPTER  XXII. 

REFERENCE    OF    CASES    AFTER   ADJUDICATION. 

§564.  (22a)  Reference    of   case   to      566.  b.  Transfer  of  case  from  one 

referee.                                                      referee  to  another. 
565.  Practice.  567.  Practice. 

§  564.  '  (Sec.  22a)  Reference  of  case  to  referee.— After  a 
'person  has  been  adjudged  a  bankrupt  the  judge  may  cause  the 
'trustee  to  proceed  with  the  administration  of  the  estate,  or 
'refer  it 

'  (1)  Generally  to  the  referee  or  specially  with  only  limited 
'authority  to  act  in  the  premises  or  to  consider  and  report 
'upon  specified  issues;  or 

'  (2)  to  any  referee  within  the  territorial  jurisdiction  of  the 
'court,  if  the  convenience  of  parties  in  interest  will  be  served 
'thereby,  or  for  cause,  or  if  the  bankrupt  does  not  do  business, 
'reside,  or  have  his  domicile  in  the  district.' 

§  565.  Practice. — Under  this  section  the  trustee  is  required 
to  proceed  with  the  administration  by  collecting  and  reducing 
to  money  the  property  of  the  estate  under  the  direction  of  the 
court,  and  close  it  up  as  expeditiously  as  compatible  with  the 
best  interests  of  the  parties  in  interest,^  or  the  case  may  be 
referred  to  the  referee  for  his  action.  The  convenience  of  the 
parties  in  interest  may  be  consulted  and  the  case  referred  to 
any  referee  in  the  judicial  district  of  the  court,  although  there 
ma}^  be  another  referee  in  the  bankruptcy  district  in  which  the 
petition  was  filed,  and  for  cause,  or  at  the  instance  of  parties, 
may  change  the  reference  from  one  referee  to  another.^  The 
record  and  findings  of  the  referee  may  be  modified,  overruled 
or  returned  by  the  court  with  instructions  for  further  proceed- 
ings by  the  referee.^ 

The  order  of  reference  should  name  a  day  on  which  the 
bankrupt  is  to  appear  before  the  referee,  after  which  he  is  sub- 
ject to  the  referee's  order.^  Where  answers  are  filed  to  a  peti- 
tion in  involuntary  bankruptcy,  the  case  may  be  referred  to  a 

1  Sec.  47,  act  of  1898.  *  G.   O.  XII    (1);     Form   No.   14 

2  Sec.  22,  b,  act  of  1898.  gives  the  terms  of  reference. 

3  Sec.  2   (10),  act  of  1898. 

357 


358  THE    NATIONAL    BANKRUPTCY    LAW.  Cli.  22 

referee  to  take  and  return  the  evidence  and  report  on  the  ques- 
tions raised,  though  the  only  question,*  involved  are  questions 
of  law,  the  action  of  the  referee  being  always  subject  to  the 
control  of  the  court/'"' 

§  566.  'b.  Transfer  of  case  from  one  referee  to  another.— 
'The  judge  may,  at  any  time,  for  the  convenience  of  parties  or 
'for  cause,  transfer  a  case  from  one  referee  to  another.' 

§  567.  Practice. — In  case  of  the  transfer  from  one  referee  to 
another,  the  judge  is  to  determine  the  proportion  in  which  the 
fee  and  commissions  therefor  shall  be  divided  between  the 
referees.^  A  case  may  be  removed  where  it  is  shown  that  the 
referee  has  attempted  to  influence  the  choice  of  a  trustee,'^  or 
otherwise  conducted  himself  in  a  manner  unbecoming  a  judi- 
cial officer,  though  the  fact  that  a  referee  is  indebted  to  the 
bankrupt  is  not  such  a  disqualification  as  will  be  grounds  for 
removing  the  case  to  another  referee.^ 

5  Clark  V.  Mfg.  &  Enameling  Co.,  ^  in  re  Smith,  1  N.  B.  R.  25,  2 
101  F.  R.  962,  4  A.  B.  R.  351.  Ben.  113,  F.  C.  1297L 

6  Sec.  40,  b,  act  of  1898.  »  Bray  v.  Cobb,  1  N.  B.  N.  209, 

1  A.  B.  R.  153,  91  F.  R.  102. 


CHAPTER  XXIII. 


JURISDICTION  OF  UNITEJ3  STATES  AND  STATE  COURTS. 


§568.  (23a)     Jurisdiction    of    Cir- 
cuit  Courts. 

569.  In  general. 

570.  Comparison  of  Acts  of  1898 

and  1867. 

571.  b.  Jurisdiction  over  suits  of 

trustee — Where  brought. 

572.  Jurisdiction     of     Court     of 

Bankruptcy    under    Act    of 
1903. 

573.  Different   constructions. 

574.  Supreme     Court     decision — 

Bardes  v.  Bank. 

575.  Early  decisions;  favor- 
ing District  Court  jurisdic- 
tion. 

576.  Against  jurisdiction  of 

District  Courts. 


§568.     '(Sec.   23a)     Jurisdiction   of   Circuit   Courts.— The 

'United  States  circuit  courts  shall  have  jurisdiction  of  all  con- 
'troversies  at  law  and  in  equity,  as  distinguished  from  proceed- 
'ings  in  bankruptcy,  between  trustees  as  such  and  adverse 
'claimants  concerning  the  property  acquired  or  claimed  by  the 
'trustees,  in  the  same  manner  and  to  the  same  extent  only  as 
'though  bankruptcy  proceedings  had  not  been  instituted  and 
'such  controversies  had  been  between  the  bankrupts  and  such 
'adverse  claimants. 'i 


577. 

Summary  jurisdiction. 

578. 

Consent. 

579. 

Decisions  under  act  of  1867. 

580. 

State      Courts      jurisdiction 

under  acts  1867   and   1898. 

581. 

Illustrative  cases. 

582. 

When   without  jurisdic- 

tion. 

583. 

Rule     governing     State 

Courts. 

584. 

Acts  of,  binding  Federal 

Courts. 

585. 

Determining  existence  of  ad- 

verse claim. 

586. 

c.  Concurrent       jurisdiction 

over  offenses. 

587. 

Practice. 

1  Analogous  provision  of  Act  of 
1867.  "Sec.  2.  .  .  .  That  the 
several  circuit  courts  of  the  United 
States,  within  and  for  the  districts 
where  the  proceedings  in  bank- 
ruptcy shall  be  pending  .  .  . 
shall  also  have  concurrent  juris- 
diction with  the  district  courts  of 
the  same  district  of  all  suits  at 
law  or  in  equity  which  may  or 
shall  be  brought  by  the  assignee 
in  bankruptcy  against  any  person 
claiming  an  adverse  interest,  or  by 
such  person  against  such  assignee. 

359 


touching  any  property  or  rights  of 
property  of  said  bankrupt  trans- 
ferable to  or  vested  in  such  as- 
signee." 

For  provisions  with  reference  to 
proceedings  in  law  and  equity,  see 
G.  O.  XXXVII.  The  jurisdiction 
of  circuit  courts  of  the  United 
States  is  set  forth  in  U.  S.  Rev. 
Stat.,  §§  629-657,  as  amended  by 
the  act  of  August  13,  1888  (1 
Supp.  U.  S.  Rev.  Stat.  611),  and 
the  acts  specified  in  note  1  thereto. 


360  THE    NATIONAL    BANKRUPTCY    LAW.  Cn.  23 

§  569.  Jurisdiction  of  Circuit  Court  in  general.— This  sub- 
division deals  with  the  jurisdiction  of  the  United  States  circuit 
courts,  and  provides  that  "such  courts  shall  have  jurisdiction 
of  all  controversies  at  law  and  in  equity,  as  distinguished  from 
proceedings  in  bankruptcy,"  (thus  clearly  recognizing  the 
essential  difference  between  proceedings  in  bankruptcy,  on  the 
one  hand,  and  suits  at  law  or  in  equity  on  the  other),  "between 
trustees  as  such  and  adverse  claimants,  concerning  the  prop- 
erty acquired  or  claimed  by  the  trustees,"  restricting  that 
jurisdiction,  however,  by  the  further  words,  "in  the  same  man- 
ner and  to  the  same  extent  only  as  though  bankruptcy  pro- 
ceedings had  not  been  instituted  and  such  controversies  had 
been  between  the  bankrupts  and  such  adverse  claimants." 
This  clause,  while  relating  to  the  circuit  courts  only,  and  not  to 
the  district  courts  of  the  United  States,  indicates  the  intention 
of  Congress  that  the  ascertainment,  as  between  the  trustee  in 
bankruptcy  and  a  stranger  to  the  bankruptcy  proceedings,  of 
the  question  whether  certain  property  claimed  by  the  trustee 
does  or  does  not  form  part  of  the  estate  to  be  administered  in 
bankruptcy,  shall  not  be  brought  Avithin  the  jurisdiction  of 
the  circuit  court  solely  because  the  rights  of  the  bankrupt 
and  of  his  creditors  have  been  transferred  to  the  trustee  in 
bankruptcy.  While  the  evident  purpose  of  the  act  of  1898  was 
that  the  circuit  court  should  be  prohibited  from  entertaining 
jurisdiction  of  suits  between  the  trustee  and  an  adverse  claim- 
ant to  property  w'hich  the  creditors  claimed  belonged  to  the 
estate  of  the  bankrupt,  unless  the  bankrupt  himself  could  have 
resorted  to  the  circuit  court  for  the  assertion  of  such  claim 
against  the  adverse  claimant,-  the  act  of  February  5,  1903, 
amending  subdivision  "b"  of  this  section,  expressly  excepts 
actions  to  recover  property,  the  transfer  of  which  is  voidable 
as  a  preference,  or  where  such  transfer  was  with  the  intent 
and  purpose  to  hinder,  delay  or  defraud  his  creditors.  In 
view  of  the  fact  that  the  supreme  court  in  the  case  of  Bardes 
v.  Bank  held  that  subdivision  "b"  applied  to  the  circuit  as 

2  Bardes  v.  Bank.  178  U.  S.  524,  Norcross  v.  Nathan,  2  N.  B.  N.  R. 

2  N.  B.  N.  R.  725,  4  A.  B.  R.  163;  405,  99  F.  R.  14,  3  A.  B.  R.   613; 

Hicks  V.  Knost,  2  N.  B.  N.  R.  734,  In  re  Murphy,  2  N.  B.  N.  R.  393, 

178  U.  S.  541;  Mitchell  v.  McClure,  3  A.  B.  R.  499. 
2  N.  B.  N.  R.  735,  178  U.  S.  539; 


Cll.  23  JURISDICTION    OF    CIRCUIT    COURTS.  3G1 

well  as  the  district  courts,  it  seems  that  the  circuit  courts  also 
have  jurisdiction  over  suits  of  this  class  by  the  trustee. 

Where  the  amount  in  controversy  exceeds  $2,000  and  there 
is  diverse  citizenship  the  circuit  courts  have  jurisdiction  irre- 
spective of  the  bankruptcy  law.^ 

If  the  judge  of  the  district  court,  in  which  bankruptcy  pro- 
ceedings are  pending,  is  disabled,  or  in  any  way  concerned  in 
interest  therein,  or  has  been  of  counsel  for  any  party  therein, 
or  is  so  related  or  connected  with  any  of  the  parties  as  to  make 
it  improper  for  him  to  sit  m  the  matter,  the  proceedings 
should  be  certified  to  the  circuit  court,  which  shall  have  the 
same  cognizance  thereof  as  the  district  court  had  and  shall 
proceed  to  hear  and  determine  the  same.*  A  claimant  cannot 
be  constrained  to  go  into  the  district  court  to  litigate  his  claim 
against  the  trustee,  by  the  refusal  of  the  circuit  court  to  act, 
where  such  court  has  jurisdiction  by  reason  of  the  amount  in- 
volved and  the  citizenship  of  the  parties.^ 

§570.     Comparison  of  Acts  of  1898  and  1867.— Under  the 

act  of  1898,  four  things  are  necessary  to  give  the  circuit  court 
jurisdiction:  (1)  it  must  be  a  controversy  at  law^  or  in  equity, 
as  distinguished  from  proceedings  in  bankruptcy;  (2)  be- 
tween a  trustee  in  bankruptcy  as  such  and  adverse  claimants; 
(3)  concerning  property  acquired  or  claimed  by  such  trustee; 
and  (4)  such  as  the  bankrupt  himself  might  have  brought  in 
such  circuit  court  if  the  bankruptcy  proceedings  had  not  in- 
tervened. By  the  amendatory  act  of  1903,  this  jurisdiction  is 
doubtless  extended  to  include  the  recovery  of  property  under 
sections  60b  and  67e.  No  general  rule  can  be  given  for  deter- 
mining what  is  a  controversy  at  law  or  in  equity  as  distin- 
guished from  proceedings  in  bankruptcy,  but  considerable  as- 
sistance may  be  had  by  consulting  the  cases,^  in  which  the 
United  States  Supreme  Court  has  considered  the  question.  They 
held  that  adverse  claimants  were  those  who  claimed  some  prop- 

3  See  act  March  3,  1887,  25  Stat.  5  j.  b.  McFarlan  Carriage  Co.  v. 

L.  433.  Solanas.  106  F.  R.  145,  5  A.  B.  R. 

i  U.  S.  Rev.  Stat,  Sees.  601,  637;  442. 

Spencer   v.    Lapsle,    20    How.    264;  s  Morgan  v.  Thornhill,  11  Wall. 

Ex  p.   U.   S.,  F.   C.   14411,   1   Gall.  65,  75;  Marshall  v.  Knox,  16  Wall. 

338;    The  Richmond,  9  F.  R.  863;  551;  Smith  v.  Mason,  14  Wall.  419, 

Wallace  v.   Loomis,  97  U.   S.  146.  430 ;  Burbank  v.  Blgelow,  92  U.  S. 

156.  179. 


362  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  23 

erty,  or  right  of  property,  as  a  fund,  or  lien  upon  a  fund,  or  a 
right  to  proceeds  of  a  judgment,  which  it  was  also  claimed  had 
belonged  to  the  bankrupt  and  been  transferred  to  his  assignee 
in  bankruptcy.  Under  the  act  of  1867  the  circuit  courts  had  con- 
current jurisdiction  with  the  district  courts  of  all  suits  at  law 
or  in  equity  between  the  assignee  in  bankruptcy  and  persons 
claiming  an  adverse  interest  touching  any  property  or  rights 
of  property  of  said  bankrupt  transferable  to  or  vested  in  such 
assignee.  This  practically  coincides  with  the  first  three  requi- 
sites under  the  present  law  and  hence  the  decisions  under  the 
act  of  1867  may  be  consulted  to  ascertain  what  are  "suits  at 
law  or  in  equity"  and  "persons  claiming  an  adverse  interest 
touching  property  or  rights  of  property  of  bankrupt  transfer- 
able to  assignee"  as  they  will  aid  in  determining  what  is  "a 
controversy  at  law  or  in  equity,  as  distinguished  from  proceed- 
ings in  bankruptcy"  and  an  "adverse  claimant;"  but,  owing 
to  the  restriction  imposed  by  the  present  act  as  to  such  con- 
troversies being  such  as  the  bankrupt  might  himself  have  been 
a  party  to  if  there  had  been  no  bankruptcy  proceedings,  few 
of  those  cases  would  now  be  within  the  jurisdiction  of  the  cir- 
cuit court.'^ 

§  571.  'b.  Jurisdiction  over  suits  of  trustees.— Suits  by  the 
'trustee  shall  only  be  brought  or  prosecuted  in  the  courts 
'where  the  bankrupt,  whose  estate  is  being  administered  by 
'such  trustee,  might  have  brought  or  prosecuted  them  if  pro- 
'ceedings  in  bankruptcy  had  not    been    instituted,    unless  by 

7  Consult  Payson  v.  Dietz,  8  N.  by  an  assignee  against  lien  hold- 
B.  R.  193;  2  Dill.  504;  F.  C.  10861,  ers  to  ascertain  the  amount  due 
an  action  by  assignee  to  recover  a  and  sell  the  property  free  from 
debt  in  a  state  other  than  that  Incumbrances;  (Hudson  v.  Schwab, 
where  bankruptcy  proceedings  18  N.  B.  R.  480;  F.  C.  6835)  re- 
were  pending;  (In  re  Ballou,  3  N.  straining  an  action  of  trover 
B.  R.  177;  4  Ben.  135;  F.  C.  818)  against  a  marshal  for  taking  pos- 
to  procure  delivery  of  property  session,  under  a  warrant  in  bank- 
suffered  to  be  taken  through  legal  ruptcy.  of  certain  goods  claimed 
proceedings  with  intent  to  prefer;  by  the  plaintiff  in  trover;  (Mark- 
( Lev/is  V.  U.  S.,  14  N.  B.  R.  64,  92  son  v.  Heaney,  4  N.  B.  R.  165;  F. 
U.  S.  618)  a  bill  filed  by  the  U.  S.  C.  9098)  refusing  to  enjoin  a  fore- 
to  obtain  payment  out  of  a  trust  closure  suit  by  a  district  court  in 
fund,  held  by  a  trustee  appointed  another  state;  (N.  C.  v.  Univer- 
in  bankruptcy  proceedings;  (Suth-  sity,  5  N.  B.  R.  466;  1  Hughes, 
erland  v.  L.  S.  S.  C.  R.  &  I.  Co.,  133,  F.  C.  10318)  holding  that  it 
9  N.  B.  R.  298;  F.  C.  13643)  a  bill  had  no  jurisdiction  of  a  suit  by  a 


Ch.  v';5      jurisdiction  over  suits  of  trustees.  3G3 

'consent  of  the  proposed  defendant,*  except  suits  for  the  re- 
'covery  of  property  under  section  sixty,  subdivision  b,  and  sec- 
'tion  sixty-seven,  subdivision  e.' 

§  572.  Jurisdiction  of  court  of  bankruptcy  under  act  of 
1903.— The  act  of  1898  limited  the  jurisdiction  of  the  Federal 
courts  to  those  cases  which  the  bankrupt  might  have  brought 
in  the  absence  of  a  bankruptcy  law,  unless  by  consent  of  the 
proposed  defendant.  This  necessarily  excluded  that  large  class 
of  cases  for  the  recovery  of  property  in  the  hands  of  a  third 
person  or  stranger  to  the  bankruptcy  proceedings  under  a 
conveyance  either  voidable  as  a  preference  or  null  and  void  as 
given  with  intent  to  hinder,  delay  or  defraud  creditors.  The 
court  of  bankruptcy  had  no  power  by  summary  order  to  direct 
the  surrender  of  such  property  to  the  trustee  in  bankruptcy 
nor  to  restrain  its  disposition,  but  resort  must  have  been  to 
the  forum  having  jurisdiction  over  the  person  or  property  of 
the  proposed  defendant.^  To  meet  the  difficulty  incident  to 
such  restricted  jurisdiction.  Congress  by  the  act  of  February 
5,  1903,  specifically  gave  the  Federal  courts  jurisdiction  over 
actions  (1)  to  recover  property  transferred  to  a  creditor  who 
had  reasonable  cause  to  believe  that  a  preference  was  thereby 
intended,  as  defined  by  the  law,  (2)  to  recover  property  con- 
veyed, transferred,  assigned  or  incumbered  within  four  months 
of  the  filing  of  the  petition  in  bankruptcy,  with  the  intent  and 
purpose  on  the  bankrupt's  part  to  hinder,  delay  and  defraud 
his  creditors. 

It  should  be  observed,  however,  that  this  extension  of  juris- 
diction to  the  Federal  courts,  applies  only  to  suits  by  the  trus- 
tee, and  not  by  an  adverse  claimant,  as  to  whom  the  jurisdic- 
tion remains  the  same  as  prior  to  the  amendment. 

state   against   its   citizens,   neither  B.  R.  163;   Hiclcs  v.  Knost,  178  U. 

the    construction    nor    act   of    con-  S.  542,  4  A.  B.  R.  178,  2  N.  B.  N.  R. 

gress  conferring  such  jurisdiction.  734;  Mitchell  v.  McClure,  178  U.  S. 

s  The  amendment  to  this  subdi-  539,  2  N.  B.  N.  R.  735,  4  A.  B.  R. 
vision  by  the  act  of  1903  consists  177;  Wall  v.  Cox,  181  U.  S.  244,  5 
in  the  addition  of  the  words  at  the  A.  B.  R.  727;  Mueller  v.  Nugent, 
end  thereof,  "except  suits  for  the  184  U.  S.  1,  7  A.  B.  R.  224  ;  Louis- 
recovery  of  property  under  section  ville  Trust  Co.  v.  Cominger,  184 
sixty,  subdivision  b,  and  section  U.  S.  18,  7  A.  B.  R.  421 ;  Pickens 
sixty-seven,  subdivision  e."  v.  Roy.  187  U.  S.  177;   Jaquith  v. 

^  Bardes   v.   Hawarden  Bk.,   178  Rowley,    187   U.    S.   — ;    Bryan   v. 

U.  S.  524,  2  N.  B.  N.  R.  725,  4  A.  Bernheimer,  181  U.  S.  188,  5  A.  B. 


364      '  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  23 

Suits  of  the  character  mclicated  may  now  be  brought  in 
either  the  circuit  or  district  courts,  since  under  the  decision 
of  the  Supreme  Court  subdivision  "b"  of  this  section  applies 
equally  to  both  courts,  but  by  an  amendment  to  sections  "60b" 
and  "67e,"  it  is  provided  that  for  the  purpose  of  the  recovery 
of  such  property  "any  court  of  bankruptcy  as  hereinbefore 
defined,  and  any  state  court  which  would  have  had  jurisdic- 
tion if  bankruptcy  had  not  intervened,  shall  have  concurrent 
jurisdiction."  Accordingly  the  court  of  bankruptcy  is  now 
given  jurisdiction  over  actions  for  the  recovery  of  such  prop- 
erty, irrespective  of  the  amount  involved,  which  is  concurrent 
with  the  state  courts,  while  the  circuit  court  has  a  like  juris- 
diction where  the  amount  exceeds  $2,000. 

While  the  amendment  to  section  ' '  23b ' '  covers  but  the  two 
classes  of  actions  referred  to,  by  an  amendment  enacted  at 
the  same  time  to  section  70e  the  court  of  bankruptcy  is  given 
concurrent  jurisdiction  with  the  state  courts  to  avoid  any 
transfer  of  property  which  any  creditor  of  such  bankrupt 
might  have  avoided.  As  to  this  particular  case  the  circuit 
court  has  no  jurisdiction  unless  by  reason  of  diverse  citizen- 
ship or  consent  of  the  proposed  defendant. 

§  573.  Different  constructions.— This  subdivision  as  it  ap- 
peared in  the  act  of  1898  was  the  source  of  much  difference  of 
/  opinion,  but  the  amendment  of  1903  largely  removes  the  diffi- 
culty. Three  constructions  were  put  upon  the  limitations  im- 
posed by  this  subdivision  as  it  appeared  before  the  amend- 
ment. The  first  confined  its  operation  to  the  circuit  courts;^'' 
the  second  gave  to  the  state  courts  exclusive  jurisdiction,  ex- 
cept with  the  defendant's  consent,  of  all  suits  concerning  the 
bankrupt's  estate  brought  by  the  trustee  against  any  person 
other  than  the  bankrupt ;  ^^  and  the  third  gave  the  state  courts 

R.  623;  In  re  Baird,  116  F.  R.  765,  Co.  v.  Thompson,  112  F.  R.  945,  7 

8  A.  B.  R.  649;    In  re  Silberhorn,  A.  B.  R.  520;   In  re  Ward,  5  A.  B. 

105  F.  R.  899,  5  A.  B.  R.  568;  In  re  R.   215;    In   re  Michie,  8  A.   B.  R. 

Gerdes,  4  A.  B.  R.  346;    In  re  San  734,    116   F.   R.   749;    In   re   Steed, 

Gabriel  Sanatorium  Co.,  Ill  F.  R.  107  F.  R.  682,  6  A.  B.  R.  73. 

892.  7  A.  B.  R.  206;    In  re  Shein-  lo  In  re  Sievers,  1  N.  B.  N.  168, 

baum,   107   F.   R.    247,   5   A.  B.   R.  1  A.  B.  R.  117,  91  F.  R.  366. 

187;    In  re  Tollett,   105  F.  R.  425,  n  Perkins  v.  McCauley,  98  F.  R. 

5     A.     B.     R.     305;     Woodruff    v.  286;   Shoshone  Mining  Co.  v.  Rut- 

Cheeves   et   al.,    105    F.    R.    601,    5  ter,  177  U.  S.  505,  511,  513. 
A.   B.   R.    296;    Real   Estate  Trust 


Ch.  22        JURISDICTION    OVER    SUITS    OF    TRUSTEES.  365 

exclusive  jurisdiction,  except  with  the  defendant's  consent,  oi 
suits  concerning  the  bankrupt's  estate,  if  they  were  such  as 
bankrupt  himself  could  have  brought  had  he  not  been  a  bank- 
rupt, but  reserved  to  the  district  court,  at  least  concurrent  jur- 
isdiction, of  those  suits  by  the  trustee  against  a  stranger,  which 
bankrupt  himself  could  not  have  brought;  as  suits  to  set  aside 
an  assignment  or  restrain  the  sale  of  property  held  under  an 
attachment  avoided  by  the  bankrupt  act,  or,  as  otherwise  ex- 
pressed, suits  original  with  the  trustee  and  not  derived  by 
him  through  those  whom  he  represents.^^ 

§  574.  Supreme  court  decision— Bardes  v.  Bank.— Notwith- 
standing the  amendment  which  entirely  changes  the  jurisdic- 
tion, the  decision  of  the  Supreme  Court  of  the  United  States 
in  the  leading  case  of  Bardes  v.  Hawarden  Bank,  is  interesting 
as  a  treatment  of  the  jurisdiction  of  the  courts,  although  the 
amendment  of  1903  is  designed  to  meet  the  obstacles  presented 
by  that  decision.  In  that  case  the  court  stated  that  subdivision 
"b"  applied  to  the  district  courts  and  to  the  circuit  courts 
of  the  United  States,  as  well  as  to  the  state  courts,  this  ap- 
pearing not  only  by  the  words  of  the  title  of  the  section,  but 
also  by  the  use,  in  this  clause,  of  the  general  words,  "the 
courts,"  as  contrasted  with  the  specific  words,  "the  United 
States  Circuit  Courts,"  in  the  first  and  third  clauses.  It  posi- 
tively directs  that  "suits  by  the  trustee  shall  only  be  brought 
or  prosecuted  in  the  courts  where  the  bankrupt,  whose  estate 
is  being  administered  by  such  trustee,  might  have  brought 
or  prosecuted  them  if  proceedings  in  bankruptcy  had  not  been 
instituted,  unless  by  consent  of  the  proposed  defendant. ' '  Had 
there  been  no  bankruptcy  proceedings,  the  bankrupt  inight 
have  brought  suit  in  any  state  court  of  competent  jurisdiction ; 
or,  if  there  was  a  sufficient  jurisdictional  amount,  and  the  requi- 
site diversity  of  citizenship  existed,  or  the  case  arose  under  the 
Constitution,  laws  or  treaties  of  the  United  States,  he  could 
have  brought  suit  in  the  circuit  court  of  the  United  State^.i^ 
He  could  not  have  sued  in  a  District  Court  of  the  United 
States,^ '^  because  such  a  court  has  no  jurisdiction  of  suits  at 
law  or  in  equity  between  private  parties,    except    where,  by 

12  In  re  Hammond,  98  F.  R.  845,  i*  Changed  by  the  amendment  of 
3  A.  B.  R.  466.  Feb.  5,  1903 

13  Act    of    Aug.    13,    1888,    chap. 
866,  25  Stat.  L.  434. 


3Uti  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  :^3 

special  provision  of  an  act  of  Congress,  a  District  Court  has 
the  powers  of  a  Circuit  Court,  or  is  given  jurisdiction  of  a 
particular  class  of  civil  suits.  Congress  appeared  by  this  sub- 
division to  have  clearly  manifested  its  intention  that  contro- 
versies, not  strictly  or  projjerly  part  of  the  proceedings  in 
bankruptcy,  but  independent  suits  brought  by  the  trustee  in 
bankruptcy  to  assert  a  title  to  money  or  property  as  assets  of 
the  bankrupt  against  strangers  to  those  proceedings,  should 
not  come  within  the  jurisdiction  of  the  District  Courts  of  the 
United  States,  "imless  by  consent  of  the  proposed  defend- 
ant."^^ In  other  words  the  question  of  the  forum  in  these 
cases  was  to  be  determined  as  if  there  were  no  bankruptcy. 

Since  Congress  has  no  constitutional  power  to  impose  upon 
the  state  courts  the  duty  of  administering  any  part  of  the 
bankrupt  act,  and  since  the  performance  of  such  duty  by  such 
state  courts  is  purely  discretionary  and  they  might  at  any 
time  wholly  renounce  it  or  impose  onerous  conditions,^ ^  the 
question  is  suggested  whether  the  foregoing  decision  of  the 
Supreme  Court^'  did  not  leave  all  actions  by  the  trustees 
against  adverse  parties  where  the  cause  of  action  arose  under 
the  bankrupt  act  at  the  discretion  of  the  state  courts;  and  is 
not  that  fact  a  strong  argument  in  favor  of  the  construction 
contended  for  by  those  Avho  held  this  subdivision  applied  if 
the  cause  of  action  existed  in  the  bankrupt— that  is,  independ- 
ently of  the  bankrupt  law— but  not  if  the  cause  of  action  was 
created  in  the  trustee  by  the  law,  and  are  not  both  construc- 
tions equally  consonant  with  the  language  of  the  subdivision? 
This  view  is  strongly  supported  by  a  recent  well  considered 
opinion  of  a  state  supreme  court  which  holds  that  bills  by  the 
trustee  to  reach  property  transferred  in  fraud  of  the. bank- 
ruptcy act  should  not  be  brought  in  a  state  court.^^ 

15  Bardes  v.  Hawarden  Bk.,  178  F.   C.   12762;  Goodall  v.   Tuttle,  7 
U.  S.  524,  2  N.  B.  N.  R.  725,  4  A.  N.    B.    R.    193,    3    Biss.    219,    F.    C. 
B.  R.  163;   Hicks  v.  Knost,  178  U.  5533;  Martin  v.  Hunter's  Lessee,  1 
S.  541,  2  N.  B.  N.  R.  734,  4  A.  B.  Wheat.     304,     330;     Robertson     v. 
R.    178;    Mitchell   v.   McClure,   178  Baldwin,    165   U.    S.   275;    see  also 
U.  S.  539,  2  N.  B.  N.  R.  735,  4  A.  B.  Claflin  v.  Houseman,  93  U.  S.  130 
R.  177;  Wall  v.  Cox,  181  U.  S.  244,  Alleman   v.    Booth.    21    How.    506 
5  A.  B.  R.  727;  Shoshone  Min.  Co.  The    Moses    Taylor,    4    Wall.    429 
V.  Rutter,  177  IJ.  S.  505,  511,  513.  Ex  p.  McNeil,  13  Wall.  236. 

16  In  re  Woodbury,  2  N.  B.  N.  R.  i^  Bardes  v.  Hawarden  Bk., 
284,  98  F.  R.  833,  837,  3  A.  B.  R.  supra. 

457.   citing  Sherman  v.   Bingham,         t*  Lyon  v.  Clark,  2  N.  B.  N.  R. 


Ch.  2o     jurisdiction   over  suits  of  trustees.  oG7 

§  575.  Decisions  prior  to  that  of  Bardes  v.  Bank— Favoring 
jurisdiction  of  district  court.— Prior  to  the  decision  of  th(^ 
United  States  Supreme  Court  in  Bardes  v.  Bank,  the  Circuit 
Courts  of  Appeals  in  four  circuits  in  passing  upon  various 
phases  of  the  question,  sustained  in  general  the  jurisdiction  of 
Courts  of  Bankruptcy  over  controversies  arising  in  bankruptcy 
proceedings,^^  in  addition  to  which  there  are  a  number  of 
similar  decisions  by  other  federal  courts.-*^  A  careful  examina- 
tion of  the  decisions,  however,  shows  much  purely  obiter  discus- 
sion of  this  subdivision.  In  those  cases  of  general  assignments 
and  legal  proceedings  rendered  void  by  the  bankruptcy  pro- 
ceedings, the  persons  claiming  under  them  did  not  claim  ad- 
versely, but  by  right  of  the  bankrupt's  title  and  their  right 
ceased.  The  appointment  of  the  receiver  is  specifically  pro- 
vided for,2i  and  the  enjoining  of  the  others  was  a  necessary 
incident  to  the  execution  of  other  powers  of  the  court.  In  none 
is  there  a  plenary  suit  by  the  trustee. 

It  was  held,  however,  that  actions  by  trustees  in  bankruptcy 
to  set  aside  fraudulent  conveyances  as  void  at  common  law, 
or  as  preferences,  or  because  in  fraud  of  the  bankruptcy  law, 
could  be  brought  in  the  district  courts  as  courts  of  bank- 
ruptcy ,22  because,  as  said  in  one,  this  subdivision  did  not  im- 
pair the  jurisdiction  conferred  by  Sec.  2,  of  the  law,  but  re- 

792,  revd.,  2  N.  B.  N.  R.  1100,  in  466;    In  re  Fellerath,   1   N.   B.  N. 

deference  to  Bardes  v.  Bk.,  178  U.  292,   2  A.  B.  R.   40,  95  F.  R.  121; 

S.  524,  2  N.  B.  N.  R.  725,  4  A.  B.  In  re  Kenney,  1  N.  B.  N.  401,  2  A. 

R.  163;   see  also  Mueller  v.  Bruss,  B.    R.    494,    95    F.    R.    427;    In    re 

8  A.  B.  R.  442.  Kletchka,  1  N.  B.  N.  160,  92  F.  R. 

19  In  re  Gutwillig,  1  N.  B.  N.  901,  1  A.  B.  R.  479;  In  re  Richards, 
554,  1  A.  B.  R.  388,  34  C.  C.  A.  1  N.  B.  N.  487,  2  A.  B.  R.  506,  94 
377,  92  F.  R.  337;  s.  c.  below  1  N.  F.  R.  633;  In  re  Pittelkow,  1  N.  B. 
B.  N.  40,  1  A.  B.  R.  78,  90  F.  R.  N.  234,  1  A.  B.  R.  472,  92  F.  R. 
475;  Carriage  Co.  v.  Stengel,  1  N.  901;  In  re  Booth,  1  N.  B.  N.  476, 
B.  N.  387,  37  C.  C.  A.  210,  95  F.  R.  2  A.  B.  R.  770,  96  F.  R.  943;  In  re 
637,  2  A.  B.  R.  383;  Davis  v.  Bohle,  Nathan,  1  N.  B.  N.  563,  92  F.  R. 
1  N.  B.  N.  216,  34  C.  C.  A.  37,.  92  590;  In  re  Kimball,  1  N.  B.  N. 
F.  R.  325,  1  A.  B.  R.  412,  s.  c.  be-  515.  3  A.  B.  R.  161,  97  F.  R.  29; 
low.  In  re  Sievers,  1  N.  B.  N.  168,  Keegan  v.  King,  96  F.  R.  758,  3  A. 
91  F.  R.  366,  1  A.  B.  R.  117;  In  re  B.  R.  79;  Trust  Co.  v.  Benbow,  1 
Francis- Valentine  Co.,  1  N.  B.  N.  N.  B.  N.  499,  3  A.  B.  R.  9,  96  F.  R. 
529,  2  A.  B.  R.  522,  36  C.  C.  A.  499,  514;  In  re  Fixen,  1  N.  B.  N.  568, 
94  F.  R.  793.  2  A.  B.  R.  822,  96  F.  R.  748. 

20  In  re  Smith.  1  N.  B.  N.  356,  2  21  Sec.  2   (3),  act  of  1898. 

A.  B.   R.   9,   92   F.   R.   135;    In   re         22  Robinson  v.  White,  1  N.  B.  N. 
Hammond,  98  F.  R.  845,  3  A.  B.  R.     513,  3  A.  B.  R.  88,  97  F.  R.  33;  In 


368  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  23 

lated  to  the  venue;  and,  in  another,  only  when  the  cause  of 
action  existed  originally  in  the  bankrupt.  For  the  last  reason, 
an  action  by  the  trustee  to  subject  to  creditors  an  income  held 
in  trust  for  the  bankrupt  was  cognizable  in  the  bankruptcy 
court  ;2^  so  also  an  action  to  quiet  title,^^  or  to  determine  the 
rights  of  the  joint  holders  of  a  liquor  license  ;-^  or  an  action  to 
enforce  the  liability  of  stockholders  for  the  unpaid  subscrip- 
tion to  stock  upon  call  by  trustee  p''  or  by  consent  to  set  aside 
a  bill  of  sale  made  within  four  months.^'^ 

§  576.  Early  decisions  against  jurisdiction  of  district  court. 
'--In  a  number  of  cases  the  opposite  view  was  taken,  and  the 
wfistriet  court  sitting  in  bankruptcy  was  held  not  to  have  juris- 
diction to  determine  by  summary  proceeding  a  controversy  be- 
tw^een  the  trustee  as  such  and  an  adverse  claimant  concerning 
property  claimed  by  the  trustee,  or  by  a  trustee  against  a 
creditor  of  the  bankrupt  to  recover  money  alleged  to  have  been 
paid  as  a  preference  or  in  fraud  of  other  creditors,-^  or  the 
like,  nor  did  it  make  any  difference  whether  the  cause  of 
action  existed  in  the  bankrupt  prior  to  the  bankruptcy,  or  had 
arisen  since.^^ 

§  577.     Summary  Proceedings.— Neither  the  act  of  1898  or 

re  Newberry,   2  N.  B.  N.  R.  56,  3  ^4  Murray  v.  Beal,  2  N.  B.  N.  R. 

A.  B.  R.  158,  97  F.  R.  24;    Carter  164,  3  A.  B.  R.  284,  97  F.  R.  567. 

V.  Hobbs,  1  N.  B.  N.  529,  2  A.  B.  R.  05  in    re   Brodbine,    1   N.    B.    N. 

224,  94  F.  R.  108;   s.  c.  1  N.  B.  N.  279,  326,  93  F.  R.  643,  2  A.  B.  R. 

191,  1  A.  B.  R.  215,  92  F.  R.  594;  53 


26  In  re  Crystal  Spring  Bottling 
Co.,  96  F.  R.  945,  3  A.  B.  R.  194. 

27  In  re  Connolly,  2  N.  B.  N.  R. 


Norcross  v.  Nathan,  2  N.  B.  N.  R. 
405,  99  F.  R.  14,  3  A.  B.  R.  613; 
Cox  V.  Wall.,  2  N.  B.  N.  R.  572,  99 
F.  R.  546,   3  A.   B.  R.   664;    Trust 

Co.  V.  Marx,  98   F.   R.   456;  In  re  ''''  ^^^  ^-  ^-  ^^0,  3  A.  B.  R.  842, 

Woodbury,   2  N.   B.  N.  R.   284,   98  ^^^-  ^  ^-  ^-  ^-  ^-  ^^'^• 

F.  R.  83,  3  A.  B.  R.  457;   Lehman  -""  Hicks  v.  Knost,  178  U.  S.  541, 

V.  Crosby,  99  F.  R.  542,  2  N.  B.  N.  2  N.  B.  N.  R.  734,  s.  c.  1  N.  B.  N. 

R.    451,    3    A.    B.    R.    662;     In    re  336,  2  A.  B.  R.  153,  94  F.  R.  625; 

Kerske  Bros.,  1  N.  B.  N.  328,  2  A.  Camp  v.  Zellars,  94  F.  R.  799 ;  Con- 

B.  R.  79;   Shutts  v.  Bk.,  2  N.  B.  N.  tra,  see  cases  under  previous  sub- 

R.   320,  98   F.   R.   705,   3   A.   B.  R.  liead,  ante  p.  355. 

492;  Hall  v.  Kincell,  102  F.  R.  301,  29  Perkins  v.  McCauley,  98  F.  R. 

2  N.  B.  N.  R.  745;   In  re  San  Gab-  286;   Burnett  v.  Mercantile  Co.,  1 

riel  Sanatorium  Co.,  Id.  310,  2  N.  N.  B.  N.  138,  91  F.  R.  365,  1  A.  B. 

B.  N.  R.  827,  4  A.  B.  R.  197.  R.  229;  In  re  Abraham,  1  N.  B.  N. 

23  In  re  Baudouine,   1   N.   B.  N.  281,  2  A.  B.  R.  266,  93  F.  R.  767; 

506,  3  A.   B.  R.  55,   96  F.  R.   536,  Contra,  Pepperdine  v.  Headley,  98 

101  F.  R.  574,  3  A.  B.  R.   651.  F.  R.  863,  3  A.  B.  R.  455;   Lehman 


Ch.  23       JURISDICTION    OVER    SUITS    OF    TRUSTEES.  369 

the  amendment  of  1903,  authorizes  the  court  of  bankruptcy 
by  summary  process  to  disturb  the  possession  of  property  held 
adversely  at  the  time  of  the  institution  of  bankruptcy  pro- 
ceedings ;  and  while  such  party  is  entitled  to  his  day  in  court, 
the  mere  assertion  of  title  is  not  a  bar  to  the  exercise  of  juris- 
diction, as  the  court  may  examine  into  such  claim-^'-^**  Hence, 
where  one  holds  property  as  a  general  assignee,  or  the  vendee 
of  such  property,  or  while  making  claim  to  property  merely 
has  a  colorable  title  to  the  same,  the  property  really  being 
that  of  the  bankrupt,  and  the  like,  the  court  of  bankruptcy 
may  by  summary  proceedings  order  that  such  property  be 
turned  over  to  the  bankrupt.-^'' 

§  578.  Consent  of  defendant.— The  act  of  February  5,  1903, 
extending  the  jurisdiction  of  the  Federal  courts  to  cases  for 
the  recovery  of  property  transferred  as  a  preference,  as  well 
as  transfers  made  with  the  intent  to  hinder,  delay  and  defraud 
creditors,  still  leaves  certain  causes  of  action  where  the  juris- 
diction of  such  courts  is  dependent  upon  the  consent  of  the 
proposed  defendant.  Thus  in  addition  to  the  case  of  an  ex- 
plicit consent  on  the  part  of  the  defendant,  a  person  will  be 
deemed  to  have  consented  who,  when  proceedings  are  insti- 
tuted against  him  by  the  trustee,  appears  and  maintains  the 
bona  fides  of  the  transfer^^  or  answers  on  the  merits,  gives  a 

V.  Crosby,   2  N.  B.   N.  R.   451,  99  berg,  1  A.  B.  R.  385;  Chattanooga 

F.  R.  542,  3  A.  B.  R.  662.  Nat.  Bank  v.  Rome  Iron  Co.,  99  F. 

See  generally,  as  opposed  to  the  R.  82;   In  re  Rockwood,  1  N.  B.  N. 

jurisdiction  of  the  Federal  Courts  134,  1  A.  B.  R.  272,  91  F.  R.  363; 

in   suits   of   this    character  unless  In  re  Fowler,  1  N.  B.  N.  215,  1  A. 

diverse  citizenship  existed:     In  re  B.  R.  637;  In  re  Carter,  1  N.  B.  N. 

Abraham,  93  F.  R.  767,  35  C.  C.  A.  162,   1  A.   B.  R.   160;    In  re  Cohn, 

592,  2  A.  B.  R.  266;  Heath  v.  Shaf-  98  F.  R.  75,  2  N.  B.  N.  R.   299,  3 

fer,  1  N.  B.  N.  399,  2  A.  B.  R.  98,  A.  B.  R.  421. 

93  F.  R.  647;  comp.  In  re  Brooks,  29a  Metcalf  v.  Barker,  187  U.  S. 
1  N.  B.  N.  240,  1  A.  B.  R.  606,  91  165;  Peck  v.  Jenness,  7  How.  611; 
F.  R.  508;  In  re  Buntrock  Clothing  Eyster  v.  Goff,  91  U.  S.  521;  Mar- 
Co.,  1  N.  B.  N.  291,  1  A.  B.  R.  454,  shall  v.  Knox,  16  Wall.  551;  In  re 
92  F.  R.  886;  In  re  Franks,  95  F.  Tune,  115  F.  R.  906,  8  A.  B.  R. 
R.  635,  2  A.  B.  R.  634;  In  re  Blair,  285;  In  re  Baird,  116  F.  R.  765, 
102  F.  R.  987,  2  N.  B.  N.  R.  890.  4  8  A.  B.  R.  645. 
A.  B.  R.  220;  Mitchell  v.  McClure,  ^m,  Bryan  v.  Bernheimer,  181  U. 
178  U.  S.  539,  2  N.  B.  N.  R.  735.  s.  S.  188,  5  A.  B.  R.  623;  Mueller  v. 
c.  1  N.  B.  N.  138,  1  A.  B.  R.  53,  91  Nugent.  184  U.  S.  1,  7  A.  B.  R.  224. 
F.  R.  621;  s.  c.  under  title  In  re  so  philips  v.  Turner,  114  F.  R. 
Scott,  1  N.  B.  N.  327;  In  re  Gold-  726,  8  A.  B.  R.  171. 
24 


370  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  23 

bond  for  the  delivery  of  the  property,  and  proceeds  to  a  hear- 
ing without  objection/"^!  In  such  cases  he  will  not  be  per- 
mitted to  raise  the  question  of  jurisdiction  for  the  first  time  on 
exceptions  to  a  decision  of  the  referee  adverse  to  him,32  or  on 
appeal.^^  The  consent  will  also  be  implied  where  he  submits 
his  claim  to  such  court  in  response  to  a  petition  for  an  order 
requiring  the  property  in  his  possession  to  be  turned  over  to 
the  custody  of  the  court/^^  or,  if  he  enters  his  appearance  and 
obtains  an  order  assenting  to  the  sale  of  property,^^  or,  where 
a  petition  is  filed  to  declare  a  chattel  mortgage  null  and  void 
and  the  case  is  submitted  on  the  merits  without  objection.^*' 

The  consent  necessary  to  give  the  court  jurisdiction  is  to  the 
tribunal  and  not  to  the  mode  of  procedure  and  if  that  be  un- 
lawful, the  appearance  of  the  defendant  and  his  contesting  the 
proceedings  do  not  confer  jurisdiction,  notwithstanding  the 
fact  that  he  answers  to  a  rule  to  show  cause.^^  A  general 
appearance  by  a  defendant  to  a  rule  to  show  cause  does  not 
constitute  consent,^^  nor  does  the  filing  by  a  general  assignee 
of  accounts  for  allowance  and  settlement,  where  objection  is 
made  to  the  jurisdiction  before  the  final  order  on  the  merits,"**^ 
nor  an  appearance  in  response  to  an  order  to  turn  over  prop- 
erty alleged  to  belong  to  the  estate,  if  during  such  proceed- 
ings, he  raises  the  question  of  jurisdiction.^^  Consent  is  not 
to  be  assumed  where  an  adverse  claimant  is  made  a  party  de- 
fendant to  a  petition  for  adjudication,  although  he  partici- 
pates in  the  proceedings  before  the  referee,  if  objection  is 
made  to  the  exercise  of  jurisdiction  ;^-  nor  is  the  mere  proving 

:^i  In   re  Steuer,   104   F.   R.   976;  B.  R.  724;  s.  c.  107  F.  R.  96,  5  A. 

Bryan   v.    Bernheimer,    181    U.    S.  B.  R.  720. 

188,  5  A.  B.  R.  623.  '■^^  Sinsheimer   v.    Simonson,    107 

S2  Hicks  V.  Knost,  178  U.  S.  241.  F.  R.  898,  5  A.  B.  R.  537;    Louis- 

2  N.  B.  N.  R.  734,  4  A.  B.  R.  178;  ville  Trust  Co.  v.   Comingor,   7  A 

In  re  Connolly,  2  N.  B.  N.  R.  564.  B.  R.  421,  184  U.  S.  18. 

100  F.  R.  620,  3  A.  B.  R.  842;    In  39  in  re  Hemby-Hutchinson  Pub. 

re  Adams,  1  N.  B.  N.  503,  2  A.  B.  Co.,  105  F.  R.  909,  5  A.  B.  R.  569. 

R.   415,  97   F.  R.   188;    In  re  Dur-  4o  in  re  Klein,  116  F.  R.  523,  8 

ham,  114  F.  R.  750,  8  A.  B.  R.  115.  A.  B.  R.  559. 

33  Boonville  Nat.  Bank  v.  Blakey,  ^i  Sinsheimer  v.  Simonson,  107 
107  F.  R.  891,  6  A.  B.  R.  13.  F.   R.  898,   5  A.   B.  R.  537;    In  re 

34  In  re  Klein,  116  F.  R.  523,  8  Michie,  116  F.  R.  749,  8  A.  B.  R. 
A.  B.  R.  559.  734. 

35  Bryan  v.  Bernheimer,  supra.  *^  Louisville  Trust   Co.   v.   Com- 

36  In  re  Riker,  109  F.  R.  63,  5  A.  inger,  184  U.  S.  18,  7  A.  B.  R.  421. 


Ch.  "^3       JURISDICTION    OVER    SUITS    OF    TRUSTEES.  371 

of  a  claim  in  the  bankruptcy  proceedings  evidence  of  assent.^^ 
§  579.  Decisions  under  the  Act  of  1867.— The  decisions  un- 
der the  former  act  upon  the  question  of  suits  by  assignees 
against  adverse  parties  in  the  district  courts  are  generally  in- 
applicable now.^^ 

§  580.  State  courts— Jurisdiction  under  Acts  of  1867  and 
1898,  compared.— Under  sections  one  and  two  of  the  Act  of 
1867,  two  distinct  classes  of  jurisdiction  were  conferred  on  the 
District  and  Circuit  Courts  of  the  United  States ;  by  the  first, 
jurisdiction  as  a  court  of  bankruptcy  over  the  proceedings  in 
bankruptcy,  initiated  by  the  petition,  and  ending  in  the  distri- 
bution of  the  assets  amongst  the  creditors,  and  a  discharge  or 
refusal  of  a  discharge  of  the  bankrupt,  and  by  the  second, 
jurisdiction  as  an  ordinary  court,  of  suits  at  law  or  in  equity, 
brought  by  or  against  the  assignee  in  reference  to  alleged 
property  of  the  bankrupt,  or  to  claims  alleged  to  be  due  from 
or  to  him.  The  jurisdiction  of  these  courts  over  suits  to  re- 
cover assets  of  the  bankrupt  from  a  stranger  to  the  proceed- 
ings in  bankruptcy,  brought  by  the  assignee  in  a  district  other 
than  that  in  which  the  decree  in  bankruptcy  had  been  made, 
was  upheld  under  a  special  clause  in  section  two  which  gave 
those  two  courts  concurrent  jurisdiction  of  all  suits  at  law  or 
in  equity,  brought  by  the  assignee  against  any  person  claim- 
ing an  adverse  interest,  or  by  such  person  against  the  assignee, 
touching  any  property  or  rights  of  property  of  the  bankrupt 
transferable  to  or  vested  in  such  assignee.^^  The  Supreme 
Court  in  the  case  of  Bardes  v.  Hawarden  Bank  points  out  that 
Mr.  Justice  Clifford  in  an  earlier  case  had  called  attention  tc 

43Jaquith  v.  Rowley,  187  U.  S.  188,   F.   C.   6072;    In  re  Krogman, 

— ;   see  Pickens  v.  Roy,  187  U.  S.  5  N.  B.  R.  116,  F.  C.  7936;   In  re 

177.  Oregon  Iron  Wks.,  17  N.  B.  R.  404, 

"Sherman  v.  Bingham,  7  N.  B.  4    Sawy.    168,   F.   C.    10562;    In    re 

R.    490,    F.    C.    12762;     Goodall    v.  Campbell,  17  N.  B.  R.  4,  3  Hughes, 

Tuttle,  7  N.  B.  R.  193,  3  Biss.  219,  276.  F.  C.  2348;    Bill  v.  Beckwith, 

F.  C.   5533;    Jobbins  v.  Montague,  2  N.  B.  R.  82,   F.  C.   1406;  Stores 

6  N.  B.  R.  509,  F.  C.  7330;    In  re  v.    Engel,    19    N.    B.    R.    90,    F.   C. 

Fendley,    10    N.    B.    R.    250,    F.    C.  13494;   Sanger  v.  Upton,  13  N.  B. 

4728;   Smith  v.  Mason.  6  N.  B.  R.  R.  226,  91  U.  S.  56. 
1,  14  Wall.  419  ;  In  re  Marter,  12         45  Bardes  v.   Hawarden  Bk.,  178 

N.   B.    R.    185,    F.    C.    9143;    In    re  U.   S.  524,   2  N.  B.  N.  R.  725,  4  A 

Bonesteel.  3  N.  B.  R.  127,  7  Blatch.  B.    R.    163;    See    also    Lathrop    v. 

175,    F.    C.    1627;     Harmanson    v.  Drake.  91  U.  S.  516. 
Bain,  15  N.  B.  R.  173,  1  Hughes, 


372  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2o 

the  fact  that  the  jurisdiction  conferred  by  the  Act  of  1867  was 
the  regular  jurisdiction  between  party  and  party  as  described 
in  the  Judiciary  Act  and  the  third  article  of  the  Constitution.^'" 
That  court  repeatedly  held  under  that  act  the  right  of  an  as- 
signee to  assert  a  title  in  property  transferred  by  the  bankrupt 
before  bankruptcy  and  claimed  by  a  third  person  adversely 
could  only  be  enforced  by  a  plenary  suit,  at  law  or  in  equity, 
under  such  second  section,  notwithstanding  the  broad  terms 
used  in  the  first  ;*'^  and  that  the  jurisdiction  of  the  United 
States  Courts  over  all  matters  of  bankruptcy  as  distinguished 
from  suits  at  law  or  in  equity  was  exclusive  and  as  to  such 
suits  they  had  concurrent  jurisdiction  with  the  state  courts. 
The  similarity  of  section  two  of  the  Act  of  1898  to  section  one 
of  the  Act  of  1867  and  the  omission  of  any  provision  like  that 
in  section  two  of  the  Act  of  1867  was  then  noted  and  the  court 
reached  the  conclusion  that,  under  the  Act  of  1898,  there  was 
no  such  concurrent  jurisdiction  as  there  was  under  the  former 
act  between  the  United  States  and  state  courts  of  suits  between 
the  trustee  and  adverse  claimants  of  property  alleged  to  be- 
long to  the  bankrupt.  This  decision  necessarily  overruled  the 
decisions  under  the  Act  of  1898*^  holding  the  contrary,  and 

■te  Morgan  v.  Thornhill,  11  Wall.  R.   88;    In  re  Murphy,  2  N.  B.  N. 

65,  76,  80.  R.  393,  3  A.  B.  R.  499;  In  re  Wood- 

*T  Smith  V.  Mason,  14  Wall.  419;  bury,  2  N.  B.  N.  R.  284,  98  F.  R. 

Marshall    v.    Knox.    16    Wall.  551,  833,  3  A.  B.  R.  457;   In  re  Cobb,  1 

557;    Eyster  v.  Gaff,  91  U.  S.  521,  N.  B.  N.  557,  96  F.  R.  821,  3  A.  B. 

525.  R.  129 ;  In  re  Booth,  1  N.  B.  N.  476, 

i8  Leidigh  Car  Co.  v.   Stengel,  1  96  F.  R.  843,  2  A.  B.  R.  770 ;  In  re 

N.  B.  N.  387,  95  F.  R.  637,  2  A.  B.  Smith,  1  N.  B.  N.  356,  92  F.  R.  135. 

R.   383;    In  re  Russell,   101   F.    R.  2  A.  B.  R.  9;   Keegan  v.  King,  96 

248,  3  A.  B.  R.  658;  In  re  Francis-  F.    R.   758,   3   A.   B.   R.   79;    In   re 

Valentine  Co.,  1  N.  B.  N.  529,  94  F.  Kletchka,  92  F.  R.  901,  1  A.  B.  R. 

R.  793,  2  A.  B.  R.  522;   Affg.  1  N.  479,  1.  N.  B.  N.  160;  In  re  Kenney, 

B.  N.  532,  93  F.  R.  953,  2  A.  B.  R.  2  N.  B.  N.  R.  140,  97  F.  R.  554,  3 

188;    In   re   Baudouine,   101    F.   R.  A.  B.  R.  353;   s.  c.  1  N.  B.  N.  401, 

574,  3  A.  B.  R.  651,  overruling  1  N.  95  F.  R.  427,  2  A.  B.  R.  494;   In  re 

B.  N.  506,  96  F.  R.  536,  3  A.  B.  R.  Nathan,  1  N.  B.  N.  563,  92  F.  R. 

55;   In  re  Corbett,  1  N.  B.  N.  326;  590;    In   re   Fellerath,   1  N.   B.   N. 

Carter  v.  Hobbs,  1  N.  B.  N.  191,  1  292,  95  F.  R.  121,  2  A.  B.  R.  40;  In 

A.  B.  R.  215,  92  F.  R.  594 ;  s.  c.  1  re  Crystal  Springs  Bottling  Co.,  3 

N.  B.  N.  529,  94  F.  R.  108,  2  A.  B.  A.  B.  R.  194,  96  F.  R.  945;    In  re 

R.  224;  Wall  v.  Cox,  101  F.  R.  403;  Fixen,  2  N.  B.  N.  R.  885,  102  F.  R. 

Hall  V.  Kincell,  2  N.  B.  N.  R.  745,  295,  4  A.  B.  R.  10;  s.  c.  1  N.  B.  N. 

102  F.  R.  301;  Robinson  v.  White,  568,  96  F.  R.  748,  2  A.  B.  R.  822; 

1  N.  B.  N.  513,  97  F.  R.  33,  3  A.  B.  Lehman  v.  Crosby.   2  N.  B.  N.  R. 


Ch.  23        JURISDICTION    OVER    SUITS    OF    TRUSTEES. 


373 


made  inapplicable  a  number  of  decisions  under  the  former 
act.^'*  This  decision  of  the  Supreme  Court  determined  that 
the  district  court  as  a  court  of  bankruptcy  had  no  jurisdiction 
of  any  suits,  at  law  or  in  equity,  independent  of  the  proceed- 
ings in  bankruptcy  as  such;  but  that  all  such  suits  should  be 
brought  in  the  proper  court,  which  is  ordinarily  a  state  court, 
unless  the  jurisdictional  requirements  exist  outside  of  the 
bankrupt  law  for  suing  in  a  federal  court;  or  it  may  inquire 
in  a  summary  way  as  to  an  adverse  claim  made  by  a  stranger, 
to  the  property,  and  if  the  claim  be  without  foundation,  order 
the  property  turned  over  to  the  trustee.^o  Property  in  the 
actual  possession  of  a  state  court,  draws  to  it  the  right  to 
decide  upon  conflicting  claims  to  its  ultimate  possession  and 
control.^^ 

§  581.  Illustrative  cases.— The  state  courts  have  jurisdic- 
tion, though  not  exclusive  in  all  cases,  of  actions  by  trustees 
in  bankruptcy  to  set  aside  fraudulent  conveyances,  assign- 
"ments  or  transfers  by  the  bankrupt  on  the  ground  of  their 


451,  99  F.  R.  542,  3  A.  B.  R.  662; 
Louisville  Tr.  Co.  v.  Marx,  98  F.  R. 
456,  3  A.  B.  R.  450;  In  re  Ham- 
mond, 98  F.  R.  845,  3  A.  B.  R.  466; 
Shutts  V.  Bk.,  2  N.  B.  N.  R.  320,  98 
F.  R.  705,  3  A.  B.  R.  492;  Pepper- 
dine  V.  Headley,  98  F.  R.  863,  3  A. 
B.  R.  455 ;  In  re  Newberry,  2  N.  B. 
N.  R.  56,  97  F.  R.  24,  3  A.  B.  R. 
158;  In  re  Kimball,  1  N.  B.  N. 
515,  97  F.  R.  29,  3  A.  B.  R.  161 ;  In 
re  Schloerb,  2  N.  B.  N.  R.  234,  97 
F.  R.  326,  3  A.  B.  R.  224;  Murray 
V.  Beal,  2  N.  B.  N.  R.  164,  97  F.  R. 
567,  3  A.  B.  R.  284;  In  re  Richard, 
1  N.  B.  N.  487,  94  F.  R.  633,  2  A.  B. 
R.  506;  In  re  Siever,  1  N.  B.  N.  68, 
1  A.  B.  R.  117,  91  F.  R.  366;  s.  c. 
as  Davis  v.  Bohle,  1  N.  B.  N.  216, 
92  F.  R.  325,  1  A.  B.  R.  412;  In  re 
Brooks,  1  N.  B.  N.  240,  91  F.  R. 
508,  2  A.  B.  R.  531;  In  re  Gutwil- 
lig,  1  N.  B.  N.  554,  92  F.  R.  337,  1 
A.  B.  R.  388,  Affg.  1  N.  B.  N.  40, 
90  F.  R.  475,  1  A.  B.  R.  78;  South- 
ern L.  &  T.  Co.  v.  Benbow,  1  N.  B. 
N.  499,  96  F.  R.  514,  3  A.  B.  R.  9; 


In  re  Etheridge  Furn.  Co.,  1  N.  B. 
N.  139,  92  F.  R.  329,  1  A.  B.  R.  112; 
In  re  Pittelkow,  1  N.  B.  N.  234,  92 
F.  R.  901,  1  A.  B.  R,  472;  In  re 
Norcross  v.  Nathan,  2  N.  B.  N.  R. 
405,  99  F.  R.  414,  3  A.  B.  R.  613; 
and  see  In  re  San  Gabriel  Sana- 
torium Co.,  2  N.  B.  N.  R.  827,  102 
F.  R.  310,  4  A.  B.  R.  197. 

49  Claflin  V.  Houseman,  15  N.  B. 
R.  50;  Samson  v.  Burton,  4  N.  B. 
R.  1,  5  Ben.  343,  F.  C.  12285;  Pay- 
son  V.  Dietz,  8  N.  B.  R.  193,  2  Dill. 
504,  F.  C.  10861;  Gilbert  v.  Priest, 
8  N.  B.  R.  159;  Kidder  v.  Hornbin, 
18  N.  B.  R.  146;  Wente  v.  Young, 
17  N.  B.  R.  90;  Goodrich  v.  Wilson, 
14  N.  B.  R.  555;  Blake  v.  Ala.  & 
Chatt.  R.  R.  Co.,  6  N.  B.  R.  331, 
F.  C.  1493. 

50  In  re  Tune,  8  A.  B.  R.  285; 
Wall  V.  Cox,  181  U.  S.  244,  5  A. 
B.  R.  727. 

51  Metcalf  Bros.  v.  Barker,  187  U. 
S.  165;  in  re  Lemmon  &  Gale  Co., 
112  F.  R.  292,  7  A.  B.  R.  291;  In  re 
Shoemaker,  7  A.  B.  R.  437. 


374 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch.  23 


being  void  at  common  law,  or  as  a  preference,  or  as  being  in 
contravention  of  the  bankruptcy  act,'^^  -which  jurisdiction  is 
by  the  amendment  of  February  5,  1903,  shared  by  the  bank- 
ruptcy court;  to  foreclose  mortgages  after  leave  had  from 
the  bankruptcy  court,  the  trustee  being  a  party ,^^  but  it  is 
discretionary  with  the  bankruptcy  court  whether  to  grant  such 
leave  or  have  the  property  sold  under  its  direction  by  the 
trustee  ;^^  of  the  trustee  against  adverse  claimant  of  bank- 
rupt's property ;^5  to  quiet  title;  ^^  to  reduce  choses  in  action 
to  money  or  to  recover  possession  of  the  property  of  the  bank- 
rupt and  to  sell  such  property  to  satisfy  a  judgment  rendered 
in  favor  of  the  trustee,   or  to  set  aside  fraudulent  convey- 


52  Robinson  v.  White,  1  N.  B.  N. 
513,  3  A.  B.  R.  88,  97  F.  R.  33; 
Hicks  V.  Knost,  178  U.  S.  541,  2  N. 
B.  N.  R.  734;  s.  c.  1  N.  B.  N.  336, 
2  A.  B.  R.  153,  94  F.  R.  625;  Car- 
ter V.  Hobbs,  1  N.  B.  N.  191,  1  A. 
B.  R.  215,  92  F.  R.  594;  Norcross  v. 
Nathan,  2  N.  B.  N.  R.  405,  99  F. 
R.  414,  3  A.  B.  R.  613;  Cox  v.  Wall., 
2  N.  B.  N.  R.  572,  99  F.  R.  546,  3 
A.  B.  R.  664;  Perkins  v.  McCauley, 
98  F.  R.  286,  3  A.  B.  R.  445;  Bur- 
nett V.  Mercantile  Co.,  1  N.  B.  N. 
138,  91  F.  R.  365,  1  A.  B.  R.  221; 
In  re  Abraham,  1  N.  B.  N.  281,  2 

A.  B.  R.  266,  93  F.  R.  767,  779  ;  In 
re  Corbett,  1  N.  B.  N.  326;  In  re 
Murphy,  2  N.  B.  N.  R.  393,  3  A.  B. 
R.  499;  In  re  Woodbury,  2  N.  B.  N. 
R.  284,  98  F.  R.  833,  3  A.  B.  R.  457; 
In  re  Cobb,  1  N.  B.  N.  557,  3  A.  B. 
R.  129,  96  F.  R.  821;  In  re  New- 
berry, 2  N.  B.  N.  R.  56,  3  A.  B.  R. 
158,  97  F.  R.  24;  Isett  v.  Stuart, 
16  N.  B.  R.  191,  Gilbert  v.  Priest, 
8  N.  B.  R.  159;  but  see  Voorhees 
V.  Frisbie,  8  N.  B.  R.  152;  Claflin 
V.  Houseman,  15  N.  B.  R.  49,  93  U. 
S.  130;  Kemmemer  v.  Tool,  12  N. 

B.  R.  334;  Jordan  v.  Downey,  12 
N.  B.  R.  427;  Goodrich  v.  Wilson, 
14  N.  B  R.  555;  Peiper  v.  Harmer, 
5  N.  B.  R.  252;  State  v.  Dewey,  5 
N.  B.  R.  466;  In  re  Cent.  Nat.  Bk., 


6  N.  B.  R.  207,  F.  C.  2547;  Damb- 
mann  v.  White,  12  N.  B.  R.  438; 
but  see  Bingham  v.  Claflin,  7  N.  B. 
R.  412;  Bromley  v.  Goodrich,  15 
N.  B.  R.  289;  McKenna  v.  Simpson, 
129  U.  S.  506. 

53  In  re  Pittelkow,  1  N.  B.  N. 
234,  1  A.  B.  R.  472,  92  F.  R.  901; 
In  re  Brooks,  1  N.  B.  N.  240,  91 
F.  R.  508,  2  A.  B.  R.  531;  Heath  v. 
Shaffer,  1  N.  B.  N.  399,  2  A.  B.  R. 
98,  93  F.  R.  647;  In  re  Booth,  1  N. 
B.  N.  476,  2  A.  B.  R.  770,  96  F.  R. 
943;  Burlingame  v.  Parce,  17  N.  B. 
R.  246;  McHenry  v.  La  Societe 
Francaise,  16  N.  B.  R.  385,  95  U. 
S.  581;    Brown  v.  Gibbons,  13   N. 

B.  R.  407;  Reed  v.  Bullington,  11 
N.  B.  R.  408. 

54  In  re  Pittelkow,  supra;  In  re 
Booth,  supra;  In  re  Brooks,  supra; 
In  re  Devore,   16  N.   B.  R.  56,  F. 

C.  3847. 

55  Mitchell  V.  McClure,  178  U.  S. 
539,  2  N.  B.  N.  R.  735;  s.  c.  1  N. 
B.  N.  138,  1  A.  B.  R.  53,  91  F.  R. 
621;  Blumberg  v.  Bryan,  107  F.  R. 
673,  6  A.  B.  R.  20. 

56  Murray  v.  Beal,  2  N.  B.  N.  R. 
164,  3  A.  B.  R.  284,  97  F.  R.  567. 

57  In  re  Gerdes,  2  N.  B.  N.  R. 
131.  102  F.  R.  318,  4  A.  B.  R.  346; 
Heath  v.  Shaffer.  1  N.  B.  N.  399,  2 
A.  B.  R.  98,  93  F.  R.  647. 


Ch.  23       JURISDICTION    OVER    SUITS    OF    TRUSTEES.  375 

ances;^"  to  collect  a  debt  due  the  estate  ;^^  to  enforce  a  valid 
lien  by  a  qualified  judgment  limited  to  the  property  encum- 
bered.^^ As  further  illustrative  of  the  jurisdiction  of  the  state 
courts  there  are  a  number  of  cases  decided  under  the  Act  of 
1867,  which  may  be  consulted,  but  in  so  doing  it  should  be 
borne  in  mind  that  the  state  courts  now  have  jurisdiction  of 
many  cases  that,  under  the  Act  of  1867,  were  tried  in  the 
United  States  district  courts.^^ 

§  582.  When  state  courts  do  not  have  jurisdiction.— Imme- 
diately upon  the  commencement  of  proceedings  in  bankruptcy, 
if  the  bankrupt's  estate  is  in  process  of  settlement  by  the 
state  courts,  further  proceedings  should  be  stayed,*^^ 
as,  in  proceedings  in  bankruptcy  as  distinguished 
from  controversies  "arising  in  bankruptcy  proceedings,"  the 
courts  of  bankruptcy  have  exclusive  jurisdiction,^-  and  obtain 
complete  control  over  the  property  in  the  possession  of  the 
bankrupt  and  scheduled  as  owned  by  him  from  the  filing  of 
the  petition,  while  it  is  brought  in  custodia  legis  from  the  date 
of  adjudication.  It  is  not,  therefore,  subject  to  interference 
by  any  other  court  until  such  jurisdiction  is  divested,^^  even 
though  a  state  court  may  have  obtained  possession  of  the 
property  under  a  voluntary  general  assignment,  or  otherwise, 
and  be  administering  it  thereunder,  as  its  jurisdiction  to  pro- 
ceed will  at  once  cease.^^  Accordingly  when  the  bankruptcy 
jurisdiction  becomes  vested,  a  state  court  has  no  authority  to 

58  In  re  Goldberg,  1  A.  B.  R.  385;  R.  393,  3  A.  B.  R.  499;  Thornhill 
Russell  V.  Owen,  15  N.  B.  R.  322.  v.  Bk.,  3  N.  B.  R.  110,  F.  C.  13990. 

59  Stoddard  v.  Locke,  9  N.  B.  R.  63  in  re  Schloerb,  2  N.  B.  N. 
73.  R.   234,   3     A.    B.     R.     224,     97    F. 

60  In  re  Davis,  8  N.  B.  R.  167,  F.  R.  326;  White  v.  Schloerb,  178 
C.  3619;  Stevens  v.  Brown,  11  N.  U.  S.  542,  4  A.  B.  R.  178;  In  re 
B.  R.  568;  Johnson  v.  Bishop,  8  N.  Emslie.  102  F.  R.  290,  2  N.  B.  N.  R. 

B.  R.  533,  F.  C.  7373;  In  re  Mann-  992;  In  re  Murphy,  2  N.  B.  N.  R. 
heim,  7  N.  B.  R.  342,  6  Ben.  270.  F.  393,  3  A.  B.  R.  499;  In  re  Horgan, 

C.  9038;  Mason  v.  Warthen,  14  N.  2  N.  B.  N.  R.  233,  2  A.  B.  R.  253, 
B.  R.  346.  98  F.  R.  414 ;  In  re  Barrow.  1  N.  B. 

61  In  re  McKee,  1  N.  B.  N.  139,  R.  125,  F.  C.  1057;  In  re  Solomon, 
1  A.  B.  R.  311;  see  also  Watson  v.  2  N.  B.  N.  R.  460;  In  re  Gerdes,  2 
Bk.,  11  N.  B.  R.  161.  2  Hughes,  200,  N.  B.  N.  R.  131,  102  F.  R.  318,  4 
F.  C.  17279;  In  re  Noonan,  10  N.  A.  B.  R.  346;  Smith  v.  Buchanan. 
B.  R.  330,  F.  C.  10292;  contra.  Ap-  4  N.  B.  R.  133,  F.  C.  13016;  Hewett 
pleton  V.  Bowles,  9  N.  B.  R.  354.  v.    Norton,    13    N.    B.    R.    276,    1 

62  Bardes  v.   Hawarden  Bk.,   178  Woods,  68  F.  C.  644;  see  also  cases 
U.  S.  524.  2  N.  B.  N.  R.  725,  4  A.  B.  cited  sec.  11a  of  act  of  1898,  ante. 
R.  163;   In  re  Murphy,  2  N.  B.  N.  64  Lea  v.  Geo.  M.  West  Co.,  174 


376  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  33 

issue  a  writ  of  replevin  against  property  in  the  trustee's  pos- 
session,^^ nor  punish  a  bankrupt  for  contempt  for  failing  to 
obey  an  order  to  pay  costs  pending  the  bankruptcy  proceed- 
ings,^*^ but  this  is  not  so  if  he  were  summoned  to  appear  and 
filed  a  petition  in  bankruptcy  between  the  time  of  the  service 
and  the  date  fixed  for  his  examination.*''^ 

§  583. Rule  governing  state  courts.— While  it  is  true 

that  Congress  cannot  require  state  courts  to  administer  the 
bankrupt  law  or  enforce  rights  and  duties  created  by  any 
other  federal  law,''^  it  is  equally  true  that  the  state  courts 
must  obey  the  bankrupt  law,  as  any  other  constitutional  law, 
and  hence,  while  not  administering  federal  laws  except  by 
comity,  if  it  appears  that  by  virtue  of  the  bankrupt  law  the 
state  court  has  no  jurisdiction  of  an  action  pending  therein, 
it  will  so  decide  upon  proper  plea.^^  But  in  the  suits  brought 
by  or  against  a  trustee  in  bankruptcy,  a  state  court  is  not 
acting  under  the  bankruptcy  law,  but  merely  recognizes  it  as 
the  source  of  its  title.'^*'  An  attachment  issued  by  a  state 
court  more  than  four  months  before  the  commencement  of 
proceedings  in  bankruptcy  will  not  be  dismissed  ;'^^  but,  if 
issued  within  that  period,  it  will  be  dissolved,  though  judgment 
has  been  entered,  sale  made  and  proceeds  paid  to  attaching 
creditor.'^- 

§  584. Acts  of,  which  bind  federal  courts.— Acts  done 

U.  S.  590,  1  N.  B.  N.  409,  2  A.  B.  R.  U.  S.  542,  2  N.  B.  N.  R.  234,  3  A.  B. 

463;   s.  c.  1  N.  B.  N.  79,  1  A.  B.  R.  R.  224,  97  F.  R.  326. 

261,   91  F.   R.  237;  Bryan  v.  Bern-  66  in  re  Summers,  1  N.  B.  N.  60. 

heimer,    181    U.   S.  188,    5    A.    B.  67  Cent.  Nat.  Bk.  v.  Graham,  1  N. 

R.   623;    Leidigh   Car   Co.  v.  Sten-  B.  N.  59. 

gel,    1    N.    B.    N.    387,    2    A.    B.  es  in  re  Woodbury,  2  N.  B.  N.  R. 

R.  383,  95  F.  R.  637;  In  re  Gutwil-  284,  98  F.  R.  833,  837,  3  A.  B.  R. 

lig,  1  N.  B.  N.  40,  1  A.  B.  R.  78,  90  457 ;  citing  Sherman  v.   Bingham, 

F.  R.  475;  s.  c.  1  N.  B.  N.  554,  92  F.  C.  12762;   Goodall  v.  Tuttle,  Id. 

F.  R.  337;  In  re  Sievers,  1  N.  B.  N.  5533,  7  N.  B.  R.  193,  3  Biss.  219; 

68,  1  A.  B.  R.  117,  91  F.  R.  366;  Martin     v.      Hunter's     Lessee,      1 

s.  c.  as  Davis  v.  Bohle,  1  N.  B.  N.  Wheat.     304,     330;     Robertson    v. 

216,  1  A.  B.  R.  412,  92  F.  R.  329;  Baldwin,  165  U.  S.  275. 

S.  L.  &  T.  Co.  V.  Benbow,  1  N.  B.  69  in  re  Cent.  Bk.,  6  N.  B.  R.  207, 

N.  499,  3  A.  B.  R.  9,  96  F.  R.  514;  F.  C.  2547. 

In  re  Merchants  Ins.  Co.,  6  N.  B.  -o  Cook  v.  Waters,  9  N.  B.  R.  155. 

R.  43,  3  Biss.  162;  In  re  Bousfield,  7i  Munson  v.  R.  R.  Co.,  14  N.  B. 

17  N.  B.  R.  153,  F.  C.  1704.  R.  173. 

6f  In  re  Russell,  101  F.  R.  248,  3  72  Dickerson  v.  Spaulding,  15  N. 

A.  B.  R.  658;   In  re  Schloerb,  178  B.  R.  213. 


Ch.  2'.]         JURISDICTION    OVER    SUITS    OF    TRUSTEES.  377 

by  state  courts  in  the  proper  exercise  of  their  jurisdiction  and 
not  in  conflict  with  the  decrees  or  jurisdiction  of  federal  courts, 
are  valid  and  bind  such  federal  courtsJ^  Whenever  a  trustee 
in  bankruptcy  voluntarily  submits  himself  to  the  jurisdiction 
of  a  state  court,  he  cannot,  after  judgment,  object  to  the 
power  of  such  court,  and  a  federal  court  cannot  assume  juris- 
dictionJ^  In  general,  decisions  of  state  courts  are  not  binding 
on  the  bankruptcy  court,  although  provisions  in  the  state 
insolvent  laws  may  be  similar  to  those  of  the  bankrupt  act.'*^ 

§  585.  Determination  of  existence  of  adverse  claim.— The 
mere  refusal  to  surrender  property,  or  the  assertion  by  a 
person  that  he  holds  an  adverse  claim  thereto,  does  not  con,- 
stitute  an  adverse  holding  and  will  not  oust  the  summary 
jurisdiction  of  the  bankruptcy  court  to  ascertain  whether 
any  basis  for  such  claim  actually  exists.  The  court  of  bank- 
ruptcy or  referee  has,  therefore,  the  imdoubted  power  to 
examine  into  the  claim  and  determine  whether  it  is  merely 
colorable  or  not.''"^ 

§  586.  'c.  Concurrent  jurisdiction  over  offenses.  —  The 
"United  States  circuit  courts  shall  have  concurrent  jurisdic- 
'tion  with  the  courts  of  bankruptcy,  within  their  respective 
'territorial  limits,  of  the  offenses  enumerated  in  this  Act.' 

§  587.  Practice. — Courts  of  bankruptcy  are  invested,  within 
their  territorial  limits,  with  jurisdiction  to  arraign,  try  and 
punish  bankrupts,  officers  and  other  persons,  and  the  agents, 
officers,  members  of  the  board  of  directors  or  trustees,  or  other 
similar  controlling  bodies,  of  corporations  for  violations  of 
this  act,  in  accordance  with  the  laws  of  procedure  of  the 
United  States  now  in  force,  or  such  as  may  hereafter  be 
enacted,  regulating  trials  for  the  alleged  violation  of  laws  of 
the  United  States.'^^  This  subdivision  has  no  applicability  to 
civil  actions;  the  "offenses  enumerated"  meaning  the  crimes 
described  in  section  29  of  the  law.'^^ 

T4  Robinson   v.   White,   97   F.  R.  77  Mueller  v.  Nugent,  183  U.  S.  1, 

33,  1  N.  B.  N.  513,  3  A.  B.  R.  88;  7  A.  B.  R.  224;  In  re  Tune,  8  A.  B. 

In  re  Keiler,  18  N.  B.  R.  10,  F.  C.  R.  285;  Jaquith  v.  Rowley,  187  U. 

7647.  S.  — ;   In  re  Waukesha  Water  Co., 

T5  Scott  V.  Kelly,  12  N.  B.  R.  96,  116  F.  R.  1009,  8  A.  B.  R.  715. 

22  Wall.   57;    Winchester  v.   Heis-  "^  Sec.  2  (4),  act  of  1898. 

kell,  119  U.  S.  450,  120  U.  S.  273;  to  Gk)odier  v.  Barnes.  1  N.  B.  N. 

Ludeling  v.  Chaffee,  143  U.  S.  301.  383,  2  A.  B.  R.  328,  94  F.  R.  798. 

-<■'  In  re  Knight,  8  N.  B.  R.  436, 
F.  C.  7880. 


■588. 

(24a)   Appellate  Courts. 

594. 

589. 

For    controversies    aris- 

ing in  bankruptcy  proceed- 

595. 

ings. 

596. 

590. 

Statutory    provisions    as    to 

appeals    generally — To    Su- 

597. 

preme  Court. 

598. 

591. 

To    Circuit    Courts    of 

Appeals. 

599. 

592. 

From    highest  court    of 

600. 

a  state. 

601. 

593. 

When  and  how  allowed. 

602. 

CHAPTER  XXIV. 
JURISDICTION    OF   APPELLATE   COURTS. 

Certification  of  questions  by 
Circuit  Courts  of  Appeals. 

Certiorari. 

b.  Circuit  Courts  of  Ap- 
peals;   jurisdiction. 

■  In  general. 

What  may  be  reviewed. 

What  may  not  be  re- 
viewed. 

Petition   for   review. 

Who  may  present  petition. 

Finality  of  decision. 

§588.  '(See.  24a)  Appellate  courts.— The  Supreme  Court 
*of  the  United  States,  the  circuit  courts  of  appeals  of  the 
'United  States,  and  the  supreme  courts  of  the  Territories,  in 
'vacation  in  chambers  and  during  their  respective  terms,  as 
'now  or  as  they  may  be  hereafter  held,  are  hereby  invested 
'with  appellate  jurisdiction  of  controversies  arising  in  bank- 
'ruptcy  proceedings  from  the  courts  of  bankruptcy  from 
'which  they  have  appellate  jurisdiction  in  other  cases.  The 
'Supreme  Court  of  the  United  States  shall  exercise  a  like 
'jurisdiction  from  courts  of  bankruptcy  not  within  any  or- 
''ganized  circuit  of  the  United  States  and  from  the  Supreme 
'Court  of  the  District  of  Columbia.'^ 

§  589.  Appellate  courts  for  controversies  arising  in  bank- 
ruptcy proceedings.— To  all  intents  and  purposes  the  session 
of  the  appellate  courts  is  continuous  throughout  the  year,  as 
they  are  invested  with  appellate  jurisdiction  of  controversies 
arising  in  bankruptcy  proceedings,  in  vacation  in  chambers 
and  during  their  respective  terms.  The  right  of  appeal  is 
limited  to  controversies  arising  in  bankruptcy  proceedings, 
that  is  suits  by  or  against  the  trustee  in  cases  of  persons 
claiming  an  adverse  interest,  or  owing  debts  to  the  bankrupt, - 

1  Act  of  1867.  For  analogous  pro-         2  in  re  Adler,  3  N.  B.  N.  R.  15, 
visions  see  sees.  8  and   24,  which     103  F.  R.  444,  4  A.  B.  R.  583. 
follow  section  25  of  this  act. 

378 


Ch.  24 


APPELLATE    COURTS. 


379 


in  the  courts  of  bankruptcy,  which  here  means  only  the  dis- 
trict courts,  and  not  to  the  rulings  or  action  of  either  referee 
or  trustee.  Under  this  section  appeals  from  the  Supreme 
Court  of  the  District  of  Columbia  are  taken  immediately  to 
the  Supreme  Court  of  the  United  States  instead  of  through 
the  Court  of  Appeals  of  the  District.  Section  25  provides  for 
the  class  of  cases  that  may  be  reviewed,  and  fixes  the  time 
for  the  same.  A  comparison  of  sections  23,  24  and  25  will 
show  that  section  23  clearly  indicates  a  distinction  between 
"controversies  arising  in  bankruptcy  proceedings,"  and  "pro- 
ceedings in  bankruptcy ; ' '  that  section  24a  provides  for  appeals 
in  the  former  and  section  25a  in  the  latter.  Section  25a  leaves 
appeals  in  "controversies  arising  in  bankruptcy  proceedings" 
to  be  determined  by  the  general  provisions  of  the  statutes, 
under  this  section.^ 

§  590.    Statutory   provisions    as    to   appeals   generally— to 
Supreme  Court.^— The  Act  of  March  3,  1891,^  establishing  the 

3  Shutts,  Tr.  V.  1st  Nat.  Bk.,  2 
N.  B.  N.  R.  320,  323,  98  F.  R.  705,  3 
A.  B.  R.  492;  First  Nat.  Bk.  of 
Denver  v.  Klug,  186  U.  S.  202,  8 
A.  B.  R.  12;  compare  Walter  Scott 
&  Co.  V.  Wilson,  115  F.  R.  284. 

■i  The  following  statutory  pro- 
visions have  particular  reference 
to  the  jurisdiction  of  the  Supreme 
Court: 

U.  S.  Rev.  Stat.,  sees.  687-710, 
5261. 

The  act  of  April  7.  1874,  ch.  80 
(1  Supp.  R.  S.  7),  which  provides 
that  the  appellate  jurisdiction  of 
the  Supreme  Court  over  judgments 
and  decrees  of  territorial  courts, 
in  cases  of  trial  by  jury,  shall  be 
by  writ  of  error,  and  in  other  cases 
by  appeal,  etc. 

The  act  of  Feb.  16,  1875,  ch.  77, 
sec.  1  (1  Supp.  R.  S.  62,  63),  limits 
the  review  of  the  Supreme  Court 
of  decrees  of  circuit  courts  in  ad- 
miralty casec  to  questions  of  law 
arising  on  findings  of  fact  to  be 
made  in  such  cases  by  circuit 
courts. 


The  act  of  March  3,  1885.  ch.  353 
(1  Supp.  R.  S.  485),  provides  for 
an  appeal  to  the  Supreme  Court  in 
cases  of  habeas  corpus. 

The  act  of  March  3,  1885,  ch.  353 
(1  Supp.  R.  S.  485),  regulates  ap- 
peals from  the  Supreme  Court  of 
the  District  of  Columbia  and  the 
territories. 

The  act  of  Aug.  13,  1888,  ch.  866, 
sees.  1,  6  (1  Supp.  R.  S.  613,  614), 
takes  away  the  right  of  review  by 
the  Supreme  Court  of  orders  of 
circuit  courts  remanding  causes  to 
state  courts. 

The  act  of  Feb. '25,  1889,  ch.  266 
(1  Supp.  R.  S.  650),  provides  for 
writs  of  error  or  appeals  to  the 
Supreme  Court  in  cases  involving 
the  question  of  the  jurisdiction  of 
circuit  courts. 

The  act  of  March  3,  1891  (1 
Supp.  R.  S.  901),  creating  the  Cir- 
cuit Courts  of  Appeals. 

5  1  Supp.  R.  S.  901,  26  U.  S. 
Stat.  826;  commonly  called  the 
Evarts  Act, 


380  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2i 

circuit  courts  of  appeals,  fixes  the  appellate  jurisdiction  of 
the  United  States  courts.  Appeals  or  writs  of  error  may  be 
taken  from  the  circuit  or  district  courts  direct  to  the  Supreme 
Court  in  any  case  in  which  the  jurisdiction  of  the  court  is  in 
issue,  in  which  case  only  the  question  of  jurisdiction  shall  be 
certified;"  in  any  case  that  involves  the  construction  or  appli- 
cation of  the  Constitution  of  the  United  States;'^  or  in  which 
the  constitutionality  of  any  law  of  the  United  States,  or  the 
validity  or  construction  of  any  treaty  made  under  its  author- 
ity, is  drawn  in  question ;  or  in  which  the  constitution  or  a 
law  of  a  state  is  claimed  to  be  in  contravention  of  the  Con- 
stitution of  the  United  States,^  in  which  three  latter  cases  the 
Supreme  Court  passes  on  the  whole  case,^  and  under  any  of 
which  a  controversy  in  bankruptcy  proceedings  may  arise. 

In  all  cases  not  made  final  in  the  Circuit  Court  of  Appeals, 
an  appeal  or  writ  of  error  lies  to  the  Supreme  Court  if  the 
amount  involved  exceeds  one  thousand  dollars  besides  costs, 
and  in  such  case  the  record  must  show  that  the  question  on 
which  the  appeal  is  based  was  brought  to  the  attention  of 
the  lower  court.^*' 

§  591.  Appeals  to  circuit  courts  of  appeals.— Except  in  the 
cases  above  mentioned  the  circuit  courts  of  appeals  review  on 
appeal  or  writ  of  error  the  final  decisions  of  the  circuit  and 
district  courts  and  their  judgment  is  final  in  all  cases  depend 
ing  on  diversity  of  citizenship  and  in  all  cases  arising  under 
the  patent,  revenue  or  criminal  laws  and  in  admiralty  cases.^^ 
Where  the  jurisdiction  of  the  circuit  or  district  court  is  in 
issue,  an  appeal  may  be  taken  to  the  Supreme  Court  on  the 
question  of  jurisdiction  or  to  the  circuit  court  of  appeals  on 
the  merits,  but  appellant  will  be  bound  by  his  election,!^  but 
after  an  appeal  to  the  circuit  court  of  appeals  in  a  case  involv- 
ing the  construction  of  the  Constitution  of  the  United  States, 
the  case  may  be  taken  to  the  Supreme  Court.^^ 

6  Bldg.  &  Loan  Ass'n  v.  Price,  lo  Muse  v.  Hotel  Co.,  168  U.  S. 
169  U.  S.  45;  First  Nat.  Bk.  of  Den-     430. 

ver  et  al.  v.  Klug  et  aL,  186  U.  S.         n  Ex   p.    Jones,    164    U.    S.    691; 

202,  8  A.  B.  R.  12.  Carey  v.  H.   &  T.    Ry.,   161   U.    S. 

7  Walla  Walla  v.  Walla  Walla  115;  Sonnentheil  v.  Moerlein  Brew- 
Water  Co.,  172  U.  S.  1.  ing  Co.,  172  U.  S.  401. 

8  Penn.  Ins.  Co.  v.  Austin,  168  12  Benjamin  v.  New  Orleans,  169 
U.  S.  685.  U.  S.  161. 

!'  Carey  v.  Houston  &  T.  Ry.,  1-  Pullman  Car  Co.  v.  Central 
150  U.  S.  170.  Transportation  Co.,  171  U.  S.  138. 


Ch.  -^4  APPELLATE    COURTS.  381 

The  Circuit  Court  of  Appeals  has  power  to  review  on  appeal 
the  action  of  a  circuit  or  district  court  granting  or  refusing  an 
interlocutory  injunction  in  a  hearing  in  equity,  but  not  ap- 
pointing a  receiver  unless  an  injunction  issues  also;!-'  and,  as 
a  bankruptcy  proceeding  may  be  equitable,  this  would  prob- 
ably apply  to  an  injunction  granted  in  bankruptcy  proceed- 
ings. An  appeal  to  the  circuit  court  of  appeals  may  also  be 
taken  in  all  prosecutions  for  offenses  in  bankruptcy.  The 
decision  of  the  district  court  in  "controversies"  between  the 
trustee  and  a  stranger  to  the  bankruptcy  proceedings,  at  law 
or  in  equity,  may  be  reviewed;!^  as  a  final  decree  of  a  district 
court  taking  jurisdiction  of  a  bill  in  equity  by  a  trustee 
against  a  stranger,  a  citizen  of  the  same  state  as  the  bank- 
rupt, to  set  aside  an  alleged  fraudulent  conveyance ;!''  or  an 
independent  suit  in  the  nature  of  an  equitable  replevin ;!"  or 
a  decision  of  a  circuit  court  failing  to  find  on  the  question  oi 
fraud  and  ruling  that  the  cause  of  action  was  merged  in  the 
judgment  and  fraud  could  not  be  inquired  into  ;^^  or  in  a  case 
involving  a  copyright. !^'  In  those  cases  in  which  the  amount 
to  authorize  an  appeal  is  in  controversy,  it  may  be  showTi  by 
affidavit  and  need  not  appear  in  the  pleadings.-''  The  denial 
of  a  right  to  intervene  in  a  bankruptcy  proceeding,  not  being 
a  final  order  or  decree,  is  not  appealable. ^^ 

§  592.  Appeals  from  highest  court  of  a  state.— As  the 
trustee  is  authorized  to  sue  in  the  state  courts  and  must  do 
so  in  many  cases,  the  provisions  as  to  the  review  of  such  cases 
by  the  Supreme  Court  of  the  United  States--  are  important. 
The  Supreme  Court  may  re-examine  on  writ  of  error  the  final 
judgment  or  decree  in  any  suit  in  the  highest  court  of  a  state, 
in  which  a  decision  in  the  suit  could  be  had,  where  is  drawTi 
in  question  the  validity  of  a  treaty  or  statute  of,  or  an  author- 

li  Highland  Ave.  R.  R.  v.  Equip-  pare  Walter  Scott  &  Co.  v.  Wilson, 

ment  Co.,  168  U.  S.  27;  In  re  Tarn-  8  A.  B.  R.  349. 

pa  R.  R.,  168  U.  S.  583.  i--  Packer  v.  Whittier,  1  N.  B.  N. 

15  Shutts   V.   Bk.,   2   N.   B.   N.   R.  99,  1  A.  B.  R.  621. 

320.  3  A.  B.  R.  492,  98  F.  R.  705 ;         lo  Press  Pub.  Co.  v.  Monroe,  164 

see  Boonville  Nat.  Bk.  v.  Blakey,  U.  S.  105. 

107  F.  R.  891,  6  A.  B.  R.  13.  20  u.  S.  v.  Freight  Ass'n.  166  U. 

16  In  re  Jacobs,   99  F.  R.  593,  3  S.  290. 

A.  B.  R.  671.  21  In    re    Columbia    Real    Estate 

1'  Stelling  &  Jones  Lumber  Co.,     Co.,  112  F.  R.  643,  7  A.  B.  R.  441. 
116  F.  R.  261,  8  A.  B.  R.  521:  com-         ■^■■^  Sec.  709  U.  S.  Rev.  Stat. 


382  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  M 

ity  exercised  under,  the  United  States,  and  the  decision  is 
against  their  validity ;  or  where  is  drawn  in  question  the 
validity  of  a  statute,  or  an  authority  exercised  under  any 
state,  on  the  ground  of  their  being  repugnant  to  the  Consti- 
tution, treaties,  or  laws  of  the  United  States,  and  the  decision 
is  in  favor  of  their  validity:  or  where  any  title,  right,  privi- 
lege, or  immunity  is  claimed  under  the  Constitution,  or  any 
treaty  or  statute  of,  or  commission  held  or  authority  exercised 
under,  the  United  States,  and  the  decision  is  against  the  title, 
right,  privilege,  or  immunity  specially  set  up  or  claimed  by 
either  party,  under  such  Constitution,  treaty,  statute,  com- 
mission, or  authority. 

Only  questions  of  law  can  be  exaioined;-^  and  the  amount 
involved  is  immaterial,  but  there  must  have  been  a  final  judg- 
ment or  decree  in  the  lower  court  ;-^  that  is,  there  must  not  be 
any  judicial  question  undetermined.-^  The  record  on  such 
appeal  includes  the  pleadings  and  judgment  in  an  action  at 
law  'and  the  bill  of  exceptions ;  or  the  pleadings,  evidence  and 
decree  in  equity;  and  if  the  local  practice  makes  it  part  of 
the  record,  the  opinion  of  the  court  may  be  considered.-^  The 
record  must  show  on  its  face  that  the  federal  question  was 
presented  to  the  state  court  ;-^  and,  if  either  party  claims  a 
right,  title,  privilege  or  immunity  under  the  United  States  or 
the  Constitution,  laws  or  treaties  thereof,  he  must  plead  it;^^ 
and  the  attention  of  the  state  court  must  have  been  directed 
to  it  in  time  for  consideration  before  deciding  the  case.-^  It 
is  not  sufficient  to  raise  such  question  first  on  a  motion  for  a 
new  trial  or  petition  for  rehearing,^*^  except  in  a  statutory 
proceeding  requiring  no  answer  and  where  the  defense  could 
not  be  made  earlier,^^  but  the  points  may  be  made  on  trial.^- 

23Egan  V.  Hart,  165  U.  S.  188.  com.  172  U.  S.  314;   Capital  Bk.  v. 

24  Clark  t.  Kansas  City,   172  U.  Cadiz  Bk.,  172  U'.  S.  425. 

S.  334.  3"  Pirn  v.  St.  Louis,  165  U.  S.  273; 

-'•-•  California  Bk.  v.  Stateler,  171  L.  &  N.  R.  R.  v.  Louisville,  166  U. 

U.  S.  447.  S.  709;  comp.  Meyer  v.  Richmond, 

-■'•  Thompson    v.    Maxwell    Land  172   U.   S.   82,   in   which,   however, 

Co.,  168  U.  S.  451.  the  state  court  may  have  decided 

27  Columbia  Water  Power  Co.  v.  on  a  non-federal  question,  see  dis- 
Railway  Co.,  172  U.  S.  475.  senting  opinion. 

28  Chi.  &  N.  W.  R.  V.  Chicago.  3i  c.  B.  &  Q.  R.  R.  v.  Chi.,  166 
164   U.   S.   454 ;   Pitts.,   etc.,   Ry.  v.  U.  S.  226. 

L.  &  T.  Co.,  172  U.  S.  493.  32  Backus  v.  Fort  Street  Co.,  169 

•-"J  Bellingham  Bay  v.  New  What-     U.  S.  557. 


Ch.  24:  APPELLATE    COURTS.  383 

The  decision  of  the  state  court  will  not  be  reviewed  if  it  can 
be  supported  on  some  other  ground,  though  a  federal  question 
was  passed  upon;^^  nor  unless  there  was  an  adverse  decision 
on  the  federal  question  ;■''•*  or  the  federal  question  was  directly 
involved.^'^  •  If  there  are  several  federal  questions  and  the 
state  court  considered  only  one,  the  Supreme  Court  will  not 
consider  the  others,^^  but  will  affirm  the  judgment  unless  the 
question  was  decided  erroneously.^^  In  case  the  question  at 
issue  is  as  to  the  validity  of  a  transfer  by  a  trustee  and 
whether  the  suit  is  barred  by  the  limitation  of  the  bankrupt 
act,  an  appeal  lies  to  the  Supreme  Court  from  a  state  court.-"*^ 

§  593.  When  and  how  appeals  allowed.— Appeals  to  the 
Circuit  Courts  of  Appeals  and  to  the  Supreme  Court  of  the 
United  States  must  be  allowed  by  the  judge  of  the  court  ap- 
pealed from  or  a  judge  of  the  court  appealed  to,  those  to  the 
Circuit  Court  of  Appeals  within  six  months,  the  period  of 
limitation  fixed  for  appeals  by  the  act  creating  that  court,^^ 
and  those  to  the  Supreme  Court  within  thirty  days  and  in 
such  the  lower  court  must  make  a  finding  of  facts  and  con- 
clusions of  law,  and  the  record  consists  only  of  these  findings 
and  the  pleadings  with  the  judgment  or  decree.*^  The  appel- 
lant, except  when  it  is  the  trustee,  must  file  a  bond  to  prosecute 
his  appeal  or  writ  of  error,  whether  from  state  or  federal 
courts. 

§  594.  Certification  of  questions  to  Supreme  Court  by  Cir- 
cuit Courts  of  Appeals.— The  Circuit  Court  of  Appeals  may  at 
any  time  within  its  discretion  certify  to  the  Supreme  Court  of 
the  United  States  any  questions  or  proposition  of  law  whether 
its  decision  would  be  final  or  not,  concerning  which  it  desires 
the  instruction  of  that  court  for  its  proper  decision.  The 
Supreme  Court  may  either  give  its  opinion  which  shall  bind 
the  Circuit  Court  of  Appeals  or  require  the  whole  record  and 

33  McQuade  v.  Trenton,  172  U.  S.  37  Laclede  Gas  Co.  v.  Murphy, 
636;   Bailsman  v.  Dixon,  173  U.  S.     170  U.  S.  78. 

113.  38  Traer  v.  Clews,  115  U.  S.  528. 

34  Castillo  V.  McConnico,  168  39  Boonvill  Nat.  Bk.  v.  Blakey, 
U.  S.  674.  107,  F.  R.  891,  8  A.  B.  R.  13 ;  Steele 

35Leyson  v.  Davis,  170  U.  S.  36;  v.  Buel,  104  F.  R.  968,  5  A.  B.  R. 

Briggs  V.  Walker,  171  U.  S.  466.  165;  1  Supp.  R.  S.  U.  S.  904,  §  11. 

36  Dewey  v.  Des  Moines,  170  U.         40  g.  O.  XXXVI;  sec.  25a,  Act  of 

S.  193.  1898. 


384  THE    NATIONAL    BANKRUPTCY    LAW.  Cll.  24. 

then  decide  it  as  if  ou  appeal  or  writ  of  error. ^'  While  the 
certilication  is  made  by  the  Circuit  Court  of  Appeals  of  its 
own  motion,  the  advisability  therefor  may  be  suggested  by 
counsel  though  not  by  formal  motion.  The  certification  should 
be  restricted  to  questions  of  law  and  not  seek  a  decision  of 
the  whole  ease,^-  nor  comprehend  mixed  questions  of  law  and 
fact.^3 

§  595.  Certiorari. — In  any  case  in  which  the  judgment  of 
the  Circuit  Court  of  Appeals  is  tinal,  the  Supreme  Court  may 
by  certiorari  or  otherwise  require  it  to  be  certified  for  its 
review  and  determination  as  if  it  had  been  carried  to  it  by 
appeal  or  writ  of  error.-*^  Application  for  the  issuance  of  this 
writ  should  be  addressed  to  the  Supreme  Court  and  will  not 
be  granted  except  in  its  discretion  and  then  only  in  matters 
of  gravity  and  general  importance.^^  While  no  time  limit  is 
fixed  by  law  or  the  rules  of  the  Supreme  Court  for  making 
this  application,  by  analogy  it  would  seem  to  be  limited  to  the 
period  of  one  year  fixed  generally  by  law  for  the  review  of 
decisions  of  the  Circuit  Court  of  Appeals. 

The  application  nuist  be  made  by  i)etition,  in  which  the 
title  is  A.  B.,  petitioner,  vs.  C.  D.,  respondent,  and  w^hich  must 
be  filed  in  the  office  of  the  Clerk  of  the  Supreme  Court  together 
with  a  certified  copy  of  the  entire  record,  including  the  pro- 
ceedings in  the  Circuit  Court  of  Appeals,  an  entry  of  appear- 
ance for  the  petitioner,  signed  by  a  member  of  the  bar  of  the 
Supreme  Court,  a  deposit  of  twenty-five  dollars  on  account 
of  costs,  and  between  fifteen  and  twenty  printed  copies  of  such 
certified  copy  of  the  record.  It  is  well  to  have  printed  fifty 
copies  for  use  on  the  final  hearing,  in  case  the  application, 
which  must  be  presented  in  open  court,  is  granted. 

§  596.     'b.     Circuit   Courts   of   Appeals,    jurisdiction.— The 

'several  circuit  courts  of  appeal  shall  have  jurisdiction  in 
'equity,  either  interlocutory  or  final,  to  superintend  and  revist' 
'in  matter  of  law  the  proceedings  of  the  several  inferior  courts 

41  Act  of  March  3,  1891.  par.  6,  R.  S.  903,  26  Stat.  L.  826.  sec.  6; 

1  Supp.  R.  S.  901,  26  Stat.  L.  826.  see  First  Nat.  Bk.  v.  Klug,  186  U. 

•♦^Warner   v.    New    Orleans,    167  S.  202.  8  A.  B.  R.  12. 
U.  S.  467.  +Mn   re  Woods,   143   U.   S.    202; 

4s  McHenry  v.  Alford.  168  U.  S.  Forsyth   v.    Hammond,    166    U.    S. 

651.  506. 

n  Act  of  March  3,  1891,  1  Supp. 


Cn.  'U  APPELLATE    COURTS.  385 

'of  bankruptcy  within  their  jurisdiction.  Such  power  shall 
'be  exercised  on  due  notice  and  petition  by  any  party  ag- 
'  grieved. '^"^ 

§  597.  Jurisdiction  in  general.— By  this  provision,  the  juris- 
diction of  the  circuit  courts  of  ai:)peals  is  limited  to  the  review 
in  matters  of  law  of  some  action  taken  or  order  made  in  the 
course  of  a  bankruptcy  proceeding  for  which  an  appeal  is  not 
provided,  and,  if  an  appeal  is  provided,  that  is  exclusive,  but 
then  both  law  and  fact  are  reviewed.'*'^  A  similar  view  pre- 
vailed under  the  former  act.'*^  To  have  a  referee's  decision 
revicAved,  it  should  be  certified  to  a  judge  of  the  district  court, 
and  his  decision  first  taken. 

§  598.  What  may  be  reviewed.— This  provision  is  limited  to 
proceedings  already  had  and  contemplates  a  summary  review 
of  the  orders  of  the  bankruptcy  courts  in  matters  of  law, 
whether  the  proceedings  be  at  law  or  in  equity,  but  does  not 
contemplate  any  review  of  the  facts,  and  is  exercised  on  an 
original  petition  filed  in  the  circuit  court  of  appeals  by  any 
person  aggrieved.  Thus  there  may  be  reviewed  an  order  con- 
firming or  refusing  to  confirm,  or  setting  aside  a  composition  ;^'^ 
or  revoking  a  discharge;  or  allowing  or  rejecting  a  lien 
claimed  as  incident  to  a  debt  sought  to  be  proved  ;-'^^  or  a 

^fi  Analogous  provision  of  act  of  act  of  1898;   In  re    Jacobs,    99    F. 

1867.     "Sec.   2.     .     .     .     That   the  R.    539,    3    A.    B.    R.    671;     In    re 

several  Circuit  Courts   .    .    .   shall  Good,    99     F.     R.     389,    3.     A.     B. 

have    a    general     superintendence  R-    605;    In  re    Richards,    2    N.  B. 

and   jurisdiction   of   all   cases  and  N.  R.  38,  3  A.  B.  R.  145,  96  F.  R. 

questions    .   .    .    and,  except  when  935;    In  re  Rusch,  8  A.  B.  R.  518, 

special      provision      is      otherwise  116  F.  R.  270;  Mueller  v.  Nugent, 

made,  may     .     .     .     hear  and   de-  184  U.  S.  1,  9,  7  A.  B.  R.  224. 
termine  the  case."  •»«  Bk.   v.   Slagle,  106  U.  S.  558; 

It  has  been  held  that  the  Cir-  Bk.  v.  Cooper,  20  Wall.  171 ;  San- 
cuit  Court  of  Appeals  of  the  8th  dusky  v.  Bk.,  23  Wall  289;  Leggett 
Circuit  has  no  revising  jurisdiction  v.  Allen,  10  Wall.  741. 
over  courts  of  bankruptcy  in  the  In  the  case  of  Meyers  (105  F.  R. 
Indian  Territory,  but  the  court  of  353,  5  A.  B.  R.  4)  it  was  held  that 
appeals  of  that  territory  alone  has  there  is  nothing  in  the  law  which 
appellate  jurisdiction  (In  re  Blair,  requires  the  court  of  bankruptcy 
106  F.  R.  662,  5  A.  B.  R.  793)  ;  and  to  make  findings  of  fact  for  the 
that  this  subdivision  has  no  appli-  purposes  of  an  appeal  from  its  de- 
cation  to  territorial  courts  (In  re  cision. 
Stumpff,  4  A.  B.  R.  267).  ^f  In  re  Adler,  3  N.  B.  N.  R.  15, 

47  Elliott  &  Co.  V.  Toeppner,  187  103  F.  R.  444.  4  A.  B.  R.  583;    In 

U.  S.  327,  9  A.  B.  R.  50,  sec.  25a,  re  .Joseph.  24  F.  R.  137. 

■><^>  Courier  Journal  Co.  v.  Schae- 

25 


386  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  24 

decision  as  to  the  priority  of  a  claim  not  amounting  to  $500, 
the  validity  not  being  disputed  ;^^  or  an  order  enjoining  re- 
plevin by  a  third  person  against  a  trustee  claiming  property 
in  such  trustee's  possession ;^2  or  enjoining  an  assignee  under 
a  voluntary  general  assignment  avoided  by  the  bankruptcy 
and  directing  the  marshal  to  take  the  assigned  property  ;''3  or 
directing  a  trustee  to  take  possession  of  property  held  by  a 
sheriff  under  attachment  at  the  time  of  adjudication  ;^4  or 
enjoining  a  sheriff  from  paying  over  money  to  an  execution 
creditor  and  directing  him  to  pay  it  to  a  trustee  ;^^  or  impris- 
oning bankrupt  for  contempt  in  failing  to  obey  an  order 
requiring  him  to  pay  over  money  to  a  trustee  ;^6  or  to  produce 
books  ;^^  or  requiring  a  bankrupt  to  indorse  a  liquor  license 
for  sale;^^  or  setting  off  a  usury  judgment  against  claims  ;^^ 
or  removing  or  refusing  to  remove  a  trustee  ;^<^  or  a  sale  of 
property  by  a  trustee  on  exception  to  the  report;^*  or  an  order 
sustaining  a  demurrer  to  a  petition  filed  for  the  purpose  of 
vacating  an  adjudication  ;62  qj.  for  the  review  of  an  order 
denying  a  petition  for  the  reinstatement  of  proceedings,  where 
the  adjudication  has  been  refused  and  the  petition  dismissed  ;^^ 
or  where  a  court  abused  its  discretion  in  denj'ing  a  creditor 
the  right  to  amend  his  specifications  in  opposition  to  a  dis- 
charge;^* or  a  petition  claiming  ownership  of  funds  in  the 
hands  of  a  bankrupt's  trustee,  where  the  facts  are  undis- 
puted,^^ though  such  orders  be  made  in  chambers.^^ 

fer  Co.,  101  F.  R.  699.  4  A.  B.  R.  N.  B.  N.  233,  3  A.  B.  R.  253;  Aff'g 

183.  97  F.  R.  319,  2  N.  B.  N.  53. 

51  In  re  Rouse,  Hazard  &  Co.,  1  ss  In  re  Fisher,  103  F.  R.  860. 
N.  B.  N.  75,  1  A.  B.  R.  234,  91  F.  59  Wilson  v.  Bk.,  3  F.  R.  91. 

R.  96;  In  re  Worcester  County,  102         eo  Hutchins   v.   Briggs,  61  F.  R. 

F.  R.  808,  4  A.  B.  R.  496.  498;  In  re  Prouty,  24  F.  R.  554. 

52  In  re  Russell,  101  F.  R.  248,  3         6i  Bk.  v.   Slagle,  106  U.   S.  558; 
A.  B.  R.  658.  Nimick  v.  Coleman,  95  U.  S.  266. 

53  Davis  V.  Bohle,  1  N.  B.  N.  216,         62  in  re  Ives,  113  F.  R.  911,  7  A. 
1  A.  B.  R.  412,  92  F.  R.  325.  B.  R.  692. 

54  In  re  Francis-Valentine  Co.,  1         63  in  re  Jamison  Mercantile  Co., 
N.  B.  N.  529,  2  A.  B.  R.  522,  94  F.  112  F.  R.  966,  7  A.  B.  R.  558. 

R.  793.  64  In  re  Carley,  117  F.  R.  130,  8 

55  In  re  Kenney,   2  N.  B.  N.  R.     A.  B.  R.  720. 

140,  3  A.  B.  R.  353,  97  F.  R.  554.  65  in    re   Hutchinson,    113    F.   R. 

56  In  re  Purvine,  2  A.  B.  R.  787,     202. 

1  N.  B.  N.  326,  96  F.  R.  192.  66  Hall  v.  Allen,  9  N.  B.  R.  6,  12 

-''  In  re  Morgan,  98  F.  R.  414,  2     Wall.  452;  Morgan  v.  Thornhill,  5 

N.  B.  R.  1,  11  Wall.  65. 


Ch.  '*^  APPELLATE    COURTS.  387 

It  should  be  borne  in  mind  that  this  power  to  review  does 
not  confer  original  jurisdiction  over  bankruptcy  proceedings 
as  such  and  the  decree,  if  affirmed,  remains  the  decree  of  the 
lower  court,  to  be  carried  out  by  it,*^"^  Ordinarily  a  case 
erroneously  brought  up  should  be  dismissed  unless  such  action 
would  leave  a  decree  entered  in  a  case  over  which  the  court 
had  no  jurisdiction,  when  it  may  be  remanded  with  directions 
to  dismiss.*^^ 

§  599.  What  may  not  be  reviewed.— On  a  petition  to  the 
circuit  court  of  appeals  under  this  provision,  an  objection  ol 
the  petitioner  that  the  evidence  in  the  case  did  not  warrant 
the  order  complained  of  will  not  be  considered  ;•'■''  or  a  finding 
that  a  creditor  did  not  have  reasonable  cause  to  believe  his 
debtor  insolvent  when  he  obtained  security  for  his  debt;'^*^  or 
an  error  in  entertaining  a  bill  in  equity  by  the  trustee  against 
a  stranger,  a  citizen  of  the  same  state,  to  set  aside  a  fraudulent 
conveyance  ;'^^  or  where  the  record  presents  only  questions  of 
fact ;'-  or  questions  not  raised  and  considered  by  the  court 
l)elow  -J^  or  that  do  not  appear  on  the  record  ;'^^  or  matters 
committed  to  the  discretion  of  the  lower  court  unless  there 
was  a  manifest  abuse  of  such  discretion,"^-^  as  an  order  to 
produce  bonds  and  papers  and  regarding  examination  of  wit- 
nesses ;^*'  or  mere  irregularities  :"^  or  to  review  an  order  allow- 
ing or  rejecting  a  claim  exceeding  $500,  since  the  proper 
procedure  is  by  appealJ^ 

A  specific  provision"^  having  been  made  for  ajipeal  from  a 

67  Clark  V.  Bininger,  3  N.  B.  R.  "s  In  re  Jaycox,  13  N.  B.  R.  122, 

489,  7  Blatch.  165;  F.  C.  2815.  F.  C.  7244. 

ti«  Stickney  v.  Wilt,  11  N.  B.  R.  t4  Serra   e    Hijo   v.    Hoffman,   17 

97,  23  Wall.  150.  N.  B.  R.  124. 

69  In  re  Rosser,  101  F.  R.  562.  4  "■  In  re  Lesser,  99  F.  R.  913,  3 

A.  B.  R.  153;  Babbitt  v.  Burgess,  A.  B.  R.   758;    In   re  Marsh,  F.  C. 

7  N.  B.  R.  561,  2  Dill.  169,  F.  C.  9108;    In  re  Adler,    2  Woods.   511, 

693.  F.  C.  82;  In  re  Perkins,  8  N.  B.  R. 

'"In  re  Eggert,  102  F.  R.  735,  4  56,  5  Biss.  254.  F.  C.  10982;  Mor- 

A.  B.  R.  449.  gan  v.  Thornhill,  5  N.  B.  R.  1,  11 
"1  In  re  Jacobs,  99  F.  R.  539,  3  A.  Wall.   65;    Woods   v.   Buckewell.   7 

B.  R.  671;  In  re  Abraham,  1  N.  B.  N.  B.  R.  405,  2  Dill.  38,  F.  C.  17991. 
N.  281.  2  A.  B.  R.  266,  93  F.  R.  767;  t6  in  re  Horgan,  98  F.  R.  414. 
Stickney  V.  Wilt,  23  Wall.  150;  Mil-         "Huntington    v.    Saunders,    64 
ner  v.  Meek,  95  U.  S.  252.  F.  R.  476,  92  F.  R.  10. 

■72  Ruddick   V.    Billings,   3    N.   B.         78  in  re  Dickson,  111  F.  R.  726, 
R.  14,  Woolw.  330,  F.  C.  12110.  7  A.  B.  R.  186. 

79  Sec.  25a,  act  of  1898. 


388  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  34 

judgment  adjudging  or  refusing  to  adjudge  a  bankrupt,  grant- 
ing or  denying  a  discharge  or  allowing  or  rejecting  a  debt  or 
claim  of  $500  or  over,  the  courts  are  not  at  liberty  to  disregard 
the  distinction  and  only  non-appealable  orders  can  be  reviewed 
under  this  provision  :^^  which  was  also  the  view  under  the 
former  act  :^^  but  the  present  act  is  mandatory  as  to  the 
I'evision  while  the  former  was  permissive.*^-  If  the  claim  is 
less  than  $500  it  is  not  within  the  provision  as  to  appeals  and 
an  order  allowing  or  rejecting  it  is  final  on  the  facts  but  may 
be  reviewed  under  this  provision  as  to  any  question  of  law. 

§  600.  The  petition  for  review.— It  is  expressly  provided 
that  the  power  of  revision  shall  be  exercised  "on  due  notice 
and  petition  by  the  party  aggrieved."  While  it  has  been  held 
that  the  petition  may  be  presented  and  allowed  by  a  judge  of 
a  court  of  bankruptcy,^^  or  any  one  of  the  judges  of  the 
circuit  courts  of  appeals,  the  better  practice  is  to  present  it  to 
the  latter.s^  It  should  state  specifically  the  question  of  law 
which  was  involved  and  was  ruled  upon  by  the  court  below, 
and  should  be  accompanied  by  a  certified  copy  of  so  much  of 
the  record  as  will  exhibit  the  manner  in  which  the  question 
arose  and  its  determination  ;S5  and  the  question  of  law  so 
presented  is  the  only  question  which  will  be  decided.  Reason- 
able notice  thereof  should  be  given  to  the  adverse  party;  but 
where  the  record  contains  everything  that  was  done  it  may 
contain  more  than  is  necessary,  but  is  certainly  sufficient,  and 
notice  given  in  open  court  in  the  presence  of  all  the  parties 
and  their  attorneys  at  the  very  instant  the  judgment  sought 
to  be  revised  was  announced  is  due  notice.^^ 

While  neither  the  statute  nor  the  rules  limit  the  time  within 
which   a  petition  for  review  should  be  filed,^"    it  should  be 

so  In  re  Worcester  County.  102  F.  R.  937;   In  re  Abraham,  2  A  B.  R. 

R.  808,  4  A.  B.  R.  496;  In  re  Good,  266,   1   N.   B.   N.   28,   93  F.  R.  767; 

99  F.  R.  389,  3  A.  B.  R.  605.  Courier    Journal    Co.    v.    Schaefer 

81  Smith  V.  Mason,  6  N.  B.  R.  1,  Br'g  Co.,   101   F.   R.   699;    see  also 

14  Wall.   419;    In  re   Alexander,   3  In    re    Casey,    8    N.    B.    R.    71,    10 

N.  B.  R.  6.  Chase,  295,  F.  C.  160.  Blatch.  376,  F.  C.  2495;  A.  &  C.  R. 

S2  Bk.  V.  Cooper,  20  Wall.  171.  R.  Co.  v.  Jones,  5  N.  B.  R.  97,  F.  C. 

83  In  re  Abraham,  post.  126. 

84  In  re  Williams,  105  F.  R.  906,  se  in  re  Abraham,  supra. 

5  A.  B.  R.  198.  87  In    re   New   York   Economical 

8-.  In  re  Baker,  3  N.  B.  N.  R.  104,  Printing  Co.,  106  F.  R.  839,  5  A.  B. 

104  F.  R.  287;  In  re  Richards,  2  N.  R.  697. 
B.  N.  R.  38,  3  A.  B.  R.  145,  96  F. 


Ch.  24  APPELLATE    COURTS.  389 

within  a  reasonable  time,  depending  upon  the  circumstance 
of  each  case.  The  better  practice  is  to  fix  it  at  six  months, 
by  analogy  to  the  time  allowed  by  the  statute  for  taking 
appeals  to  the  circuit  court  of  appeals  in  other  eases  ;^^  and 
it  may  be  filed,  nothwithstanding  an  appeal  has  been  sued 
out,  as  both  can  be  taken  at  the  same  time.^^ 

§  601.  Who  may  present  petition.— The  circuit  court  of 
appeals  cannot  revise  the  proceedings  of  the  district  court  in 
bankruptcy  without  an  issue  made  and  presented  by  parties 
who  have  a  substantial  interest  in  the  controversy,  and  who 
can  suitably  represent  it,  or  at  least  without  a  proper  oppor- 
tunity being  given  therefor,  and  where  the  creditor  against 
whom  the  petition  for  review  was  filed  has  been  paid,  and  has 
therefore  no  longer  any  interest  in  the  controversy,  the  court 
will  not  proceed  further  until  other  creditors,  having  an 
interest,  are  brought  in  or  given  an  opportunity  to  come  in 
by  notice  properly  served.^^  A  petition  for  revision  should 
not  be  dismissed  for  lack  of  proper  parties,  where  the  parties 
referred  to  were  not  parties  to  the  proceedings  below.^^ 

§  602.  Finality  of  decision.— The  decision  of  a  circuit  court 
of  appeals,  in  the  exercise  of  its  supervisory  jurisdiction  over 
proceedings  in  bankruptcy,  is  final  and  no  appeal  will  lie.^- 

88  In  re  Worcester  County.  102  F.  no  In  re  Baker,  3  N.  B.  N.  R.  104, 
R.  808,  4  A.  B.  R.  496;  Comp.  Bk.     104  F.  R.  287. 

V.  Cooper,  20  Wall.  171;   In  re  Ca-  m  In  re  Utt,  105  F.  R.  754,  5  A. 

sey,  supra ;  compare  In  re  Good,  3  B.  R.  383. 

A.  B.  R.  605.  '-'2  Hall  v.  Allen,  9  N.  B.  R.  6,  12 

89  In  re  Fisher,  103  F.  R.  860;  Wall.  452;  Wiswall  v.  Campbell,  15 
In  re  Worcester  Co.,  102  F.  R.  808,  N.  B.  R.  421;  Bk.  v.  Cooper,  9  N. 
4  A    B.  R.  496;   Imp.  Co.  v.  Brad-  B.  R.  529,  20  Wall.  171. 

bury,  132  U.  S.  509,  515. 


CHAPTER  XXV. 

APPEALS    AND    WRITS    OF    ERROR. 


5603.   (25a)   Appealable  cases    and 
time  of  appeal. 

604.  Subject  of  provision. 

605.  Appealable  cases. 

606.  Non  appealable  cases. 

607.  Who  may  appeal. 

608.  From  whose  decisions. 

609.  Time  of  appeal. 

610.  How  appeal  taken. 

611.  Appeal  and   petition   for   re- 

view at  same  time. 

612.  Effect  of  appeal. 


613.  b.  Appeal  to  Supreme  Court 

from  Circuit  Courts  of  Ap- 
peals. (1)  Where  amount 
exceeds  $2,000.  (2)  On  cer- 
tificate of  Justice. 

614.  How  and   from  what  appeal 

taken. 

615.  What   constitutes   matter   or 

amount  in  controversy. 

616.  c.  No  bond  required  of  trus- 
tees. 

617.  d.  Certification  of  cases  and 
certiorari. 

618.  Requisites  for  certiorari. 


§  603.     '  (Sec.  25a)     Appealable  cases  and  time  of  appeal.— 

'That  appeals,  as  in  equity  cases,  may  be  taken  in  bankruptcy 
'proceedings  from  the  courts  of  bankruptcy  to  the  circuit 
'court  of  appeals  of  the  United  States,  and  to  the  supreme 
'court  of  the  Territories,  in  the  following  cases,  to  wit,  (1) 
'from  a  judgment  adjudging  or  refusing  to  adjudge  the  defend- 
'ant  a  bankrupt;  (2)  from  a  judgment  granting  or  denying  a 
'discharge,  and  (3)  from  a  judgment  allowing  or  rejecting  a 
'debt  or  claim  of  five  hundred  dollars  or  over.  Such  appeal 
'shall  be  taken  within  ten  days  after  the  judgment  appealed 
'from  has  been  rendered,  and  may  be  heard  and  determined 
'by  the  appellate  court  in  term  or  vacation,  as  the  case  may 
'be.'i 


1  Analogous  provisions  of  Act  of 
1867.  "Sec.  8.  .  .  .  That  appeals 
may  be  taken  from  the  district  to 
the  circuit  courts  in  all  cases  in 
equity,  and  writs  of  error  may  be 
allowed  to  said  circuit  courts  from 
said  district  courts  in  cases  at  law 
under  the  jurisdiction  created  by 
this  act,  when  the  debt  or  dam- 
ages claimed  amount  to  more  than 
five  hundred  dollars,  and  any  sup- 
posed   creditor,     whose    claim    is 


wholly  or  in  part  rejected,  or  an 
assignee  who  is  dissatisfied  with 
the  allowance  of  a  claim  may  ap- 
peal from  a  decision  of  the  district 
court  to  the  circuit  court  from  the 
same  district,  but  no  appeal  shall 
be  allowed  in  any  case  from  the 
district  to  the  circuit  court  unless 
it  is  claimed,  and  notice  given 
thereof  to  the  clerk  of  the  district 
court,  to  be  entered  v.'ith  the  rec- 
ord of  the  proceedings,   and  also 


390 


Ch. 


APPEALS    AND    WRITS    OP    ERROR. 


391 


§  604.  Subject  of  provision.— This  section  applies  to  "bank- 
ruptcy proceedings"  as  such,^  as  appears  from  the  specification 
of  the  cases  from  which  it  provides  an  appeal,  and  supple- 
ments the  preceding  provision,^  which  provides  for  the  sum- 
mary review  in  the  matter  of  law  of  all  other  orders  of  the 
district  courts  in  "bankruptcy  proceedings"  as  such;  while 
section  25  is  confined  to  "appeals  as  in  equity  cases"  and 
covers  both  fact  and  law.^  "Controversies  arising  in  bank- 
ruptcy proceedings,"  that  is,  between  the  trustee  on  one  side 
and  a  stranger  to  the  proceedings  on  the  other,  are  to  be 
reviewed  in  the  same  manner  and  under  the  same  rules  as 
other  cases  in  the  United  States  courts.^  Thus  three  methods 
are  provided,  (1)  a  review  in  matter  of  law  of  all  orders  in 
bankruptcy  except  those  provided  for  in  the  second  method; 
(2)   an    appeal  in  case  of    orders    adjudging  or  refusing  to 


to  the  assignee  or  creditor,  as  the 
case  may  be,  or  to  the  defeated 
party  in  equity,  within  ten  days 
after  the  entry  of  the  decree  or 
decision  appealed  from.  The  ap- 
peal shall  be  entered  at  the  term 
of  the  circuit  court  which  shall  be 
first  held  within  and  for  the  dis- 
trict next  after  the  expiration  of 
ten  days  from  the  time  of  claim- 
ing the  same.  But  if  the  appellant 
in  writing  waives  his  appeal  be- 
fore any  decision  thereon,  proceed- 
ings may  be  had  in  the  district 
court  as  if  no  appeal  had  been 
taken;  and  no  appeal  shall  be  al- 
lowed unless  the  appellant  at  the 
time  of  claiming  the  same  shall 
give  bond  in  man[ner]  now  re- 
quired by  law  in  cases  of  such  ap- 
peals. No  writ  of  error  shall  be  al- 
lowed unless  the  party  claiming  it 
shall  comply  with  the  statutes  reg- 
ulating the  granting  of  such  writs. 

Sec.  24.  That  a  supposed  cred- 
itor who  takes  an  appeal  to  the 
circuit  court  from  the  decision  of 
the  district  court,  rejecting  his 
claim  in  whole  or  in  part,   shall. 


upon  entering  his  appeal  in  the  cir- 
cuit court,  file  in  the  clerk's  office 
thereof  a  statement  in  writing  of 
his  claim,  setting  forth  the  same, 
substantially,  as  in  a  declaration 
for  the  same  cause  of  action  at 
law,  and  the  assignee  shall  plead 
or  answer  thereto  in  like  manner, 
and  like  proceedings  shall  there- 
upon be  had  in  the  pleadings,  trial, 
and  determination  of  the  cause,  as 
in  action  at  law  commenced  and 
prosecuted  in  the  usual  manner, 
in  the  courts  of  the  United  States, 
except  that  no  execution  shall  be 
awarded  against  the  assignee  for 
the  amount  of  a  debt  found  due  to 
the  creditor.  The  final  judgment 
of  the  court  shall  be  conclusive." 

2  Shutts  V.  Bk.,  2  N.  B.  N.  R.  320, 
3  A.  B.  R.  492,  98  F.  R.  705,  709. 

3  Sec.  34b,  act  of  1898. 

4  In  re  Worcester  Co.,  102  F.  R. 
808,  4  A.  B.  R.  496;  Courier  Jour- 
nal Co.  V.  Schaefer  Brewing  Co., 
101  F.  R.  699,  4  A.  B.  R.  183;  In 
re  Richards,  2  N.  B.  R.  38,  3.  A.  B, 
R.  145,  96  F.  R.  935. 

5  Sec.  24a,  act  of  1898. 


o02  THE    NATIONAL    BANKRUPTCY    LAW.  Cu.  25 

adjudge  bankrupt;  granting  or  denying  a  discharge,  which 
is  held  to  include  granting  or  refusing  an  order  confirming  a 
composition;*^  the  same  reasoning  allowing  or  rejecting  a  claim 
of  $500  or  over;  and  (3)  an  appeal  in  the  usual  way  in  con- 
troversies arising  in  bankruptcy  proceedings. 

§  605.  Appealable  cases.— Hence  an  appeal  under  this  pro- 
vision lies  from  the  district  court  to  the  circuit  courts  of 
appeal  from  orders  adjudging  a  person  a  bankrupt;^  or  allow- 
ing a  claim  of  $500  f  notwithstanding  it  also  settles  the  priority 
of  such  claim,  which  latter  could  be  the  subject  of  review;" 
and  includes  as  an  incident  the  question  as  to  the  rank  or  lien 
of  such  claim  in  the  distribution  of  the  estate,  at  least  where 
such  question  is  one  of  controverted  fact  and  lawi^*^  or  the 
allowance  of  an  attorney's  fee  included  in  the  claim  of  a 
mortgaged  creditor,  who  proves  his  claim  as  a  secured  one;^^ 
or  to  petitioning  creditors  in  an  involuntary  case;^-  or  from 
an  order  refusing  or  confirming  a  composition,  since  it  is  the 
equivalent  of  an  order  of  discharge.^^ 

In  an  appeal  from  a  judgment  adjudging  or  refusing  to 
adjudge  the  defendant  a  bankrupt  in  which  a  jury  trial  was 
not  had  or  demanded,  but  the  court  of  bankruptcy  proceeds 
on  its  own  findings  of  fact,  both  the  facts  and  law  are  re- 
examinable  on  appeal,  while  if  the  judgment  is  entered  on  the 
verdict  of  a  jury,  the  issue  of  facts  is  concluded  and  the 
judgment  is  reviewable  for  errors  of  law  only;  in  the  latter 
case  errors  in  instructions  given  or  refused  or  in  the  admission 
or  rejection  of  evidence  must  appear  by  exceptions  duly  taken 

6  Adler  v.  Hammond,  3  N.  B.  N.  lo  Cunningham  v.  Bk.,  103  F.  K. 
R.  58,  rev'g  3  N.  B.  N.  R.  15,  103  F.  932,  2  N.  B.  N.  R.  689,  4  A.  B.  R. 
R.  444,  4  A.  B.  R.  583.  192;  Courier  Journal  Co.  v.  Schae- 

7  Elliott  &  Co.  V.  Toeppner,  187  fer  Br'g  Co..  101  F.  R.  699,  4  A.  B, 
U.    S.   327,    9  A.   B.   R.   50;    In   re  R.  183. 

Good,  99  F.  R.  389,  3  A.  B.  R.  605;  n  In  re  Roche,  101  F.  R.  956,  4 

Parmenter  Mfg.  Co.   v.  Stoever,  2  A.  B.  R.  369. 

N.  B.  N.  R.  174,  3  A.   B.  R.  220,  12  In  re  Curtis,  100  F,  R.  784,  4 

97   F.    R.   330;    Simonson   v.    Sin-  A.  B.  R.  17. 

sheimer,  100  F.  R.  426,  3  A.  B.  R.  13  United    States    v.    Hammond, 

824.  104  F.  R.  862.  4  A.  B.  R.  736,  over- 

8  In  re  Eagle  v.  Crisp,  2  N.  B.  N.  ruling  In  re  Adler,  3  N.  B.  N.  R. 
R.  462,  3  A.  B.  R.  733,  99  F.  R.  15,  103  F.  R.  444,  4  A.  B.  R.  583; 
695.  compare  Ross  v.  Saunders,  105  F. 

9  In  re  Worcester  Co.,  102  F.  R.  R.  915,  5  A.  B.  R.  350. 
808,  4  A.  B.  R.  496. 


Cll.  "25  APPEALS    AND    WRITS    OF    ERROR.  393 

and  preserved  by  bill  of  exceptions.!^  The  finding  of  the 
court  below,  whether  through  a  verdict  or  through  a  decision 
by  the  judge  or  chancellor,  where  the  issue  is  peculiarly  one 
of  fact,  as  whether  there  was  fraud,  will  not  be  disturbed 
unless  the  appellate  court  is  clearly  convinced  that  it  is  op- 
posed to  the  weight  of  evidence,  or  plain  and  manifest  error 
appears.!^ 

§  606.  Non-appealable  cases.— This  section  has  no  reference 
to  independent  suits  to  assert  title  to  property  or  money  as 
assets  of  the  bankrupt  against  strangers  to  the  proceed- 
ings.!^  It  has  been  held  that  an  appeal  would  not  lie  from 
an  order  sustaining  a  demurrer  to  a  petition  filed  for  the 
purpose  of  vacating  an  adjudication  ;i'^  or  from  an  interlocu- 
tory order  reversing  a  ruling  of  the  referee  made  during  the 
bankrupt's  examination,  refusing  to  require  him  to  produce 
his  books  ;!^  or  from  an  order  requiring  the  bankrupt  sum- 
marily to  do  certain  acts,  his  remedy  seeming  to  have  been  to 
refuse  to  do  the  acts  and,  on  contempt  proceedings  against 
him,  to  take  proper  steps  for  their  review;!^  or  from  any 
judgment  rendered  or  order  made  by  a  court  of  bankruptcy 
in  the  administration  of  an  estate,  except  the  particular  judg- 
ments enumerated  in  this  section,  and  would  not  lie  from  a 
judgment  entered  on  a  petition  of  intervention  filed  by  a 
claimant  of  property  in  the  hands  of  a  trustee  declaring  the 
ownership  of  the  intervener,  and  ordering  restitution  of  the 
property,  such  judgment  not  being  one  allowing  a  claim  within 
the  meaning  of  the  statutes;  the  "debt  or  claim  of  $500  or 
over"  would  seem  to  moan  a  moneyed  demand,  the  same  as 
debt,  and  was  used  not  to  enlarge  but  to  render  certain  ;-'^  nor 
would  objections  to  the  sufficiency  of  specifications  in  oppo- 
sition to  a  discharge  be  considered,  where  they  were  not 
presented  or  passed  upon  by  the  court  below.-^ 

§  607.     Who  may  appeal.— The  general  rule  that  any  party 

1*  Elliott  &  Co.  V.  Toeppner,  187  i'  Goodman  v.  Brenner,  109  F.  R. 

U.  S.  327.  9  A.  B.  R.  50;  Insurance  481. 

Co.    V.   Comstock,    16   Wall.    258;  is  In  re  Ives,  113  F.  R.  911,  7  A. 

Duncan  v.  Landis,  106  F.  R.   839,  B.  R.  692. 

5  A.  B.  R.  649.  is  In  re  Fisher,  103  F.  R.  860. 

15  Osborne  v.  Perkins,  112  F.  R.  20  in  re  Whitener,  105  F.  R.  180. 
127,  7  A.  B.  R.  250.  21  Osborne  v.  Perkins,  112  F.  R. 

16  Boonville  Nat.  Bk.  v.  Blakey,  127,  7  A.  B.  R.  250. 
107  F.  R.  891,  6  A.  B.  R.  13. 


ay-t  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  25 

in  interest  adversely  affected  by  an  appealable  decision  may 
appeal  applies,  but,  in  its  application,  it  must  be  remembered 
that  the  trustee  represents  the  bankrupt,  the  estate  and  the 
creditors— the  bankrupt  to  see  that  his  estate  is  administered 
so  as  to  pay  his  creditors  as  far  as  possible ;  the  estate  to  see 
that  it  is  all  realized  and  administered  to  the  best  advantage 
and  the  creditors  to  enforce  their  rights.  In  the  adjudication, 
the  bankrupt  and  the  creditors  are  the  interested  parties  and 
creditors  appearing  in  opposition  to  an  involuntary  petition 
as  well  as  the  bankrupt  and  petitioning  creditors  may  appeal 
if  the  decision  is  adverse  to  their  interests.  If  the  act  of 
bankruptcy  alleged  is  a  voluntary  general  assignment,  the 
assignee  may  intervene  and,  if  necessary,  appeal.22  In  the 
granting  or  denying  of  a  discharge  the  trustee  is  not  interested, 
it  being  a  personal  privilege  of  the  bankrupt,  and  so  the 
parties  in  interest  are  the  opposing  creditors  and  the  bankrupt. 
In  the  allowance  of  claims,  all,  trustee,  bankrupt  and  cred- 
itors, are  interested,  though  to  allow  each  if  dissatisfied  to 
appeal,  would  be  to  multiply  appeals  and  allow  fractious 
creditors  to  delay  the  proceedings,  and  the  appeal  must  be 
taken  in  such  case  by  the  trustee,  or,  if  he  refuses,  or  fails  to 
act,  the  bankruptcy  court  may,  on  its  own  motion,  if  doubtful 
of  its  decision,  order  him  to  appeal,  or  may  make  such  order 
on  application  of  a  dissatisfied  party,  or,  in  its  discretion, 
allow  such  party  to  appeal  in  the  name  of  the  trustee.-^  In 
rejecting  a  claim  only  the  particular  creditor  whose  claim  it 
is  can  appeal.  It  should  be  observed  that  to  be  appealable 
the  order  must  be  one  allowing  or  rejecting  a  claim  of  $500 
or  over ;  so  that,  if  the  claim  amounts  to  as  much  as  $500,  the 
order  allowing  or  rejecting  it  will  be  appealable  irrespective 
of  the  fact  that  it  may  be  partially  allowed..  Such  a  case 
would  be  appealable  by  those  entitled  to  appeal  from  an 
allowance  and  the  party  entitled  to  appeal  from  a  rejection. 
§  608.     From  whose  decisions.— It  should  be  observed  that 

22  In  re  Meyer,  98  F.  R.  976.  F.  C.  7532;  In  re  Place,  4  N.  B.  R. 

23Chatfield  v.  O'Dwyer,  101  F.  R.  178,  8  Blatch.  302,  F.  C.  11200;   In 

797,  4   A.   B.  K.   313;    Foreman  v.  re  Randall,  1  Sawy.  56,  F.  C.  11552  ; 

Burleigh,  109  F.  R.  313,  6  A.  B.  R.  In   re  Curtis,   100  F.  R.  784,  4  A. 

230;  McDaniel  v.  Stroud,  106  F.  R.  B.  R.   17.   rev'g  91   Id.   737;    In  re 

486;    5  A.  B.   R.   685;    In  re  Troy  Roche,  101  F.  R.   956,  4  A.  B.  R. 

Woolen   Co..   1    Blatch.    191,   F.    C.  369. 
14204;  In  re  Joseph,  2  Woods,  390, 


ClI.  v\5  APPEALS    AND   WRITS    OF    ERROR.  395 

an  appeal  is  confined  to  the  decisions  of  the  courts  of  bank- 
ruptcy. If  the  purpose  is  to  secure  a  review  of  a  referee's 
decision,  the  question  must  be  certified  to  the  judge  and  the 
appeal  taken  from  the  latter 's  action. 

§  609.  Time  of  appeal. — An  appeal  under  this  section  must 
be  taken  within  ten  days.  Unless  so  taken  and  all  the  statu- 
tory requirements  complied  with,  the  appellate  court  will  be 
without  jurisdiction;-^  but  it  has  been  held  that  a  court  may, 
in  its  discretion,  overlook  a  breach  of  its  own  rules  ;-^  and, 
where  the  failure  to  appeal  in  time  was  due  to  a  mistake  of 
the  remedy,  the  lower  court  may  grant  a  review  of  the  deci- 
sion, from  which  an  appeal  is  desired,  so  that  an  appeal  may 
be  in  time.-^  even  though  the  lower  court  is  satisfied  with  its 
original  decision  on  the  merits  and  is  unwilling  to  grant  a 
rehearing  in  order  to  give  these  merits  further  consideration.^' 
But  the  court  cannot  extend  the  time  for  appeal.^s  The  time 
fixed  by  this  subdivision  has  no  application  to  appeals  in 
independent  proceedings  instituted  for  the  recovery  of  assets 
of  the  estate  or  to  set  aside  alleged  preferences,  which  are 
governed  by  the  general  provisions  regulating  appeals  to  the 
circuit  courts  of  appeals.-^ 

While  it  has  been  held  that  if  a  circuit  or  district  court 
permits  the  filing  of  a  petition  for  rehearing  during  the  term 
at  which  the  order  sought  to  be  reviewed  was  entered,^*^  it 
retains  jurisdiction  to  act  on  it  at  the  succeeding  term,  and 
the  time  for  appeal  does  not  begin  to  run  until  action  is  taken 
on  the  petition,^^  such  decisions  seem  to  overlook  the  fact  that 
in  the  bankruptcy  court  the  term  is  continuous  from  the  com- 
iiKmcing  of  a  proceeding  to  the  closing  of  an  estate.^-     Where 

-'4  Benjamin  v.  Hart,  4  N.  B.  K.  s^judson  v.  Courier  Co..  25  F.  R  . 

138.  4  Ben.  454,  F.  C.  1302;   Wood  705. 

V.  Bailey  12  N.  B.  R.  132,  21  Wall.  so  Booneville  Nat.  Bk.  v.  Blakey, 

640;    Sedgwick    v.    Fridenberg,    11  107  F.  R.  891,  6  A.  B.  R.  13. 

Blatch.  77,  F.  C.  12611;  In  re  York,  ao  in  re  Anderson,  23  F.  R.  482. 

4  N.  B.  R.  156,  F.  C.  18139;   Haw-  si  in  re  Worcester  Co.,  102  F.  K. 

kins  V.  Bk.,  1  Dill,  453,  F.  C.  6245.  808,   4   A.   B.  R.    496;    Andrews   v. 

s-i  Barron  v.  Morris,  14  N.  B.  R.  Thum,   64   P.  R.  149;    Kingman   & 

371,  F.  C.  9828.  Co.  v.  Western  Mfg.  Co.,  170  U.  S. 

2c  Stickney  v.  Wilt,  11  N.  B.  R.  675,  679. 

97,  23  Wall.  150,  164.  32  See  §  28,  ante. 

27  In  re  Wright,  3  A.  B.  R.  184, 
96  F.  R.  820. 


396  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  25 

appellant,  within  ten  days  after  the  adjudication,  prayed  an 
appeal,  which  was  allowed,  and  liled  a  bond,  but  the  petition 
for  the  appeal,  its  allowance,  and  the  citation  and  service 
thereon  were  not  filed  in  the  district  court  until  after  the 
expiration  of  the  ten  days,  the  appeal  was  not  in  time  and 
should  be  dismissed.^^  A  judgment  allowing  or  rejecting  a 
claim  is  presumptively  rendered  at  the  date  of  its  filing  with 
the  clerk,  and  the  ten  days  would  begin  to  run  from  that 
timc^"* 

§  610.  Appeal,  how  taken.— The  appellant  must  present  a 
petition  praying  the  appeal  accompanied  by  an  assignment  of 
errors,  without  which  the  judgment  will  be  affirmed,^^  and,  if 
by  others  than  the  trustee,  an  appeal  bond,  to  the  judge  of  the 
court  of  bankruptcy  or  circuit  court  of  appeals.  It  should  be 
presented  to  the  judge  of  the  court  of  bankruptcy  first,  and, 
in  case  of  his  refusal  to  allow  it,  to  the  judge  of  the  circuit 
court  of  appeals.  This  is  the  usual  course  and  the  higher 
judge,  unless  there  was  reason  for  not  having  presented  it  to 
the  lower,  would  exact  this  requirement.  Upon  the  allow- 
ance of  the  appeal  and  the  approval  of  the  bond,  indorsed  on 
it  usually,  the  papers  with  the  citation,  with  evidence  of  ser- 
vice on  the  adverse  party ,3*^  should  be  filed  in  the  clerk's  office 
of  the  court  of  bankruptcy,  which  must  be  done  within  ten 
days  after  the  order  appealed  from  or  the  appeal  will  be  dis- 
missed.3'''  If  the  papers  are  regular  and  the  judge  applied  to 
refuses  to  allow  the  appeal,  he  may  be  compelled  to  do  so 
by  mandamus.^^  On  notice  of  an  appeal,  the  citation  must  be 
given.^^ 

§  611.  Appeal  and  petition  for  review.— A  petition  for  re- 
view may  be  made  notwithstanding  that  an  appeal  has  been 
taken.40 

§  612.     Effect  of  appeal.— An  appeal  cannot  be  used  to  give 

33  Norcross  v.  Mercantile  Co.,  101  Mercantile  Co.,  101  F.  R.  796,  4  A. 
F.  R.  796,  4  A.  B.  R.  317.  B.  R.  317. 

34  Peterson  v.  Nash  Bros.  112  F.  ss  ins.  Co.  v.  Comstock,  8  N.  B. 
R.  311.  R.  145,  16  Wall.  258. 

sf.  Lloyd   V.   Chapman,   93   F.   R.  39  Wear  v.  Mayer,  6  F.  R.  658. 

599;  In  re  Dunning,  94  F.  R.  709.  4o  in  re  Fisher,  103  F.  R.  860;  In 

36  Mead  v.  Piatt,   17  F.  R.   509 ;  re  Worcester  Co.,  102  F.  R.  808,  4 

Ex.  p.  Mead,  109  U.  S.  230.  A.  B.  R.  496;    In  re  Jourdan,  111 

3T  G.  O.  XXXVI  (1) ;  Norcross  V.  F.  R.  726,  7  A.  B.  R.  186. 


Ch.  25  APPEALS    AND    WRITS    OF    ERROR.  397 

a  party  a  second  trial ;  but  only  to  re-examine  and  revise  the 
rulings  and  decree  ;^i  and,  under  the  Act  of  1867,  where  a 
party  appealed  from  the  circuit  court  to  the  Supreme  Court, 
it  was  held  that  the  allowance  of  the  appeal  related  back  to 
the  time  when  the  original  application  was  made  for  appeal 
to  the  circuit  court  and  entitled  the  party  to  a  stay  of  proceed- 
ings, which  would  be  true  of  an  appeal  hereunder.*^  The 
appellate  court  will  construe  instructions  reasonably  and,  if 
they  are  correct  when  applied  to  the  facts  submitted  to  the 
jury,  will  sustain  them,  though,  if  standing  alone,  they  would 
be  incomplete.^3 

§613.  'b.  Appeal  to  Supreme  Court  from  Circuit  Court 
'of  Appeals.— From  any  final  decision  of  a  court  of  appeals, 
'allowing  or  rejecting  a  claim  under  this  act,  an  appeal  may 
'be  had  under  such  rules  and  within  such  time  as  may  be 
'prescribed  by  the  Supreme  Court  of  the  United  States,  in 
'the  following  cases  and  no  other: 

'1.  When  amount  exceeds  $2,000.— Where  the  amount  in 
'controversy*-*  exceeds  the  sum  of  two  thousand  dollars,  and 
'the  question  involved  is  one  which  might  have  been  taken  on 
'appeal*^  or  writ  of  error  from  the  highest  court  of  a  state  to 
'the  Supreme  Court  of  the  United  States;   or 

*2.  On  certificate  of  Justice.— Where  some  Justice  of  the 
'Supreme  Court  of  the  United  States  shall  certify  that  in  his 
'opinion  the  determination  of  the  question  or  questions  in- 
'volved  in  the  allowance  or  rejection  of  such  claim  is  essential 
'to  a  uniform  construction  of  this  act  throughout  the  United 
'  States. '-*« 

Ji  In  re  Dow,  6  N.  B.  R.  10,  F.  C.  State   to   the   Supreme  Court  was 

4036.  probably  a  slip,  as  such  cases  are 

42  Thornhill  v.  Bk.,  5  N.  B.  R.  taken  to  the  Supreme  Court  by 
377,  F.  C.  13991.  writ   of    error    only.     (U.    S.    Rev. 

43  Willis  V.  Carpenter,  14  N.  B.  Stat.,  Sec.  109;  Egan  v.  Hart.  165 
R.  521,  F.  C.  17770.  U.  S.  188),  and  only  when  there  is 

4*  Note    the   different    phraseol-  an   adverse   decision  on  a  federal 

ogy  here:  "exceeds  the^um  of  two  question    on    which    the    decision 

thousand  dollars."    The  amount  in  rests. 

controversy  would  not,  under  this  *«  It  will  be  observed  that  if  the 

provision,   suffice  if  just  $2,000.  case  comes  under  this  subdivision, 

^■'  The  use  of  the  word  "appeal"  there   is  no   specified    amount   re- 
in   reference    to    the    removal    of  quired, 
cases  from  the  highest  court  of  a  Analogous   provision  of   Act  of 


398  THE    NATIONAL    BANKRUPTCY  LAW.  ClI.  2o 

§  614.  How  and  from  what  appeal  taken.— The  iSupreme 
Court  provides  in  its  General  Orders  that  the  lower  court, 
when  rendering  judgment  or  decree,  must  make  and  file  a 
finding  of  the  facts  and  its  conclusions  of  law  thereon,  stated 
separately,  and  the  record  to  be  transmitted  to  the  Supreme 
Court  is  to  contain  only  the  pleadings,  the  judgment  or  decree, 
the  finding  of  facts  and  the  conclusions  of  law.  Under  this 
subdivision  an  appeal  to  the  Supreme  Court  nuist  be  taken 
within  thirty  days  after  judgment,'*'^  and  is  allowed  only  in 
cases  coming  under  clause  3  of  section  25a,  and  then  only 
from  the  final  decision,  i.  e..  one  that  cannot  be  further  affected 
by  action  in  the  circuit  court  of  appeals.'*^ 

§  615.     What  constitutes  matter  or  amount  in  controversy.— 

As  to  what  constitutes  "matter  in  controversy"  or  "matter  in 
dispute,"  the  Supreme  Court  has  long  since  definitely  stated 
the  law.  Chief  Justice  Taney,  in  Barry  v.  Barry,^''  states  that 
matter  in  controversy,  under  section  22  of  the  Judiciary  Act, 
must  be  "money  or  some  right,  the  value  of  which,  in  money, 
can  be  calculated  and  ascertained.  *  *  *  The  words  of 
the  act  of  Congress  are  plain  and  unambiguous.  They  give 
the  right  of  revision  in  those  cases  only  where  the  rights  of 
property  are  concerned,  and  where  the  matter  in  dispute  has 
a  known  and  certain  value,  which  can  be  proved  and  calcu- 
lated, in  the  ordinary  mode  of  business  transactions.  *  *  * 
It  is  the  same  in  judgments  in  criminal  cases,  although  the 
liberty  or  life  of  the  party  may  depend  on  the  decision  of  the 
circuit  court."  Chief  Justice  Marshall,  in  passing  upon  this 
same  question  in  Gordon  v.  Ogden,"^*^  said:  "The  jurisdiction 
of  the  court  has  been  supposed  to  depend  on  the  sum  or  the 
value  of  the  matter  in  dispute  in  this  court,  not  on  that  which 
was  in  dispute  in  the  circuit  court.  If  the  writ  of  error  be 
brought  by  the  plaintiff  below,  then  the  sum  which  his  dec- 
laration shows  to  be  due  may  be  still  recovered,  should  the 
judgment  for  a  smaller  sum  be  reversed;    and  consequently 

1867.      "Sec.    9.      .      .     .      That   in  dispute  in  such  case  shall  exceed 

cases  arising  under  this  act  no  ap-  two  thousand  dollars." 

peal  or  writ  of  error  shall  be  al-  4t  g.  O.  XXXVI,  2  and  3. 

lowed  in  any  case  from  the  circuit  ^s  See  Duff  v.   Carrier,  55  F.  K. 

courts  to  the  Supreme  Court  of  the  433;  Aff'g  51  F.  R.  906. 

United  States,  unless  the  matter  in  ^o  5  How.  103. 

50  3  Pet.  33. 


Cm.  25  APPEALS    AND    WRITS    OF    ERROR.  399 

the  whole  sum  claimed  is  still  in  dispute.  But  if  the  writ  of 
error  be  brought  by  the  defendant  in  the  original  action,  the 
judgment  of  this  court  can  only  affirm  that  of  the  circuit 
court,  and  consequently  the  matter  in  dispute  cannot  exceed 
the  amount  of  that  judgment.  Nothing  but  that  judgment  is 
in  dispute  between  the  parties."  The  same  view  is  laid  down 
in  Kanouse  v.  Martin,^^  wherein  it  is  held  that:  "The  settled 
rule  is,  that  until  some  further  judicial  proceedings  have  taken 
place,  showing  upon  the  record  that  the  sum  demanded  in  the 
declaration  is  not  the  matter  in  dispute,  that  sum  is  the 
matter  in  dispute." 

§  616.  'c.  No  bond  required  of  trustees.— Trustees  shall 
'not  be  required  to  give  bond  when  they  take  appeals  or  sue 
'out  writs  of  error.' 

§617.  'd.  Certification  of  cases  and  certiorari.— Contro- 
'versies  may  be  certified  to  the  Supreme  Court  of  the  United 
'States  from  other  courts  of  the  United  States,  and  the  former 
'court  may  exercise  jurisdiction  thereof  and  issue  writs  of 
'certiorari  pursuant  to  the  provisions  of  the  United  States 
'laws  now  in  force  or  such  as  may  be  hereafter  enacted.' 

§  618.  Requisites  for  certiorari.— No  certiorari  for  diminu- 
tion of  the  record  will  be  awarded  by  the  Supreme  Court  in 
any  case,  unless  a  motion  therefor  shall  be  made  in  writing, 
and  the  facts  on  which  the  same  is  founded  shall,  if  not  ad- 
mitted by  the  other  party,  be  verified  by  affidavit.  And  all 
motions  for  certiorari  must  be  made  at  the  first  term  of  the 
entry  of  the  case;  otherwise,  the  same  will  not  be  granted, 
unless  upon  special  cause  shown  to  the  court  accounting 
satisfactorily  for  the  delay.^^ 

By  the  act  of  March  3,  1891,^3  it  is  provided  that  the 
Supreme  Court  may  require  by  certiorari  or  otherwise  certain 
cases  made  final  in  the  circuit  courts  of  appeals  to  be  certified 
to  the  Supreme  Court  for  its  review  and  determination,  with 
the  same  power  and  authority  in  the  case  as  if  it  had  been 
carried  by  appeal  or  writ  of  error  to  the  Supreme  Court. 
Apart  from  section  25  of  the  law,  the  circuit  courts  of  appeals 
have  jurisdiction  on  petition  to  superintend  and  revise  any 
matter  of  law  in  bankruptcy  proceedings  and  also  jurisdiction 

51  15  How.  198.  63  1  Supp.  R.  S.  903,  Sec.  6. 

••-  Sup.  Ct.  Rule  14. 


400  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  ;35 

of  controversies  over  which  they  would  have  appellate  juris- 
diction in  other  cases.  The  decisions  of  those  courts  may  be 
reviewed  in  the  Supreme  Court  on  certiorari  or  in  certain 
cases  by  appeal,  under  section  6  of  the  act  of  1891/'''^  The 
writ  of  certiorari  may  also  be  allowed  by  the  supreme  court 
in  aid  of  the  writ  of  habeas  corpus  and  for  the  purpose  of  en- 
larging the  scope  of  that  writ.'^^ 

See  discussion  of  the  certification  of  cases  and  the  use  of 
certiorari  under  Sec.  24  of  the  law,  ante  §  598. 

54  First   Nat.    Bk.    of    Denver   v.         r,.-,  Ex.  p.  Lange.  18  Wall.  163;  In 

King,  186  U.  S.  202;  8  A.  B.  R.  12;  re  Chetwood,  165  U.  S.  443;   R.  S. 

Mueller  v.  Nugent,  184  U.   S.  1,  7  U.  S.,  §  716. 
A.  B.  R.  224. 


CHAPTER  XXVI. 

ARBITRATION    OF   CONTROVERSIEJS. 

§619.   (26a)  Arbitration  of  contro-       622,  Application  for. 

versies.  623.  To  whom  addressed. 

620,  b.  Arbitrators,  mode  of  choos-       624.  Selection  and  finding  of  arbi- 

ing.  trators. 

621.  c.  Effect  of  findings. 

§  619.  *  (Sec.  26a)  Arbitration  of  controversies,— The  trus- 
'tee  may,  pursuant  to  the  direction  of  the  court,  submit  to  arbi- 
'tration  any  controversy  arising  in  the  settlement  of  the  es- 
'tate.' 

§  620.  'b.  Arbitrators,  mode  of  choosing.— Three  arbitra- 
'tors  shall  be  chosen  by  mutual  consent,  or  one  by  the  trustee, 
'one  by  the  other  party  to  the  controversy,  and  the  third  by 
'the  two  so  chosen,  or  if  they  fail  to  agree  in  five  days  after 
'their  appointment  the  court  shall  appoint  the  third  arbitra- 
'tor.' 

§  621.  'c.  Effect  of  findings.— The  written  finding  of  the  ar- 
'bitrators,  or  a  majority  of  them,  as  to  the  issues  presented, 
'may  be  filed  in  court  and  shall  have  like  force  and  effect  as 
'the  verdict  of  a  jury.'i 

§  622.  Application  for.— This  provision  affords  an  expeditious 
and  inexpensive  mode  of  adjusting,  without  litigation,  many  of 
the  contested  claims  arising  in  the  settlement  of  an  estate. 
The  application  of  the  trustee  to  submit  a  controversy  to  the 
determination  of  arbitrators  must  clearly  and  distinctly 
set  forth  the  subject-matter  of  the  controversy  and  the  reasons 
why  he  thinks  it  proper  and  for  the  best  interests  of  the  estate 
to  have  the  controversy  so  settled.^  The  court  may  hear  testi- 
mony and  arguments  of  counsel  upon  the  application,  though 

1  Analogous  provision  of  Act  of  to  the  controversy,  and  may,  under 
1867,     "Sec.  17.     .     .     .     He  may,  such  direction,  compound  and  set- 
under  the  direction  of  the  court,  tie  any  such  controversy,  by  agree- 
submit  any  controversy  arising  in  ment  with  the  other  party,  as  he 
the  settlement  of  demands  against  thinks  proper  and  most  for  the  in- 
the  estate,  or  of  debts  due  it,  to  the  terest  of  the  creditors." 
determination  of  arbitrators,  to  be         -  G.  O.  XXXIII. 
chosen  by  him,  and  the  other  party 
26                                                         401 


402  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  2o 

there  is  no  provision  for  notice  to  creditors  of  such  hearings 
or  proceedings,  the  better  practice,  however,  is  to  give  notice. 
§  623.  To  whom  addressed,— This  application  may  be  ad- 
dressed to  the  Court  of  Bankruptcy  or  to  the  referee,  since  he 
is  required  generally  to  perform  the  duties  of  such  court^  and 
is  comprehended  within  the  definition  of  the  term  court."* 
Under  the  Act  of  1867  the  application  had  to  be  made  to  a 
judge.5 

§  624.  Selection  and  finding  of  arbitrators.— As  all  three  of 
the  arbitrators  are  to  be  mutually  chosen  or  one  by  the  trustee 
and  one  by  the  other  party,  and  the  third  by  the  two  thus 
chosen,  or  on  their  failure,  by  the  court,  it  is  unlawful  for  the 
third  arbitrator  to  be  selected  by  the  two  contending  part- 
ies.^ 

When  one  becomes  a  party  to  a  submission  to  arbitration  he 
is  bound  by  the  decision  in  a  collateral  action.'''  As  the  find- 
ing of  the  arbitrators  is  to  have  like  force  and  effect  as  the 
verdict  of  a  jury,  such  finding  when  so  filed  is  necessarily 
reviewable  and  liable  to  be  set  aside  or  adjudged  upon  by  the 
court  as  a  verdict  would  be.  Consequently  in  a  case  where  a 
few  days  before  filing  his  petition  a  bankrupt  gave  a  mort- 
gage to  one  of  his  creditors  which  on  being  submitted  to  arbi- 
trators was  held  not  given  with  intent  to  hinder,  delay  or 
defraud  creditors,  such  finding  was  held  unwarranted  and  set 
aside  as  its  necessary  effect  was  to  prefer  the  mortgagee  and 
to  hinder  and  delay  others,  and  such  must  be  presumed  to 
have  been  his  intent.^ 

a  Sec.  38a  (4),  act  of  1898.  <••  In  re  McLam,  97  F.  R.  922,  3  A. 

4  Sec.  1   (7),  act  of  1898.  B.  R.  245. 

5  In  re  Graves,  1  N.  B.  R.  237,  "  Johnson  v.  Worden,  13  N.  B.  R 
F.  C.  5709.  335. 

8  In  re  McLam,  supra. 


CHAPTER  XXVII. 

COMPROMISES. 

§625.   (27a)  Compromise  of  contro-  628.  Compounding  claims. 

versies.  629.  Plan    of    settlement   not   au- 

626.  Application.  thorized. 

627.  When  to  be  granted. 

§  625.  '  (Sec.  27a)  Compromise  of  controversies.— The  trus- 
'tee  may,  with  the  approval  of  the  court,  compromise  any  con- 
'troversy  arising:  in  the  administration  of  the  estate  upon 
'such  terms  as  he  may  deem  for  the  best  interests  of  the  es- 
'tate.'i 

§  626.  Application.— To  be  obliged  to  litigate  all  of  the  con- 
tested claims  arising  in  the  settlement  of  an  estate  would 
prove  a  source  of  great  expense  and  delay,  which  this  section 
seeks  to  avoid  by  providing  an  economic  and  speedy  mode  by 
which  the  trustee  may  dispose  of  the  same  as  advantageously 
as  possible  to  the  estate.  Creditors,  however,  must  have  at 
least  ten  days'  notice  by  mail  of  the  proposed  compromise  of 
any  controversy.^  The  trustee  must  clearly  and  distinctly  set 
forth  in  his  application,  which  may  be  made  to  the  court  of 
bankruptcy  or  the  referee,^  the  subject-matter  of  the  contro- 
versy and  the  reason  why  he  thinks  it  proper  and  most  for  the 
interest  of  the  estate  to  compromise."* 

§  627.  When  to  be  granted.— This  provision  authorizes  the 
compromise  of  claims  of  trustees  against  third  persons  to 
recover  moneys  due  bankrupt  or  controversies  between  such 
trustees  and  persons  holding  or  claiming  adversely  to  them,  as 
a  claim  by  a  trustee  to  an  accounting  by  a  preferential  trans- 
feree  and   fraudulent    grantee    of  bankrupt;^   or   of   contro- 

1  Analogous  provision  of  Act  of  ^  Sec.  58a    (7),  act  of  1898;     In 

1867.     "Sec.   17.     .     .     .     The  as-  re  Heyman.  108  F.  R.  207,  5  A.  B. 

slgnee    .    .    .    may.  under  such  di-  R.  808. 

rection    [i.  e.   of  the  court],  com-  ^  Sec.  1  (7),  act  of  1898. 

pound  and  settle  any  such  contro-  *  G.  O.  XXXIII. 

versy  by  agreement  with  the  other  •"■  Hiclts  v.  Knost,  1  N.  B.  N.  336, 

party,    as    he    thinks    proper    and  2  A.  B.  R.  153,  94  F.  R.  625 ;  cit- 

most  for  the  interest  of  the  cred-  ing  In  re  Sievers,  1  A.  B.  R.  117,  1 

itors."  N.  B.  N.  68,  91  F.  R.  366,  and  Car- 

403 


404  THE    NATIONAL    BANKRUPTCY  LAW.  CiL  27 

versies  between  trustee  and  a  strangei-  to  the  bankruptcy 
proceedings;^  or  at  law  or  in  equity,  as  distinguished  from 
proceedings  in  bankruptcy,  between  trustee  as  such  and  ad- 
verse claiinants  concerning  the  property  acquired  or  claimed 
by  the  trusteed  Notwithstanding  the  fact  that  the  creditors 
may  by  vote  approve  a  proposed  compromise  submitted  by  a 
debtor  of  the  estate,  such  action  is  not  conclusive,  for  the  court 
may  for  good  cause  disallow  it.^ 

§  628.    Compounding  claims.— Whenever  it  may  be  deemed 

for  the  benefit  of  the  estate  to  compound  and  settle  any  debts 
or  other  claims  due  or  belonging  to  the  bankrupt,  the  trustee  or 
bankrupt  or  any  creditor  who  has  proved  his  debt  may  file 
his  petition  therefor  addressed  to  the  judge  or  referee  and 
thereupon  he  will  appoint  a  suitable  time  and  place  for  the 
hearing  thereof,  notice  of  which  must  be  given  as  the  court 
may  direct,  presumably  at  least  ten  days,  so  that  all  creditors 
and  other  persons  interested  may  appear  and  show  cause,  if 
any  they  have,  why  an  order  should  not  be  passed  by  the  court 
upon  the  petition  authorizing  such  act  on  the  part  of  the  trus- 
tees.^ 

Under  the  Act  of  1867,  it  was  held  that  an  assignee  could 
not  be  authorized  to  compound  debts  for  the  purpose  of  com- 
promising the  same  under  direction  of  a  committee  of  credit- 
ors, where  all  creditors  did  not  vote  when  such  committee  was 
appointed,  but  that  each  case  must  be  presented  separately 
and  the  facts  making  the  compromise  properly  stated.^  ° 

If  after  a  proposition  of  settlement  has  been  made  a  trustee 
applies  for  instructions  as  to  a  suit  the  creditors  wish  brought, 
he  must  show  that  a  better  result  is  likely  to  be  obtained  by 
suit  than  by  accepting  the  proposed  settlement  and  that  he 
will  probably  succeed,  though  he  is  not  expected  to  demon- 
strate that  he  will  certainly  do  so.^^ 

ter  V.  Hobbs,  1  A.  B.  R.  215,  1  N.  320,  3  A.  B.  R.  492,  98  F.  R.  705. 
B.  N.  191,  92  F.  R.  594,  with  dis-         7  in  re  Abraham,  2  A.  B.  R.  266, 

approval;    and    Burnett   v.   Morris  93  F.  R.  767,  1  N.  B.  N.  281. 
Mercantile  Co.,  1  A.  B.  R,  229,  91         »  In  re  Heyman,  108  F.  R.  207,  5 

F.  R.  365,  1  N.  B.  N.  138;  Mitchell  A.  B.  R.  808. 
V.  McClure,  1  A.  B.  R.  53,  1  N.  B.         9  G.  O.  XXVIII. 
N.   138,   91   F.   R.   621,   and   In   re         lo  In  re  Dibblee,  3  N.  B.  R.  17,  3 

Abraham,  1  A.  B.  R.  266.  93  F.  R.  Ben.  354,  F.  C.  3885. 
767,  1  N.  B.  N.  281,  with  approval.         "  In  re  Phelps,  2  N.  B.  N.  R.  484, 

6  Shutts,  tr.  v.  Bk.,  2  N.  B.  N.  R.  3  A.  B.  R.  396. 


Cir.  27  COMPROMISES— COMPOUNDING    CLAIMS.  405 

§  629.  Plan  of  settlement  not  authorized,— Where  a  plan  for 
the  settlement  and  distribution  of  the  bankrupt's  estate  not 
within  the  provisions  of  the  act  is  proposed,  it  is  only  justifiable 
if  all  known  creditors  consent;  and  is  liable  to  be  interfered 
with  if  other  creditors  appear  within  the  year,  for  such  cred- 
itors are  entitled  to  their  day  in  court  and  to  their  ratable  share 
of  the  undistributed  assets ;  and,  on  a  motion  by  such  creditors 
to  set  aside  an  order  authorizing  the  execution  of  such  plan, 
the  distribution  of  the  estate  must  be  arrested  until  their 
claims  can  be  liquidated  or  found  invalid,  but  their  merits  are 
not  to  be  passed  upon  on  such  motion  but  in  the  regular  course 
of  the  proceedings.' - 

12  In  re  Lockwood^  3  N.  B.  N.  R.    57,  104  F.  R.  794,  4  A.  B.  R.  731. 


CHAPTER  XXVIII. 


DESIGNATION   OF    NEWSPAPERS. 


§630.  '(Sec,  28a)  Court  to  designate  newspapers.— Courts 
of  bankruptcy  shall  by  order  designate  a  newspaper  published 
within  their  respective  territorial  districts,  and  in  the  county 
in  which  the  bankrupt  resides  or  the  major  part  of  his  prop- 
erty is  situated,  in  which  notices  required  to  be  published  by 
this  Act  and  orders  which  the  court  may  direct  to  be  published 
shall  be  inserted.  Any  court  may  in  a  particular  case,  for  the 
convenience  of  parties  in  interest,  designate  some  additional 
newspaper  in  which  notices  and  orders  in  such  case  shall  be 
published. '1 

§  631.  This  provides  in  effect  that  the  district  court  shall, 
by  standing-  order,  designate  one  paper  in  each  county  for  the 
publication  of  notices ;  and  that,  in  a  particular  case,  the  judge, 
or  the  referee,  may  order  the  publication  of  notices  in  an  addi- 
tional paper.  For  the  publication  of  notices  to  creditors  of 
the  first  meeting,  etc.,  see  section  oSb,  of  the  law.  post. 


1  Analogous  provision  of  Act  of 
1867.  "Sec.  11.  .  .  .  And  the 
judge  of  the  district  court,  or  if 
there  be  no  opposing  party,  any 
register  of  said  court,  to  be  desig- 
nated by  the  judge,  shall  forthwith. 
if  he  be  satisfied  that  the  debts  due 


from  the  petitioner  exceed  $300, 
issue  a  warrant  ....  directed 
to  the  marshal  of  said  district,  au- 
thorizing him  forthwith,  as  mes- 
senger, to  publish  notices  in  such 
newspapers  as  the  warrant  speci- 
fies, etc." 


(06 


CHAPTER  XXIX. 

OFFENSES. 

§632.   (29a)   By  trustee.  iNO.  Receiving      property       from 

G33.  Jurisdiction    of    courts  over                   bankrupt. 

offenses.  G41.  c.  By  I'eferee. 

G34.  Practice.  G42.  d.  Indictment  must  be  found 

G35.  Of  trustee.  within  a  year. 

636.  b.  By  bankrupt,  or  others.  643.  Limitation      upon      prosecu- 

637.  Concealment  of  assets.  tions. 

638.  False  oath.  G44.  Habeas  corpus. 

639.  Advice  of  counsel. 

§  632.  '  (Sec.  29a)  Offense  as  trustee.— A  person  shall  be 
'punished,  by  imprisonment  for  a  period  not  to  exceed  five 
'years,  upon  conviction  of  the  offense  of  having  knowingly  and 
'frandidently  appropriated  to  his  own  use,  embezzled,  spent,  or 
'uiilawl'iilly  transferred  any  property  or  secreted  or  destroyed 
'any  document  belonging  to  a  bankrupt  estate  which  came  into 
'his  charge  as  trustee.' 

§  633.  Jurisdiction  of  courts  over  offenses.— Courts  of  bank- 
ruptcy with  which  the  circuit  courts  have  concurrent  juris- 
diction^ within  their  respective  territorial  limits,  have  jurisdic- 
tion to  arraign,  try  and  punish  bankrupts,  officers  and  other 
persons,  and  the  agents,  officers,  members  of  the  board  of  direc- 
tors or  trustees,  or  other  similar  controlling  bodies,  of  cor- 
porations for  violations  of  this  act,  in  accordance  with  the 
procedure  of  the  United  States  now  in  force,  or  such  as  may 
hereafter  be  enacted,  regulating  trials  for  the  alleged  viola- 
tion of  the  laws  of  the  United  States.-  Alleged  offenses  under 
this  act  may  be  submitted  to  a  jury  according  to  the  laws  of 
the  United  States  now  in  force,  or  such  as  may  hereafter  be 
enacted  in  relation  to  trials  by  jury.^ 

§634. Practice.— Oft'enses  under  the  act  may  be  prose- 
cuted on  information  or  indictment;^  and,  if  the  bankruptcy 
court  obtains  jurisdiction  over  violators  of  the  act,  it  may 
enforce    the    provisions    against    them    though    they   may   be 

1  Sec.  23c.  act  of  1898.  •»  U.  S.  v.  Block.  15  N.  B.  R.  325, 

2  Sec.  2  (4).  act  of  1898.        4  Sawy.  211,  F.  C.  14609. 


3  Sec.  19c.  act  of  1898. 


407 


408  THE    NATIONAL    BANKRUPTCY    LAW.  ClI.  29 

aliens.^  The  indictments  should  aver  scienter  and  all  essen- 
tial facts  necessary  to  constitute  the  offense  as  defined  in  the 
act.« 

§  635. Of  trustee. — This  provision  is  for  the  punishment 

of  the  trustee  if  he  knowingly  and  fraudulently  appropriates 
to  his  own  use,  embezzles,  spends  or  unlawfully  transfers  any 
property  or  secretes  or  destroys  any  document  belonging  to  a 
bankrupt  estate  which  comes  into  his  charge  as  such  trustee, 
and  has  no  reference  to  the  bankrupt  nor  to  anyone  elseJ  In 
the  event  the  trustee  misappropriates  funds,  he  cannot  be 
compelled  to  testify,  if  he  refuses  to  answer  upon  the  ground 
that  his  answer  may  incriminate  him.^ 

§  636.  'b.  By  bankrupts,  or  others.— A  person  shall  be  pun- 
'ished,  by  imprisonment  for  a  period  not  to  exceed  two  years, 
'upon  conviction  of  the  offense  of  having  knowingly  and  fraud- 
'  ulently 

'  (1)  Concealed  while  a  bankrupt,  or  after  his  discharge,  from 
'his  trustee  any  of  the  property  belonging  to  his  estate  in 
'bankruptcy;  or 

*  (2)  Made  a  false  oath  or  account  in,  or  in  relation  to,  any 
'proceeding  in  bankruptcy; 

*  (3)  Presented  under  oath  any  false  claim  for  proof  against 
'the  estate  of  a  bankrupt,  or  used  any  such  claim  in  composi- 
*tion  personally  or  by  agent,  proxy,  or  attorney,  or  as  agent, 
'proxy,  or  attorney;  or 

'  (4)  Received  any  material  amount  of  property  from  a  bank- 
'rupt  after  the  filing  of  the  petition,  with  intent  to  defeat  this 
'Act;  or 

'  (5)  Extorted  or  attempted  to  extort  any  money  or  property 
'from  any  person  as  a  consideration  for  acting  or  forbearing  to 
'act  in  bankruptcy  proceedings.'^ 

§  637.    Concealment    of    assets.— This  offense  would  occur 

eOlcott  V.  McLean,  14  N.  B.  R.  1867.     "Sec.  7.     .    .     .     All  persons 

379.  wilfully  and  corruptly  swearing  or 

6  U.  S.  V.  Prescott,  4  N.  B.  R.  29,  affirming  falsely  before  a  register 
2  Biss.  325,  F.  C.  16084.  shall  be  liable  to  all  the  penalties, 

7  See  In  re  Webb,  2  N.  B.  N.  R.  punishments,  and  consequences  of 
11,  3  A.  B.  R.  204.  perjury. 

8  In  re  Smith,  112  F.  R.  509,  7  A.  "Sec.  44.  .  .  .  If  any  debtor 
B.  R.  213.  or  bankrupt   shall,  after  the  com- 

n  Analogous  provision  of  Act  of    mencement  of  proceedings  in  bank- 


Cii.  29 


OFFENSES. 


409 


ruptcy,  secrete  or  conceal  any  prop- 
erty belonging  to  his  estate,  or  part 
with,  conceal,  or  destroy,  alter, 
mutilate,  or  falsify,  or  cause  to  be 
concealed,  destroyed,  altered,  mu- 
tilated, or  falsified,  any  book,  deed, 
document,  or  writing  relating 
thereto,  or  remove,  or  cause  to  be 
removed,  the  same  or  any  part 
thereof  out  of  the  district,  or  oth- 
erwise dispose  of  any  part  thereof, 
with  intent  to  prevent  it  from 
coming  into  the  possession  of  the 
assignee  in  bankruptcy,  or  to  hin- 
der, impede,  or  delay  either  of 
them  in  recovering  or  receiving 
the  same,  or  make  any  payment, 
gift,  sale,  assignment,  transfer,  or 
conveyance  of  any  property  be- 
longing to  his  estate  with  the  like 
intent,  or  spends  any  part  thereof 
in  gaming;  or  shall,  with  intent  to 
defraud,  wilfully  and  fraudulently 
conceal  from  his  assignee  or  omit 
from  his  schedule  any  property  or 
effects  whatsoever;  or  if,  in  case 
of  any  person  having,  to  his  knowl- 
edge or  belief,  proved  a  false  or 
fictitious  debt  against  his  estate, 
he  shall  fail  to  disclose  the  same 
to  his  assignee  within  one  month 
after  coming  to  the  knowledge  or 
belief  thereof;  or  shall  attempt  to 
account  for  any  of  his  property  by 
fictitious  losses  or  expenses;  or 
shall,  within  three  months  before 
the  commencement  of  proceedings 
in  bankruptcy,  under  the  false 
color  and  pretense  of  carrying  on 
business  and  dealing  in  the  ordi- 
nary course  of  trade,  obtain  on 
credit  from  any  person  any  goods 
or  chattels  with  intent  to  defraud  ; 
or  shall,  with  intent  to  defraud 
his  creditors,  within  three  months 
next  before  the  commencement  of 
proceedings  in  bankruptcy,  pawn, 
pledge,  or  dispose  of,  otherwise 
than  by  bona  fide  transactions  in 


the  ordinary  way  of  his  trade,  any 
of  his  goods  or  chattels  which 
have  been  obtained  on  credit  and 
remain  unpaid  for,  he  shall  be 
deemed  guilty  of  a  misdemeanor, 
and  upon  conviction  thereof  in  any 
court  of  the  United  States,  shall 
be  punished  by  imprisonment, 
with  or  without  hard  labor,  for  a 
term  not  exceeding  three  years. 

"Sec.  45.  .  .  .  That  if  any 
judge,  register,  clerk,  marshal, 
messenger,  assignee,  or  any  other 
officer  of  the  several  courts  of 
bankruptcy  shall,  for  anything 
done  or  pretended  to  be  done  un- 
der this  act,  or  under  color  of  do- 
ing anything  thereunder,  wilfully 
demand  or  take,  or  appoint  or  al- 
low any  person  whatever  to  take 
for  him  or  on  his  account,  or  for 
or  on  account  of  any  other  person, 
or  in  trust  for  him  or  for  any 
other  person,  any  fee,  emolument, 
gratuity,  sum  of  money,  or  any- 
thing of  value  whatever,  other 
than  is  allowed  by  this  act,  or 
which  shall  be  allowed  under  the 
authority  thereof,  such  person, 
when  convicted  thereof,  shall  for- 
feit and  pay  the  sum  of  not  less 
than  three  hundred  dollars  and 
not  exceeding  five  hundred  dollars, 
and  be  imprisoned  not  exceeding 
three  years. 

"Sec.  46.  .  .  .  That  if  any 
person  shall  forge  the  signature  of 
a  judge,  register  or  other  ofl!icer 
of  the  court,  or  shall  forge  or 
counterfeit  the  seal  of  the  courts, 
or  knowingly  concur  in  using  any 
such  forged  or  counterfeit  signa- 
ture or  seal  for  the  purpose  of 
authenticating  any  proceeding  or 
document,  or  shall  tender  in  evi- 
dence any  such  proceeding  or 
document  with  a  false  or  counter- 
feit signature  of  any  judge,  reg- 
ister,  or  other  officer,  or  a  false 


410 


THE    NATIONAL    BANKRUPTCY    LAV/. 


Ch.  29 


where  assets  arc  secreted,  falsified  or  mutilated.^ '^  'i'his  is  a 
penal  pi-ovisioii  and  cainiot  therefore  be  given  a  retroactive 
effect  so  that  to  create  an  offense  under  it  the  act  must  have 
been  committed  since  July  1,  1898,  the  date  of  the  passage  of 
the  law.^'  The  offense  is  concealing  from  the  trustee  so  that, 
if  no  trustee  has  been  appointed,  there  can  be  no  offense  ;i-  but 
if  property  is  afterwards  discovered,  the  proper  course  is  to 
have  a  trustee  appointed,^  ^  and  then,  if  the  concealment  con- 
tinues, the  offense  will  be  committed.  Demand  by  the  trustee 
is  not  necessary,  but  the  offense  is  complete  when  the  schedule 
is  filed.^^  It  must  be  knowingly  and  fraudulently  done;^-* 
and,  if  due  to  a  mistake  either  in  law  or  fact,  it  does  not  con- 
stitute the  offense,^  ^  nor  where  property  is  omitted  because 
deemed  worthless  or  because  after  acquired,^  ^  or  because  it 
was  not  known  at  the  time  that  a  substantial  interest  existed 


or  counterfeit  seal  of  the  court, 
subscribed  or  attached  thereto, 
knowing  such  signature  or  seal 
to  be  false  or  counterfeit,  any  such 
person  shall  be  guilty  of  felony, 
and  upon  conviction  thereof  shall 
be  liable  to  a  fine  of  not  less  than 
five  hundred  dollars,  and  not  more 
than  five  thousand  dollars,  and  to 
be  imprisoned  not  exceeding  five 
years,  at  the  discretion  of  the 
court." 

10  Sec.  1  (22),  act  of  1898. 

11  In  re  Quackenbush,  2  N.  B.  N. 
R.  964,  4  A.  B.  R.  274,  102  F.  R. 
282;  In  re  Webb,  2  N.  B.  N.  R. 
289,  3  A.  B.  R.  386,  98  F.  R.  404, 
below  2  N.  B.  N.  R.  11,  3  A.  B.  R. 
204. 

12  In  re  Leszynsky,  2  N.  B.  N.  R. 
738. 

13  In  re  Smith,  1  N.  B.  N.  532,  2 

A.  B.  R.  190,  93  F.  R.  791. 

14  U.  S.  v.  Smith,  13  N.  B.  R.  6. 
F.  C.  16339;   U.  S.  v.  Clark,  4  N. 

B.  R.  14. 

15  In  re  Lowenstein,  1  N.  B.  N. 
329,  2  A.  B.  R.  193;  In  re  Cohn. 
1  N.  B.  N.  330,  1  A.  B.  R.  655;  In 
re  Schreck,  1  N.  B.  N.  334,  1  A,  B. 


R.  366,  370;  In  re  Mendelson,  1  N. 
B.  N.  391;  In  re  Roy,  1  N.  B.  N. 
526,  3  A.  B.  R.  37,  96  F.  R.  400; 
In  re  Skinner,  97  F.  R.  190,  3  A. 
B.  R.  163;  In  re  Hyman,  3  A.  B.  R. 
169,  171,  97  F.  R.  195;  In  re 
Freund,  2  N.  B.  N.  R.  236,  3  A.  B. 
R.  418,  98  F.  R.  81;  In  re  Adams, 
104  F.  R.  72,  2  N.  B.  N.  R.  1034; 
See  also  In  re  Hussman,  2  N.  B.  R. 
437;  In  re  Rathbone,  1  N.  B.  R. 
145,  F.  C.  11583;  In  re  Goodfellow, 
3  N.  B.  R.  114,  F.  C.  5536;  In  re 
Rainsford,  5  N.  B.  R.  581,  F.  C. 
11537;  In  re  Hill,  1  N.  B.  R.  42,  2 
Ben.  136,  F.  C.  6483. 

16  In  re  Morrow,  3  A.  B.  R.  263, 
97  F.  R.  574;  In  re  Schreck,  1  N. 

B.  N.  334,  1  A.  B.  R.  366,  370; 
Huber  v.  Huber,  1  N.  B.  N.  431; 
In  re  Wilson,  F.  C.  17783;  In  re 
Boynton,  10  F.  R.  277;  In  re 
Warre.  10  F.  R.  377;  In  re  Free- 
man, 4  N.  B.  R.  17,  4  Ben.  245,  F. 

C.  5082. 

IT  In  re  Pearce,  F.  C.  10783;  In 
re  Winsor,  16  N.  B.  R.  152,  F.  C. 
17885;  In  re  Polakoff,  1  N.  B.  N. 
232,  1  A.  B.  R.  358;  In  re  Todd. 
112  F.  R.  315,  7  A.  B.  R.  770. 


C'H.  29  OFFENSES— CONCEALING    ASSETS.  411 

in  the  property  concealed  ;i*'  or  where  the  property  was  incum- 
bered for  more  than  it  was  worth.^^ 

To  constitute  the  oifeuse  the  bankrupt  must  have  a  present 
,  interest  in  the  property,  and,  if  previously  to  the  bankruptcy 
proceedings  he  has  actually  conveyed  it  away  so  that  between 
him  and  the  grantee  the  title  has  actually  passed,  though  the 
conveyance  might  be  set  aside  by  creditors  or  a  trustee  in 
bankruptcy,  such  transfer  not  being  merely  colorable  or  on  a 
secret  trust  for  bankrupt's  benefit,  his  failure  to  include  it 
would  not  constitute  the  offense.-*^  The  intentional  and  fraudu- 
lent omission  of  property  previously  conveyed  in  fraud  of  cred- 
itors, whether  such  conveyance  was  prior  or  subsequent  to  the 
bankruptcy  act,  where  there  is  a  secret  trust  for  bankrupt's 
benefit,  is  a  violation  of  the  act,  because  the  concealment  is  a 
continuing  act  and  is  perpetuated  whenever  the  bankrupt's 
duty  to  reveal  such  assets  exists  and  is  knowingly  disregarded 
and  concealment  may  be  effected  by  concealment  of  the  title  as 
well  as  by  hiding  the  property,  and  it  is  not  necessary  that 
bankrupt  himself  should  be  able  to  recover  it,  if  his  creditors 
or  trustee  can  do  so.-^  Also  where  property  was  concealed 
from  the  receiver  of  a  state  court  and  was  not  subsequently 
turned  over  to  the  trustee  in  bankruptcy;-^  or  where  there  is 
a  large  shortage  in  the  bankrupt's  assets,  or  a  disappearance  of 
some,  which  bankrupt  fails  to  satisfactorily  explain  ;23  but  mere 

i»In   re   Hirsch,   2    N.   B.   N.   R.  268;    In  re  Quackenbush,  2  N.  B. 

137,  3  A.  B.  R.  344,  97  F.  R.  571;  N.  R.  964,  4  A.  B.  R.  274,  102  F.  R. 

In  re  Parker,  F.   C.   10720;   In   re  282;     Citizens    Bank   of    Salem   v. 

Shoemaker,  F.  C.  12799.  De  Paw  Co.,  3  N.  B.  N.  R.  244;   In 

19  In  re  Townsend,  3  F.  R.  559.  re  McNamara,  2  A.  B.  R.  566,  579; 

20  In  re  Cornell,  3  A.  B.  R.  172,  In  re  Hussman,  2  N.  B.  R.  437;  In 
97  F.  R.  29;  In  re  Quackenbush.  2  re  Rathbone,  1  N.  B.  R.  536,  2  N. 
N.  B.  N.  R.  964,  4  A.  B.  R.  274,  102  B.  R.  260,  F.  C.  11583;  In  re  Hill. 
F.  R.  282;  In  re  Crenshaw,  2  A.  B.  1  N.  B.  R.  431.  F.  C.  6483;  In 
R.  623,  625.  95  F.  R.  632;  In  re  re  Goodridge,  2  N.  B.  R.  324. 
Hirsch,  2  A.  B.  R.  715,  726,  96  F.  ^^  In  re  Lesser,  108  F.  R.  205,  5 
R.  486;   In  re  Headley,  3  A.  B.  R.  A.  B.  R.  331. 

272,  1  N.  B.  N.  250,  97  F.  R.  765,  ^s  in  re  Finkelstein,  2  N.  B.  N. 

ref.  dec.  2  N.  B.  N.  R.  684;    In  re  R.  839,  101  F.  R.  418,  3  A.  B.  R. 

Webb,  2  N.  B.  N.  R.  289,  3  A.  B.  R.  800;  In  re  Ablowich,  2  N.  B.  N.  R. 

386.  98  F.  R.  404,  ref.  dec.  2  N.  B.  386,  3  A.  B.  R.  586,  98  F.  R.  81;  In 

N.   R.    11,   3   A.   B.   R,   204;    In   re  re  O'Gara,  3  A.  B.  R.  349.  97  F.  R. 

Freund,  2  N.  B.  N.  R.  236,  3  A.  B.  952;   In  re  Schlesinger,  2  N.  B.  N. 

R.  418,  98  F.  R.  81.  R.  169,  3  A.  B.  R.  342,  97  F.  R.  930; 

21  In  re  Berner,   2  N.   B.   N.  R.  In  re  Meyers,  2  A.  B.  R.  707,  1  N. 


413  THE    NATIONAL    BANKRUPTCY    LAW.  ClL  29 

inability  to  give  a  satisfactory  explanation  will  not  make  it 
bo.2*  The  omission  of  property  conveyed  by  bankrupt  to  his 
wife  for  the  purpose  of  covering  it  up  is  an  offense  under  this 
provision  ;-•'•  but  it  is  not  for  an  attorney  at  law  to  omit  listing 
contracts  for  contingent  fees  unearned  p6  and  whether  or  not 
failure  to  list  an  interest  in  remainder  under  a  will  constitutes 
the  offense  depends  upon  whether  the  interest  can  be  subjected 
to  the  claims  of  creditors  in  any  way.^^  It  is  no  excuse  for  the 
bankrupt  to  say  that  he  omitted  property  from  his  schedules 
on  the  ground  that  he  would  be  entitled  to  such  property  as 
an  exemption.28 

Fraudulent  concealment  may  be  shown  as  well  by  circum- 
stantial as  by  direct  evidence,  and  where  the  evidence  is  wholly 
circumstantial  it  has  been  held  unnecessary  to  aver  the  pre- 
cise details  of  the  act  of  concealment;-^  a  fair  preponderance 
of  the  credible  evidence  being  all  that  is  necessary  to  show 
a  fraudulent  concealment.^^ 

The  bankrupt  is  none  the  less  guilty  of  concealing  assets  be- 
cause the  facts  and  circumstances  relating  to  the  fraudulent 
transfer  were  made  known  to  the  trustee  on  bankrupt's  exam- 
ination, the  essence  of  the  offense  being  the  placing  of  the  prop- 
erty out  of  the  trustee's  reach  by  the  bankrupt  with  intent  to 
retain  it  for  himself.^i 

The  filing  of  amended  schedules  giving  a  full  statement  of 
property  including  that  which  was  originally  omitted,  while 

B.   N.   515,   96    F.   R.    408;    In    re  In  re  Freund,  2  N.  B.  N.  R.  236,  3 

Friedman,  1  N.  B.  N.  332,  2  A.  B.  A.  B.  R.  418,  98  F.  R.  81. 

R.  301;  In  re  Purvine,  1  N.  B.  N.  26  in  re  McAdam,  2  N.  B.  N.  R. 

326,  2  A.  B.  R.  787,  96  F.  R.  192;  256,  3  A.  B.  R.  417,  98  F.  R.  409. 

In  re  Rosser,  1  N.  B.  N.  469,  2  A.  2-  in  re  Wetmore,  99  F.  R.  703, 

B.    R.    746,    96    F.    R.    308;    In    re  3  A.  B.  R.  700;  In  re  Wood,  98  F. 

Tudor,  1  N.  B.  N.  476,  2  A.  B.  R.  R.  972,  3  A.  B.  R.  572;   In  re  Bau- 

808,  96  F.  R.  942,  Ripon  Knitting  doine,  1  N.  B.  N.  506,  3  A.  B.  R. 

Wks.  V.  Schreiber,  2  N.  B.  N.  R.  55,  96  F.  R.  536;   In  re  Hoadley,  2 

545,  101  F.  R.  810,  4  A.  B.  R.  299;  N.   B.  N.   R.   704,   101   F.  R.   233,  3 

In  re  Kuntz,  1  N.  B.  N.  256;  In  re  A.  B.  R.  780;   In  re  St.  John,  3  N. 

Mendelsohn.  1  N.  B.  N.  391.  B.  N.  R.  114. 

24  In  re  Idzall,  2  A.  B.  R.  741,  96  28  in  re  Royal,  112  F.  R.  135,  7 

F.  R.  314.  A.   B.  R.   106;    see  In  re  Lemmel, 

23  In  re  Skinner,  3  A.  B.  R.  163,  118  F.  R.  487. 

97  F.  R.  190;  In  re  Welch,  1  N.  B.  29  in  re  Bellah,  116  F.  R.  69,  8 

N.  533,  3  A.  B.  R.  93,  100  F.  R.  65;  A.  B.  R.  310. 

but  see  In  re  De  Leeuw,  2  N.  B.  N.  3o  in  re  Leslie.  119  F.  R.  406. 

R.  267,  3  A.  B.  R.  418,  98  F.  R.  408;  si  in  re  Quackenbush,  supra. 


L'H.  2d  OFFENSES— FALSE   OATH.  413 

(3videuce  tending  to  show  the  absence  of  an  unlawful  intent, 
is  not  a  conclusive  answer  to  a  charge  of  concealment,  and 
should  not  be  considered  as  avoiding  the  consequences  of  the 
unlawful  act.2-  The  wilful  and  fraudulent  omission  by  bank- 
rupt of  part  of  his  assets  from  his  schedules  may  be  cause  for 
prosecution  under  the  act,  but  it  is  not  an  infamous  crime  as 
the  term  is  used  at  common  law  and  in  the  5th  Amendment  to 
the  Constitution.33 

§  638.  False  oath.— The  same  rule  as  to  the  time  of  making 
the  oath  applies  as  was  stated  in  the  preceding  paragraph  as 
to  the  concealing  of  assets,  that  is,  it  must  have  been  after  the 
passage  of  the  act  of  July  1,  1898.  A  false  oath  is  a  wilful, 
deliberate,  intentional  falsehood;  or  statement  of  something 
that  the  person  making  it  knows  or  should  know  is  untrue,  or 
recklessly  makes,  without  knowing  whether  it  is  true  or  not,^^ 
or  without  having  reasonable  grounds  for  believing  it  to  be 
true,  in  regard  to  a  material  matter  ;3^  but  it  must  be  all  ma- 
terial to  the  proceedings  in  bankruptcy,  and  have  some  re- 
lation to  the  bankrupt's  estate  or  his  acts  affecting  his  estate 
and  be  knowingly  and  fraudulently  made.^^  Thus  making  a 
pauper  affidavit  will  be  deemed  a  false  oath  when  bankrupt 
lives  in  affluence  and  the  entire  circumstance  shows  that  he  has 
the  control  of  money  ;^'^  or  states  in  his  schedule  that  all  of 
his  property  was  turned  over  to  a  state  receiver,  which  was 
not  true.^^ 

The  verification  of  schedules  from  which  valuable  property 
is  knowingly  omitted  or  which  contains  a  false  statement  con- 
stitutes a  false  oath,  if  the  omission  was  with  fraudulent  in- 
tent ■,'^^  thus  it  would  constitute  a  false  oath  for  the  bankrupt 
to  state  in  his  schedules  that  he  has  paid  nothing  to  his  attor- 
neys for  their  services  and  had  assigned  no  property,  when 
he  had  given  them  an  order  for  money  due  for  services,  but 
not  yet  payable,  in  payment  of  a  past  indebtedness  to  such 

32  In  re  Eaton,  post.  5  A.  B.  R.  703. 

33  U.  S.  V.  Block,  15  N.  B.  R.  ■■>-!  In  re  Williams,  2  N.  B.  N.  R. 
325,  4  Sawy.  211,  F.  C.  14609.  206,  but  see  Sellers  v.  Bell,  94  F. 

34  In  re  White.  1  N.  B.  N.  202.  R.  801,  2  A.  B.  R.  529. 

35  In  re  Huber,  1  N.  B.  N.  431;  3s  in  re  Lesser,  108  F.  R.  205,  5 
In  re  Strouse,  2  N.  B.  N.  R.  64;  In  A.  B.  R.  331. 

re  Bushnell.  1  N.  B.  N.  528;  In  re  39  in  re  Eaton,  110  F.  R.  731,  6 
Lemmel,   118  F.  R.  487.  A.   B.  R.  531 ;   In   re  Becker.  5  A. 

36  Bauman  v.  Feist,  107  F.  R.  83,     B.  R.  438;  In  re  Lemmel,  118  F.  R. 


-Hi  THE    NATIONAL    BANKRUPTCY    LAW.  ClL  39 

attorneys;*^  or  when  he  states  that  an  indebtedness  is  a  bona 
fide  loan  when  the  facts  and  circumstances  fail  to  carry  it 
out;*^  or  where  he  is  called  upon  to  explain  the  disposition  of 
money  drawn  by  him  from  his  business  and  adopted  a  method 
of  accounting  which  enabled  him  to  avoid  an  explanation  of 
what  he  did  with  a  large  sum  •,'^^  or  where  he  produces  a  false 
and  inaccurate  statement  of  expenditures  for  the  purpose  of 
making  a  good  showing  as  to  the  disposition  of  a  sum  of 
money.^3 

Wherever  the  offense  of  concealing  property  from  the  trustee 
is  committed  by  its  omission  from  the  schedules,  or  failure  to 
disclose  it  on  examination,  there  will  also  be  a  false  oath;  but 
there  may  be  omissions  from  the  schedules  which  will  make 
the  oath  to  them  false  but  will  not  constitute  knowingly  and 
fraudulently  concealing  property  from  the  trustee.^^  The 
omission  from  bankrupt's  schedules  of  stock  held  by  his 
wife  which  was  purchased  with  money  borrowed  by  her  would 
not  make  the  oath  a  false  one,  merely  because  he  was  em- 
ployed as  manager  of  the  corporation  whose  stock  she  held;^^ 
and,  where  by  agreement  between  counsel  certain  testimony 
given  by  bankrupt  in  another  proceeding  and  claimed  to  be 
partly  false  was  made  part  of  the  record,  but  bankrupt  was 
not  sworn,  there  is  no  false  oath  in  relation  to  any  proceeding 
in  bankruptcy.^*^ 

A  false  oath  is  an  offense  under  this  provision,  and  it  mat- 
ters not  whether  the  bankrupt  can  or  cannot  be  prosecuted  or 
convicted  for  it,  thus  while  the  testimony  of  a  bankrupt  given 
at  creditors'  meeting  cannot  be  offered  against  him  in  a  crim- 
inal proceeding,  it  is  nevertheless  an  offense  which  would  bar 
a  discharge."^''' 

§  639.    Advice  of  counsel.— To  constitute  the  offense  both  in 

487 ;  Osborne  V.  Perkins,  112  F.  R.  *';  In    re    Goldsmith.    101    F.    R. 

127,  7  A.  B.  R.  250.  570.  4  A.  B.  R.  234,  2  N.  B.  N.  R. 

40  In  re  Lewin,  103  F.  R.  852.  1013. 

41  In  re  Kamsler,  2  N.  B.  N.  R.  *-  In  re  Gaylord,  112  F.  R.  668, 
97,  97  F.  R.  194.  7  A,  B.  R.  1;    In  re  Goodale,   109 

42  In  re  Dews,  2  N.  B.  N.  R.  437.  F.  R.  483,  6  A.  B.  R.  493;  In  re 
3  A.  B.  R.  691,  101  F.  R.  549.  Dow,  105  F.  R.  889.  5  A.  B.  R.  405; 

43  In  re  Dews,  supra.  In  re  Leslie,  119  F.  R.  406;  Contra, 

44  In  re  Hirsch,   2  A.  B.  R.  715.  In  re  Marx,  102  F.  R.  676,  4  A.  B. 

45  Fellows  V.  Freudenthal.  102  R.  521;  In  re  Logan,  102  F.  R.  876, 
F.  R.  731,  4  A.  B.  R.  490.  4  A.  B.  R.  525. 


Ch.  29  OFFENSES.  415 

the  case  of  "concealment  of  assets"  and  the  ''making  of  a 
false  oath,"  it  must  be  done  knowingly  and  fraudulently. 
Hence  where  a  bankrupt  has  fully  and  fairly  laid  all  the  facts 
in  relation  to  scheduling  certain  property  before  his  attorney, 
and  received  advice  that  it  is  not  such  an  asset  as  should  prop- 
erly be  scheduled  in  bankruptcy,  such  advice,  however  erro- 
neous, tends  to  deprive  a  "concealment  of  assets"  or  a  "false 
oath"  of  the  elements  of  "wilfulness  and  fraud,"  and,  in  case 
of  a  false  oath,  a  conviction  of  perjury  could  not  be  main- 
tained, and  the  offense  under  this  provision  would  not  be  com- 
mitted ;  but  such  advice  must  have  been  given  in  good  f aith.^^ 

§  640.  Receiving  property  from  bankrupt.— The  act  express- 
ly defines  the  offense  to  be  "receiving  any  material  amount  of 
property  from  a  bankrupt  after  the  filing  of  the  petition,  with 
intent  to  defeat  this  Act;"  and  hence  the  receipt  of  money 
from  a  bankrupt  prior  to  the  filing  of  the  petition,  no  matter 
what  the  amount  or  how  clear  the  intent  to  defeat  the  act,  is 
not  an  offense  under  the  act ;  though  the  trustee  may  recover  it 
by  proper  proceedings.^^  "Where  a  bankrupt  transfers  mort- 
gaged property  to  a  mortgagee  after  the  filing  of  a  petition 
and  before  control  is  taken  for  the  benefit  of  the  estate,  both 
the  bankrupt  and  the  mortgagee  would  be  liable  to  punish- 
ment.^*' 

§641.  *c.  Offense  by  referee.— A  person  shall  be  punished 
'by  fine,  not  to  exceed  five  hundred  dollars,  and  forfeit  his  of- 
'fice,  and  the  same  shall  thereupon  become  vacant,  upon  con- 
'viction  of  the  offense  of  having  knowingly 

'(1)  Acted  as  a  referee  in  a  case  in  which  he  is  directly  or 
'indirectly  interested;  or 

'  (2)  Purchased,  while  a  referee,  directly  or  indirectly,  any 
'property  of  the  estate  in  bankruptcy  of  which  he  is  referee; 
'or 

'  (3)  Refused,  while  a  referee  or  trustee,  to  permit  a  reason- 
'able  opportunity  for  the  inspection  of  the  accounts  relating 

48  In  re  Shenberger,  2  N.  B.  N.  (N.  Y.)  63;  Sherman  v.  Kortright, 

R.  783,  102  F.  R.  978,  4  A.  B.  R.  52  Barb.  (N.  Y.)  267;  In  re  Wyatt, 

487;   In  re  Headley,  2  N.  B.  N.  R.  2  N.  B.  R.  84,  F.  C.  18106. 
684;  s.  c.  3  A.  B.  R.  272,  1  N.  B.  N.         *»  Wayne   Knitting  Mills  v.  Nu- 

250,  97  F.  R.  765;  In  re  Schreck.  3  gent,  3  N.  B.  N.  R.  32,  104  F.  R. 

McLean,   573,   F.   C.   14847;    In    re  530. 

Rainsford,   5   N.   B.   R.   531.   F.   C.         s"  In  re  Arnett,  112  F.  R.  770,  7 

11537;    Hall   v.    Suydam,   6    Barb.  A.  B.  R.  522. 


I  in  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  39 

'  to  the  affairs  of,  and  the  papers  and  records  of,  estates  in  his 
'charge  by  parties  in  interest  when  directed  by  the  court  so 
'to  do.' 

§642.  'd.  Indictment  must  be  within  a  year.— A  person 
'shall  not  be  prosecuted  for  any  offense  arising  under  this  Act 
'unless  the  indictment  is  found  or  the  information  is  filed  in 
'court  within  one  year  after  the  commission  of  the  offense.' 

§  643.  Limitation  upon  prosecutions.— This  provision  is  ab- 
solutely prohibitive  to  the  prosecution  for  an  offense  arising 
under  the  law,  unless  the  indictment  is  found  within  one  year 
after  its  commission,  and  such  time  can  under  no  condition  be 
€xtended.'^^ 

An  indictment  charging  the  bankrupt  with  perjury  under 
this  section  for  havnig  falsely  omitted  from  his  schedule  certain 
of  his  property,  must  not  alone  allege  that  his  deposition  in 
that  regard  was  false,  but  also  that  he  had  other  property 
which  was  omitted,  and  which  should  be  described,  since  the 
indictment  should  not  alone  set  forth  the  substance  of  the  of- 
fense, but  there  should  be  proper  averments  to  falsify  the  mat- 
ter wherein  the  perjury  is  assigned.^- 

§  644.  Habeas  Corpus.— In  any  case  in  which  the  imprison- 
ment is  claimed  to  be  in  contravention  of  the  act,  the  same 
remedy  by  habeas  corpus  may  be  pursued  in  addition  to  any 
other  remedies,  as  in  other  cases  of  unlawful  imprisonment,  in 
which  ease  the  usual  practice  in  habeas  corpus  cases  will  gov- 
ern. 

-1  See  In  re  Webb,  2  N.  B.  N.  R.  884,  5  A.  B.  R.  678:  Markham  v. 
11,  3  A.  B.  R.  204.  U.  S.,  160  U.  S.  319;  U.  S.  v.  Mann, 

51!  Bartlett   v.    U.    S.,    106    F.    R.     95  U.  S.  580. 


CHAPTER  XXX. 

RULES,    FORMS    AND   ORDERS, 


?645.   (30a)   U.    S.    Supreme   Court 
to  make  orders  and  forms. 

646.  To  be  followed. 

647.  Conflict    between    Law    and 

Forms  and  Orders. 


648.  Prescribed  Forms — Deficient. 

649.  Effect    of    delay    in    promul- 

gating orders  and  forms. 

650.  Rules  of  procedure. 


§  645.  '  (Sec.  30a.)  U.  S.  Supreme  Court  to  make  orders  and 
'forms. — All  necessary  rules,  forms,  and  orders  as  to  procedure 
'and  for  carrying  this  Act  into  force  and  effect  shall  be  pre- 
' scribed,  and  ma.v  be  amended  from  time  to  time,  by  the  Su- 
'preme  Court  of  the  United  States. '^ 

§  646.  To  be  followed.— As  one  of  the  values  of  a  federal 
bankruptcy  law  lies  in  its  uniformity,  the  course  of  procedure 
and  forms  should  conform,  as  nearly  as  possible,  to  the  general 
orders  and  forms  promulgated  by  the  Supreme  Court  of  the 
United  States,  since  they  are  obligatory  and  binding  upon 
courts  of  bankruptcy,  in  that  they  confer  rights  as  well  as 
prescribe  rules  of  practice.- 

lowed  by  law  for  similar  services 
in  other  proceedings ; 

"For  regulating  the  practice  and 
procedure  upon  appeals; 

"For  regulating  the  filing,  cus- 
tody, and  inspection  of  records; 

"And  generally  for  carrying  the 
provisions  of  this  act  into  effect. 

"After  such  general  orders  shall 
have  been  so  framed,  they  or  any 
of  them  may  be  rescinded  or  var- 
ied, and  other  general  orders  may 
be  framed  in  manner  aforesaid; 
and  all  such  general  orders  so 
framed  shall  from  time  to  time  be 
reported  to  Congress,  with  such 
suggestions  as  said  justices  may 
think  proper." 

The  rules  and  forms  went  into 
effect  January  1,  1900. 

2  In  re  Scott,  99  F.  R  404.  2  N. 
B.  N.  R.  440,  3  A.  B.  R.  625;  In  re 


1  Analogous  provision  of  Act  of 
1867.  "Sec.  10.  .  .  .  That  the 
Justices  of  the  Supreme  Court  of 
the  United  States,  subject  to  the 
provisions  of  this  act,  shall  frame 
general  orders  for  the  following 
purposes: 

"For  regulating  the  pi'actice  and 
procedure  of  the  district  courts  in 
bankruptcy,  and  the  several  forms 
of  petitions,  orders,  and  other  pro- 
ceedings to  be  used  in  said  courts 
in  all  matters  under  this  act; 

"For  regulating  the  duties  of  the 
various  officers  of  said  courts; 

"For  regulating  the  fees  payable 
and  the  charges  and  costs  to  be  al- 
lowed, except  such  as  are  estab- 
lished by  this  act  or  by  law,  with 
respect  to  all  proceedings  in  bank- 
ruptcy before  said  courts,  not  ex- 
ceeding the  rate  of   fees  now  al- 


417 


418  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  30 

The  power  to  establish  a  system  of  l)aiikruptcy  carries  with 
it  the  power  to  establish  the  details  of  the  system  if  Congress 
shall  think  proper.-'^ 

§647.  Conflict  between  law  and  forms  and  orders.— The 
forms  prescribed  by  the  Supreme  Court  are  not  intended  to 
add  to  the  provisions  of  the  law,^  and  in  case  of  conflict  between 
the  law  and  the  general  orders  and  forms,  the  rule  is  to  follow 
the  law  first,  the  orders  next  and  the  forms  last.^ 

§  648,  Prescribed  forms— Deficient.— The  official  blank  forms 
should  be  used  as  far  as  possible,  since  they  facilitate  the  dis- 
patch of  business  and  lessen  the  labor  of  all  connected  with 
bankruptcy  proceedings,*"^  and  it  has  been  held  that  petitions 
will  not  be  filed  or  considered  unless  they  are  on  the  prescribed 
printed  forms  and  that  written  and  typewritten  petitions  and 
schedules  will  be  returned  to  the  parties  without  action,"^ 
but  this  is  a  matter  governed  by  the  local  practice  entirely. 
Where  no  proper  forms  are  provided  either  for  a  petition  or 
other  pleading,  existing  forms  may  be  adopted  as  far  as  possi- 
ble or  others  provided  to  meet  the  exigencies  of  the  case.^  It 
has  been  held  that  the  law  does  not  contemplate  that  the 
respondent  shall  be  confined  to  the  particular  form  prescribed 
for  the  answer  and  set  out  only  such  facts  as  suggested  by 
the  order,  since  the  purpose  was  to  indicate  the  form  in  sub- 
stance only,^  but  as  a  rule,  the  forms  prescribed  should  be 
used. 

§  649.  Effect  of  delay  in  promulgating  orders  and  forms.  — 
The  necessary  delay  in  the  preparation  and  promulgation  of  the 
rules,  forms  and  orders  did  not  prevent  the  act  taking  effect 
as  provided  upon  its  passage  and  the  legal  rights  and  obliga- 
tions of  all  persons  under  it  must  be  adjudged  according  to 
the  provisions  of  the  act  at  the  time  of  its  passage.i^ 

§  650.    Rules  of  procedure.— Courts  of  bankruptcy  are  not 

Cobb,  112  F.  R.  655,  7  A.  B.  R.  655.  t  Mahoney  v.  Ward,  2  N.  B.  N. 

3  Six  Penny  Savings  Bank,  et  ah  R.  538,  100  F.  R.   278,  3  A.  B.  R. 

V.   Bank,    10   N.    B.    R.   399,   F.    C.  770. 

12919.  s  Mather  v.  Coe,  1  N.  B.  N.  554, 

i  West  Co.  V.  Lea,  1  N.  B.  N.  409,  1  A.  B.  R.  504,  92  F.  R.  333. 

174  U.  S.  590,  2  A.  B.  R.  463.  9  in  re  Paige.  2  N.  B.  N.  R.  110, 

5  In  re  Soper,  1  N.  B.  N.  182,  1  99  F.  R.  538,  3  A.  B.  R.  679. 

A.  B.  R.  193.  10  In   re  Lewis,  1   N.   B.   N.  556, 

«1    N.    B.    N.    239.    396;     In    re  1  A.  B.  R.  458,  91  F.  R.  632. 
Chasnoff,  3  N.  B.  N.  R.  1. 


Ch.  30  RULES,    FORMS   AND   ORDERS.  419 

hampered  by  such  technical  rules  as  will  prevent  the  doing  of 
what  is  just,  and  for  the  protection  of  the  estate,  even  if  it  re- 
quires the  revocation  of  an  order  once  made,^^  but  they  have 
no  power  to  make  general  rules  in  bankruptcy.^^ 

The  general  rules  and  orders  made  by  the  Supreme  Court 
are  not  designed  to  create  or  declare,  nor  do  they  create  and 
declare,  the  rights  of  creditors  in  the  estate  of  the  bankrupt ; 
still  less  do  they  abrogate  and  annul  those  rights.^^ 

11  Samson  v.  Burton,  6-  N.  B.  R.  i3  In  re  Baxter  et  al.,  18  N.  B.  R 
403.  560,  F.  C.  1121. 

12  In  re  Kennedy  et  al..  7  N.  B. 
R.  337,  F.  C.  7699. 


.     CHAPTER  XXXI. 

COMPUTATION  OF  TIME. 

1651.   (31a)   Rule     for    computing       653.  Method  of  computing. 

time.  654.  Time  mandatory. 

652.  Holidays.  655.  Fraction  of  a  day. 

§651.  '(Sec.  31a)  Rule  for  computing  time.— Whenever 
time  is  enumerated  by  days  in  this  Act,  or  in  any  proceeding 
in  bankruptcy,  the  number  of  days  shall  be  computed  by  ex- 
cluding the  first  and  including  the  last,  unless  the  last  fall  on 
a  Sunday  or  holiday,  in  which  event  the  day  last  included 
shall  be  the  next  day  thereafter  which  is  not  a  Sunday  or  a 
'legal  holiday. '1 

§  652.  Holidays.— This  term  is  meant  to  cover  January  first, 
February  twenty-second.  May  thirtieth,  July  fourth.  Labor 
day  (being  the  first  Monday  in  September),  Christmas,  Thanks- 
giving day  and  any  other  day  appointed  by  the  President  or 
Congress  as  a  holiday  or  as  a  day  of  public  fasting.^ 

§  653.  Method  of  computing.— This  provision,  like  the  simi- 
lar one  in  the  Act  of  1867,  adopts  the  general  rule  followed  in 
computing  time.  In  the  event  the  last  day  falls  on  Sunday  or 
a  holiday  and  is  succeeded  by  a  holiday  or  a  Sunday,  the  next 
day  thereafter  which  is  not  a  legal  holiday  would  be  included. 

In  computing  the  time  within  which  an  act  must  be  done, 
holidays  or  Sundays  occurring  within  the  term  are  to  be 
counted,  unless  expressly  excluded  or  the  last  day  falls  on 

1  Analogous  provision  of  Act  of  of  the  first,  and  inclusive  of  the 
1867.  "Sec.  48.  .  .  .  And  in  all  last  day,  unless  the  last  day  shall 
cases  in  which  any  particular  fall  on  a  Sunday,  Christmas  day, 
number  of  days  is  prescribed  by  or  on  any  day  appointed  by  the 
this  act.  or  shall  be  mentioned  in  President  of  the  United  States  as 
any  rule  or  order  of  court  or  gen-  a  day  of  public  fast  or  thanksgiv- 
eral  order  which  shall  at  any  time  ing,  or  on  the  fourth  of  July,  in 
be  made  under  this  act,  for  the  which  case  the  time  shall  be  reek- 
doing  of  any  act,  or  for  any  other  oned  exclusive  of  that  day  also." 
purpose,  the  same  shall  be  reck-  ^  Sec.  1  (14),  act  of  1898;  act 
oned,  in  the  absence  of  any  ex-  June  28,  1894,  2  Supp.  R.  S.  193. 
pression  to  the  contrary,  exclusive 

420 


Ch.  31  COMPUTATION    OF   TIME.  421 

Sunday  or  a  holiday.-^  It  has  accordingly  been  held  that  an 
application  for  discharge  might  be  filed  on  the  27th  of  No- 
vember, the  year  within  which  it  should  have  been  filed  expir- 
ing on  the  26th,  which  was  Thanksgiving  day.^  A  petition 
is  filed  within  the  meaning  of  the  bankruptcy  law  when  de- 
livered to  the  clerk  personally  and  by  him  marked  "Filed," 
though  it  be  outside  of  his  office  and  after  office  hours,^ 
but  in  order  to  mark  the  date  with  reference  to  which  the 
validity  of  liens  and  preferential  transfers  are  to  be  deter- 
mined, it  must  be  sufficient  to  confer  jurisdiction.^ 

The  last  day  upon  which  a  petition  in  involuntary  bank- 
ruptcy may  be  filed  is  computed  by  excluding  the  day  on  which 
the  act  of  bankruptcy  was  committed  and  including  the  day 
on  which  the  petition  is  filed,  provided  the  latter  is  not  Sunday 
or  a  holiday;  thus  a  petition  filed  February  20,  1899,  the  act 
of  bankruptcy  having  been  committed  October  20,  1898,  is 
within  the  four  months  but  a  failure  to  file  the  petition  in 
duplicate  would  be  fatal  and  could  not  be  cured.'''  See  Acts 
of  Bankruptcy,  sec.  3b  of  the  law,  "Four  months'  period," 
ante,  §  85. 

In  determining  whether  a  transfer  of  property  by  a  bank- 
rupt was  made  within  four  months  next  preceding  the  filing  of 
the  petition  by  or  against  him  the  time  should  be  reckoned 
backward,  the  day  on  which  the  petition  was  filed  being  ex- 
cluded and  the  date  of  the  transfer  included;  thus  a  transfer 
made  on  December  8,  1902,  would  be  within  four  months  of  a 
petition  filed  April  8,  1903.  In  such  computation  fractions  of 
a  day  are  not  considered.* 

§  654.  Time  mandatory.— After  the  time  within  which  an  act 
is  required  to  be  done  by  parties  to  proceedings  in  bankruptcy 
has  expired,  rights  are  thereby  conferred  by  law,  and  the 
courts  will  not  ordinarily  deprive  of  such  rights  the  party  who 
may  be  entitled  thereto  by  reason  of  the  neglect  or  omission  on 

3  In  re  York,  4  N.  B.  R.  156,  F.  Dupre,  1  N.  B.  N.  513;    see  In  re 

C.  18139.  Tonawanda    Street    Planing     Mill 

i  In  re  Lang,  2  N.  B.  R.  151,  F.  Co.,  6  A.  B.  R.  38. 

C.  8056.  »<  Whitley  Grocery  Co.  v.  Roach, 

^'  In  re  Von  Boercke,  1  N.  B.  N.  8  A.  B.  R.  505 ;  Dutcher  v.  Wright, 

505,  2  A.  B.  R.  322,  94  F.  R.  382.  94  U.  S.  553;   see  also  Richards  v. 

6  In  re  Rogers,  10  N.  B.  R.  444.  Clark,    124    Mass.    491;    Cooley   v. 

7  In  re  Stevenson,  1  N.  B.  N.  313,  Cook,  125  Mass.  406. 
2  A.  B.  R.  66,  94  F.  R.  110;   In  re 


422  'lilE    NATIONAL    BANKRUPTCY    LAW.  (Jh.  31 

the  i)art  of  his  adversary.^  While  the  power  of  the  court  in 
this  respect  is  quite  broad/"  delay  in  filing  exceptions  to  a 
referee's  rulings  until  after  the  expiration  of  ten  days,  unless 
the  time  is  enlarged  by  the  court,  will  prevent  their  considera- 
tion. 

§  655.  Fraction  of  a  day. — As  a  general  rule,  in  the  computa- 
tion of  time  in  judicial  proceedings  the  law  takes  no  notice  of 
a  fraction  of  a  day,  but  such  proceedings  will  be  considered  as 
taking  effect  from  the  first  moment  of  the  day  on  which  the 
event  occurred,^  ^  although  a  fraction  of  a  day  may  be  con- 
sidered in  order  to  prevent  injustice,^-  or  in  certain  cases  to 
determine  the  priority  of  liens  or  conveyances.^-^  It  has  also 
been  considered  in  a  case  where  a  bankrupt's  goods  had  been 
seized  on  execution  or  attachment  and  the  question  was 
whether  more  or  less  than  a  certain  number  of  months  had 
elapsed  between  the  seizure  and  the  time  when  he  w^ent  into 
bankruptcy,^  ^  though  such  decision  is  contrary  to  the  weight  of 
authority.^ ^  A  fraction  of  a  day  should  properlj'  be  consid- 
ered where  it  is  a  question  whether  property  inherited  or  ac- 
quired on  the  date  a  petition  in  bankruptcy  is  filed,  was  be- 
fore or  after  such  filing.^  ^ 

The  cases  in  which  it  has  been  permitted  to  show  by  evi- 
dence and  by  records  of  which  the  court  takes  judicial  notice, 
the  exact  hour  and  minute  of  the  day  when  a  bill  was  signed 
are  those  in  which  the  ordinary  presumption  that  an  act  is 
approved  upon  the  first  minute  of  the  day  that  it  becomes  a 
law  would  result  in  making  the  legislation  retroactive  and 
therefore  harsh  and  unjust.^'''  Thus  where  the  date  at  issue  is 
the  four  months'  period  after  the  passage  of  the  bankruptcy 

9  Scott,  99  F.  R.  404,  2  N.  B.  N.  How.  Pr.  (N.  Y.)  246;  Clute  v. 
R.  440,  3  A.  B.  R.  625.  Clute,  4   Den.    (N.  Y.)    244;    Duke 

10  G.  O.  XXXVIL  V.  Clark,  58  Miss.  465. 

11  Revill  V.  Claxon,  12  Bush.  i^Godsin  v.  Sanctuary,  4  B.  & 
(Ky.)  558;  Neff  v.  Barr,  14  S.  &  Ad.  255;  Westbrook  Mfg.  Co.  v. 
R.  171.  Grant,  60  Me.  88. 

12  Blydenburgh  v.  Catheal,  4  N.  i''  Jones  v.  Stevens,  48  Atl.  170, 
Y.  418;  Maine  v.  Gillman.  11  F.  R.  5  A.  B.  R.  570;  In  re  Tonawanda 
214;  In  re  Richardson,  2  Story  (U.  Street  Planing  Mill  Co.,  6  A.  B.  R. 
S.)    571;    National  Bank  v.  Burk-  38. 

hart,  100  U.  S.  686;  Taylor  v.  le  In  re  Stoner,  105  F.  R.  752; 
Brown,  147  U.  S.  645.  In  re  Petit.  1  Ch.  Div.  478. 

13  Hayden     v.     Buddensick,     49         it  As  a  matter  of  fact  no  record 


Ch.  31  COMPUTATION  OF  TIME.  423 

bill,  the  better  rule  is  that  evidence  is  inadmissible  to  show  the 
exact  hour  and  minute  of  approval,  since  no  retroactive  effect 
is  possible ;  and  the  presumption  that  it  was  done  on  the  first 
moment  of  the  day  should  be  conclusive ;  accordingly  the  four 
months  from  July  1,  1898,  the  day  the  present  law  was  ap- 
proved, were  complete  with  the  ending  of  October  31.^'^ 

is  kept  of  the  hour  or  minute  of  a  v.  Norton,  97  U.  S.  164;  Tomlinson 

day   that  a   bill    is   signed    by   the  v.  Bullock.  42  B.  Div.  2307. 
President.  J"*  The  Leidigh  Car  Co.  v.  Sten- 

Arnold  v.   U.   S..   9   Cranch   104;  gel,  1  N.  B.  N.  387,  2  A.  B.  R.  383, 

Lapeyre  v.  U.  S.,  17  Wall.  191-198;  95  F.  R.  637. 
In  re  Wellman,  20  Vt.  653;    U.  S. 


CHAPTER  XXXII. 

TRANSFER   OF   CASES. 

§656.   (32a)   Transfer  of  cases  for       657.  Practice. 

convenience  of  parties.  658.  What  petitions  stayed. 

§  656.  '  (Sec.  32a)  Transfer  of  cases  for  convenience  of  par- 
'ties. — In  the  event  petitions  are  filed  against  the  same  person, 
'or  against  different  members  of  a  partnership,  in  different 
'courts  of  bankruptcy  each  of  which  has  jurisdiction,  the  cases 
'shall  be  transferred,  by  order  of  the  courts  relinquishing  ju- 
'risdiction,  to  and  be  consolidated  by  the  one  of  such  courts 
'which  can  proceed  with  the  same  for  the  greatest  convenience 
'of  parties  in  interest.' 

§  657.  Practice.— Where  two  petitions  are  filed  against  the 
same  individual  in  different  districts,  the  first  hearing  must  be 
had  in  the  district  in  which  the  debtor  has  his  domicile;  and 
where  there  are  two  or  more  petitions  against  or  by  different 
members  of,  the  same  partnership  in  different  courts,  each 
having  jurisdiction,  or  the  petitions  by  the  different  members 
shall  be  filed  in  the  same  court,  the  petition  first  filed  shall  be 
first  heard,  and  in  either  case  the  proceedings  upon  the  other 
petitions  may  be  stayed  until  an  adjudication  is  made  upon 
the  petition  first  heard,  and  the  court  which  makes  the  first 
adjudication  retains  jurisdiction  over  all  the  proceedings  until 
the  same  is  closed.  The  court  so  retaining  jurisdiction,  if  sat- 
isfied that  it  is  for  the  greatest  convenience  of  the  parties  in 
interest  that  another  of  said  courts  should  proceed  with  the 
case,  shall  transfer  it.  Earlier  petitions  may  be  amended  by 
inserting  acts  of  bankruptcy  in  later  ones.^ 

It  is  frequently  the  case  that  a  person  may  reside  in  the 
jurisdiction  of  one  court,  do  business  in  another,  and  have  his 
domicile  in  still  another ;  or,  in  the  case  of  a  partnership,  each 
member  of  a  firm  may  live  in  different  judicial  districts  and 
transact  business  in  still  others,  so  that  a  number  of  courts 
may  at  the  same  time  have  jurisdiction  to  render  an  adjudica- 
tion of  bankruptcy.  This  section  provides  for  such  a  contin- 
gency.   The  power  of  transfer  is  conferred  by  section  2  (19). 

1  G.  0.  VI. 

424 


Ch.  32  TRANSFER  OF  CASES.  425 

A  court  which  has  jurisdiction  of  one  of  the  partners  may  have 
jurisdiction  of  all  the  partners  and  of  the  administration  of 
the  partnership  and  individual  property,  but  not  to  adjudge 
each  member  individually  bankrupt,  unless  it  has  jurisdiction 
over  him  personally.^ 

§658.  What  petitions  stayed.— Under  the  law  of  1867  the 
court  whose  jurisdiction  was  first  invoked  had  entire  control, 
and  proceedings  in  other  courts  were  stayed  or  dismissed.^  It 
will  be  noticed  that  the  present  law  makes  the  ' '  greatest  con- 
venience of  parties"  the  ground  for  the  transfer  and  re- 
linquishment of  jurisdiction,  and,  in  view  of  that  fact  and  the 
provision  that  the  cases  shall  be  transferred,  General  Order  VI, 
which  follows  General  Order  XVI,  under  the  Act  of  1867, 
seems  inconsistent,  if  not  in  conflict,  with  the  present  law. 

Where  an  involuntary  petition  was  filed  against  bankrupt 
as  a  member  of  a  firm  at  the  place  where  the  firm  business  had 
been  conducted  and  where  the  corporation  which  succeeded 
the  firm  conducted  its  business  retaining  the  bankrupt  in  its 
employ,  although  he  claimed  to  live  in  another  jurisdiction 
where  he  afterwards  filed  a  voluntary  petition,  the  court  held 
that  the  greatest  convenience  of  all  was  subserved  by  hearing 
the  case  at  the  firm  residence,  where  the  debts  were  contracted 
and  the  facts  might  be  most  conveniently  and  effectively  inves- 
tigated, and  stayed  the  bankrupt 's  voluntary  petition  until  the 
question  of  the  adjudication  in  the  involuntary  proceedings 
had  been  determined  ' 

2  Sec.    5,   c,   act  of   1898:     In   re  575.  F.  C.  12733;    In  re  Leland,  5 

Murray,   1   N.   B.   N.  570,   96   F.  R.  N.  B.  R.  222,  5  Ben.  168,  F.  C.  8228; 

600,  3  A.  B.  R.  601;  see  In  re  Sears,  vide  especially  as  to  partners.   In 

112  F.  R.  58,  7  A.  B.  R.  279.  re  Smith,  3  N.  B.  R.  15. 

:^  In  re  Boston,  H.  &  E.  R.  R.  Co.,  *  In  re  Waxelbaum,   2   N.   B.  N. 

6  N.  B.  R.  209;  9  Blatchf.  101.  F.  R.   228,   98   F.   R.   589,   3   A.    B.   R. 

C.  1678;    Shearman  et  al.  v.  Bing-  392;    compare   In   re  Elmira   Steel 

ham  et  al.,  5  N.  B.  R.  34,  1  Lowell,  Co.,  109  F.  R.  456,  5  A.  B.  R.  484. 


CHAPTER  XXXIII. 

CREATION  OF  TWO  OFFICES. 

§659.   (33a)   Offices  of   referee  and       660.  Referee    and    trustee    corre- 
trustee.  spond    to    register    and    as- 

signee. 

§  659.     '  (Sec.  33a)     Offices    of   referee    and    trustee.— The 

'offices  of  referee  and  trustee  are  hereby  created.' 

§  660.  Referee  and  trustee  correspond  to  register  and  as- 
signee.— The  offices  of  referee  and  trustee  created  by  this  act 
correspond  respectively  to  those  of  register  and  assignee  under 
the  act  of  1867.  While  these  are  the  only  two  offices  specifically 
created,  provision  is  also  made  for  the  appointment  of  receiv- 
ers and  the  designation  of  marshals  to  take  charge  of  the 
property  of  bankrupts  after  the  petition  has  been  filed  and 
until  dismissed,  or  the  trustees  have  qualified,  in  case  it  be- 
comes necessary  for  the  preservation  of  the  estate.^ 

1  Sec.  2  (3),  act  of  1898. 


426 


CHAPTER  XXXIV. 

REFEREE'S  APPOINTMENT,   REMOVAL  AND    DISTRICTS. 

§661.   (34a)   Referee's  appointment  665.  Referee's  absence  or  disqual- 
— Term — District.  ification. 

662.  Abilities  and  disabilities.  666.  Tenure  of  ofllce. 

663.  Use  of  penalty  envelope.  667.  Removal  of  referee, 

664.  Number  and  district  of  ref- 

erees. 

§661.     '(Sec.  34a)    Referee's  appointment  term— district.— 

'Courts  of  bankruptcy'  shall,  within  the  territorial  limits  of 
'which  they  respectively  have  jurisdiction, 

'  (1)  Appoint  referees,  each  for  a  term  of  two  years,  and 
'may,  in  their  discretion,  remove  them  because  their  services 
'  are  not  needed  or  for  other  cause ;  and 

'  (2)  Designate,  and  from  time  to  time  change,  the  limits  of 
'the  districts  of  referees,  so  that  each  county,  where  the  ser- 
'  vices  of  a  referee  are  needed,  may  constitute  at  least  one 
'district.'^ 

§  662.  Abilities  and  disabilities.— The  referee  under  this  act 
occupies  an  office  corresponding  to  that  of  register  under 
the  act  of  1867.  He  exercises  much  of  the  judicial  authority 
of  the  courts  of  bankruptcy  ;2  and  is  essentially  an  assistant  to 
the  judge  in  the  district  for  which  appointed.  He  must  take 
the  oath  of  office  prescribed  for  judges  of  United  States  courts 
by  section  712,  U.  S.  Rev.  Stat.^  He  is  liable  to  punishment 
for  conviction  of  the  offense  of  acting  as  referee,  when  inter- 

1  Analogous  provision  of  act  of  bankruptcy,  to  assist  the  judge  of 

1867.       "Sec.     3.     .     .     .     That     it  the  district  court  in  the  perform- 

shall  be  the  duty  of  the  judges  of  ance  of  his  duties  under  this  act. 

the   district  courts  of   the   United  Sec.    5.     .     .     .     Such    registers 

States,  within  and  for  the  several  shall  be  subject  to  removal  by  the 

districts,   to  appoint  in  each  con-  judge  of  the  district  court.    .    .    ." 

gressional  district  in  said  districts  2  White    v.    Schloerb,    178    U.    S. 

upon   the   nomination   and    recom-  542,  2  N.  B.  N.  R.  721.  4  A.  B.  R. 

mendation  of  the  Chief  Justice  of  178;    Mueller    v.    Nugent,    184    U. 

the  Supreme  Court  of  the  United  S.  1,  7  A.  B.  R.  224. 

States,   one  or   more    registers   in  ^  Sec.  36,  act  of  1898. 

427 


428  THE    NATIONAL    BANKRUPTCY    LAW.  Cu.  34 

ested,  purchasing  property  oi  the  bankrupt's  estate,  or  refus- 
ing to  permit  an  inspection  of  his  accounts.^ 

§  663.  Use  of  penalty  envelopes.— The  referee  is  an  officer  of 
the  United  States,  and,  as  such,  is  entitled  to  transmit  through 
the  mails,  free,  in  penalty  envelopes,  exclusively  official  mail 
matter,  in  accordance  with  the  provisions  of  the  Postal  Laws 
and  Regulations.'"' 

§  664.  Number  and  district  of  referees.— This  section  clearly 
contemplates  that  each  county  where  the  service  of  a  referee 
is  needed  should  constitute  at  least  one  district,  and  there 
should  be  at  least  one  referee  for  each  county,  although,  owing 
to  the  scarcity  of  business  in  some  localities,  many  of  the 
courts  have  appointed  one  referee  for  several  counties.  The 
number  that  may  be  appointed  for  each  county  is  without 
limit,  but  there  should  be  as  many  as  are  necessary  to  expedi- 
tiously transact  the  business.^ 

The  district  of  each  referee  should  be  clearly  defined,  in 
order  that  there  may  be  no  conflict  of  jurisdiction.  This  re- 
quirement is  emphasized  by  section  18  (f),  (g),  relative  to  the 
reference  of  cases  "to  the  referee,"  as  well  as  section  35,  requir- 
ing a  residence  or  office  in  the  territorial  district  for  which 
appointed,  and  the  definition  of  the  term  "Referee,"^  as  mean- 
ing "the  referee  who  has  jurisdiction  of  the  case,"  all  of  which 
would  seem  to  indicate  a  purpose  of  limiting  the  appointments 
to  a  single  referee  for  each  district. 

§  665.  Referee's  absence  or  disqualification.— Whenever  the 
office  of  referee  is  vacant,  or  its  occupant  is  absent,  or  disquali- 
fied, the  judge  may  act,  or  appoint  another  referee,^  or  another 
referee  holding  an  appointment  under  the  same  court  may  be 
specifically  designated.^ 

§  666.  Tenure  of  office,— Referees  are  appointed  for  a  term 
of  two  years,  unless  sooner  removed.  While  there  is  authority 
for  the  proposition  that  an  officer's  functions  cease  immedi- 
ately at  the  expiration  of  his  term  of  office^^  the  rule  supported 
by  the  weight  of  authority  is,  in  the  absence  of  any  restrictive 

4  Sec.  29c,  act  of  1898.  »  Bray  v.  Cobb,  1  N.  B.  N.  209,  1 

^>  Sec.  368,  p.  159,  act  of  July  5,     A.  B.  R.  153,  91  F.  R.  102. 
1884.  9  Sec.  43,  act  of  1898. 

'!  Sec.  37,  act  of  1898.  lo  Badger  v.  United  States.  93  U. 

7  Sec.  1  (20),  act  of  1898.  S.  599;  People  v.  Tillman,  3  Barb. 

193;    U.  S.  V.  Green,  53  F.  R.  771. 


Ch.  34  REFEREES— DISQUALIFICATION— TENURE.  439 

provision,  that  the  officer  is  entitled  to  hold  until  his  successor 
is  duly  chosen  and  qualified.^^  This  rule  conserves  the  public 
good  by  conserving  the  methods  and  instrumentalities  by 
which  alone  public  business  can  be  transacted;  while  the 
opposite  rule,  when  pushed  to  its  consequences,  might  result 
in  a  suspension  of  business  in  every  department  of  the  public 
^service.  In  the  case  of  a  United  States  attorney  the  law  spe- 
cifically provides  that  his  commission  shall  cease  and  expire 
at  the  expiration  of  the  term  for  which  appointed,^-  but  there 
is  no  such  provision  with  reference  to  a  referee.  It  is  to  be 
presumed,  therefore,  that  Congress  intended  that  the  referee 
should  hold  his  office  until  the  appointment  and  qualification 
of  his  successor. 

§  667.  Removal  of  referee. — The  referee  may  be  removed 
fi'om  office  by  the  court  either  because  his  services  are  not 
needed,  or  for  other  cause ;  in  other  words,  the  power  of  re- 
moval rests  in  the  discretion  of  the  court.  While  the  weight  of 
authority  sustains  the  proposition  that  the  power  to  remove 
"for  cause"  can  only  be  exercised  after  notice  and  a  reasonable 
opportunity  to  make  defense,^  ^  it  is  a  corollary  of  this  rule 
that  the  appointing  power  having  authority  to  remove,  is  the 
sole  judge  of  the  existence  of  the  cause.^* 

11  State  V.  Harrison,  113  Ind.  Field  v.  Com.,  32  Pa.  St.  478;  State 
440;  Tuley  v.  State,  1  Id.,  500;  v.  Brice,  8  Ohio  St.  82;  Com.  v. 
State  V.  Wells,  8  Nev.  105;  Strat-  Slifer,  1  Casey,  23;  Haight  v. 
ton  V.  Oulton,  28  Cal.  44,  382;  State  Love,  39  N.  J.  L.  14. 

V.  Fagan,  42  Conn.  32.  instate  v.  Doherty,  25  La.  Ann. 

12  U.  S.  Rev.  Stat.,  Sec.  769.  119;    Patton  v.  Vaughan,  39  Ark. 
Instate  V.  St.  Louis,  90  Mo.  19;     211. 

Gaskins   case,    8   Term    Rep.    209; 


CHAPTER  XXXV. 

QUALIFICATIONS  OF  REFEREES. 

§668.   (35a)   Qualifications    of    ref-       669.  Computation  of  relationship, 
erees.  670.  What    is    disqualification. 

§668.     '(Sec.  35a)     Qualifications  of  referees.— Individuals 

'shall  not  be  eligible  to  appointment  as  referees  unless  they 
'are  respectively 

'  (1)     Competent  to  perform  the  duties  of  that  office; 

'  (2)  Not  holding  any  office  of  profit  or  emolument  under 
'the  laws  of  the  United  States  or  of  any  state  other  than  com- 
'missioners  of  deeds,  justices  of  the  peace,  masters  in  chancery, 
'  or  notaries  public ; 

'  (3)  Not  related  by  consanguinity  or  affinity,  within  the 
'third  degree  as  determined  by  the  common  law,  to  any  of 
'  the  judges  of  the  courts  of  bankruptcy  or  circuit  courts  of  the 
'United  States,  or  of  the  justices  or  judges  of  the  appellate 
'  courts  of  the  districts  wherein  they  may  be  appointed ;  and 

'  (4)  Residents  of,  or  have  their  offices  in,  the  territorial  dis- 
'tricts  for  which  they  are  to  be  appointed.'^ 

§  669.  Computation  of  relationship.— Consanguinity  is  the 
relation  existing  between  persons  descending  from  a  common 
ancestor;  affinity  is  the  connection  existing  in  consequence  of 
marriage  between  the  husband  or  wife  and  the  kindred  of  the 
other.  The  degrees  in  either  case  are  computed  alike,  thus 
according  to  the  canon  law,  which  is  adopted  in  the  common 
law,  the  computation  is  made  by  beginning  at  the  common  an- 
cestor and  reckoning  downward  to  the  party  related,  and  in 
whatever  degree  the  most  remote  party  is  distant  from  the 
common  ancestor  that  is  the  degree  in  which  they  are  related, 
counting  each  person  as  one  degree  and  excluding  the  com- 
mon ancestor. 

§  670.  What  is  disqualification.— A  referee  would  not  be 
qualified  to  act  in  a  case  in  which  he  is  directly  or  indirectly  in- 

1  Analogous  provision  of  act  of     said  court,  or  of  some  one  of  the 
1867.     "Sec.  3.     .     .     .     No  person     courts   of   record    of   the   state   in 
shall  be  eligible  to  such  appoint-     which  he  resides." 
ment  unless  he  be  a  counselor  of 

430 


Ch.  35  QUALIFICATIONS     OF    REFERElES.  431 

terested,-  although  the  fact  that  he  owes  a  debt  to  the  bank- 
rupt would  not  operate  as  a  disqualification.  The  interest  here 
indicated  must  be  either  in  the  proceedings  in  bankruptcy  or 
the  estate  of  the  bankrupt,  but,  on  being  apprised  of  the  fact 
that  the  referee  is  indebted  to  the  bankrupt  a  court  in  the 
exercise  of  its  discretion  would  doubtless  revoke  the  order  of 
reference.^ 

The  fact  that  the  referee  had  been  attorney  or  counsellor 
for  any  of  the  parties  prior  to  the  filing  of  the  petition  in 
matters  not  directly  connected  with  the  bankruptcy  proceed- 
ings, would  not  necessarily  disqualify  him  from  acting  as 
referee,*  though  if  there  is  any  doubt  as  to  the  existence  of  a 
bias  or  influence,  the  court  should  transfer  the  case  to  another 
referee. 

^  39.  b,  act  of  1898.  4  Carr  v.  Fife,  156  U.  S.  '494, 

3  Bray  v.  Cobb,  1  N.  B.  N.  209, 
91  F.  R.  102,  1  A.  B.  R.  153. 


CHAPTER  XXXVI. 

REFEREES'  OATH  OF  OFFICE. 

§671.    (36a)   Oath   of  office   of   ref-       672.  Form  of  oath, 
eree. 

§671.  '(Sec.  36a)  Oaths  of  office  of  referees.— Referees 
'shall  take  the  same  oath  of  ofSce  as  that  prescribed  for  judges 
'of  United  States  courts. '^ 

§  672.  Form  of  oath.— The  Revised  Statutes  of  the  United 
States  provide  as  follows :  The  justices  of  the  Supreme  Court, 
the  circuit  judges,  and  the  district  judges,  hereafter  appointed, 
shall  take  the  following  oath  before  they  proceed  to  perform 
the  duties  of  their  respective  offices:  "I ,  do  sol- 
emnly swear  (or  affirm)  that  I  will  administer  justice  without 
respect  to  persons,  and  do  equal  right  to  the  poor  and  to  the 
rich,  and  that  I  will  faithfully  and  impartially  discharge  and 

perform  all  the  duties  incumbent  on  me  as ,  according  to 

the  best  of  my  abilities  and  understanding,  agreeably  to  the 
constitution  and  laws  of  the  United  States:  So  help  me  God."- 

The  form  of  the  oath  prescribed  by  the  Supreme  Court  to  be 
taken  by  a  referee  in  bankruptcy  would  seem  to  indicate  that 
it  should  be  administered  by  the  District  Judge  only.^ 

1  Analogous  provision  of  act  of  ly   or   indirectly,   interested   in   or 

1867.      "Sec.    3.     .     .     .      And    he  benefited   by  the   fees    or    emolu- 

shall,  in  open  court,  take  and  sub-  ments   arising   from    any   suit    or 

scribe  the  oath  prescribed  in  the  matter  pending  in  bankruptcy,  in 

act   entitled   'An   act  to   prescribe  either  the  district  or  circuit  court 

an   oath   of   office,    and   for   other  in  his  district." 

purposes,'    approved    July    second,  ^  U.  S.  Rev.  Stat.,  Sec.  712;  Form 

eighteen   hundred    and    sixty-two,  No.  16. 

and  also  that  he  will  not,  during  '-^  Form  No.  16. 
his  continuance  in  office  be.  direct- 


432 


CHi\PTER  XXXVII. 

NUMBER  OF  REFEREES. 

§  673.  *  (Sec.  37a)  Number  of  referees.— Such  number  of 
'referees  shall  be  appointed  as  may  be  necessary  to  assist  in 
'expeditiously  transacting  the  bankruptcy  business  pending  in 
'the  various  courts  of  bankruptcy. '^ 

The  number  of  referees  for  each  district  is  to  be  determined 
by  the  amount  of  business,  but  each  county  must  constitute 
at  least  one  district  and  have  at  least  one  referee.^ 

1  For  analogous  provision  of  act        2  See   Sec.   34,   act  of  1898,   and 
of  1867,  see  note  to  Sec.  34,  of  act     note, 
of  1898,  ante. 


28  433 


CHAPTER  XXXVIII. 

JURISDICTION   OF  REFEREES. 
§674.   (38a)     Jurisdiction    In    gen-       681.  As   to   seizure   and   pos- 


eral. 

session  of  property ;  receiv- 

675. 

Limitation  of. 

ers. 

676. 

Over    petitions    for    ad- 

682. 

As  to  sale  and  appraisal 

judications. 

of  property. 

677. 

To  dismiss  petitions. 

683. 

To  grant  injunctions. 

678. 

Of  dlscliarges  and  com- 

684. 

To  employ  stenographic 

positions. 

and  clerical  help. 

679. 

Over  examinations. 

685. 

Power  to  tax  costs. 

680. 

To  administer  oaths. 

§  674.     '  (Sec.  38a)     Jurisdiction  of  referees— in  general.— 

'Referees  respectively  are  hereby  invested,  siib.ject  always  to  a 
'review  by  the  judge,  within  the  limits  of  their  districts  as  es- 
'tablished  from  time  to  time,  w^ith  jurisdiction  to 

'  (1)  Consider  all  petitions  referred  to  them  by  the  clerks 
'and  make  the  adjudications  or  dismiss  the  petitions; 

'  (2)  Exercise  the  powers  vested  in  courts  of  bankruptcy  for 
'the  administering  of  oaths  to  and  the  examination  of  persons 
'as  witnesses  and  for  requiring  the  production  of  documents 
'in  proceedings  before  them,  except  the  power  of  commitment; 

'  (3)  Exercise  the  powers  of  the  judge  for  the  taking  posses- 
'sion  and  releasing  of  the  property  of  the  bankrupt  in  the  event 
'of  the  issuance  by  the  clerk  of  a  certificate  showing  the  ab- 
'sence  of  a  judge  from  the  judicial  district,  or  the  division  of 
'the  district,  or  his  sickness,  or  inability  to  act; 

'  (4)  Perform  such  part  of  the  duties,  except  as  to  questions 
'arising  out  of  the  applications  of  bankrupts  for  compositions 
'or  discharges,  as  are  by  this  Act  conferred  on  courts  of  bank- 
'ruptcy  and  as  shall  be  prescribed  by  rules  or  orders  of  the 
'courts  of  bankruptcy  of  their  respective  districts,  except  as 
'herein  otherwise  provided;  and 

'  (5)  Upon  the  application  of  the  trustee  during  the  exami- 
'  nation  of  the  bankrupts,  or  other  proceedings,  authorize  the 
'employment  of  stenographers  at  the  expense  of  the  estates 
'at  a  compensation  not  to  exceed  ten  cents  per  folio  for  report- 
'ing  and  transcribing  the  proceedings. '^ 

1  Analogous  provision  of  act  of  ing  in  this  section  contained  shall 
1867.    "Sec.  4.     .     .     .     That  noth-    empower  a  register  to  commit  for 

434 


til.  38  REFEREES— JURISDICTION.  435 

§  675.  Jurisdiction— limitation  of.— This  section  limits  tlie 
jurisdiction  of  tlie  referee  and  nothing  here  stated  can  be 
construed  to  enlarge  his  power  or  to  give  any  authority  to  hear 
and  determine  any  question  which  the  court  of  bankruptcy 
appointing  him  could  not  determine.  He  is  a  part  of  such 
court  and  performs  all  of  its  functions  except  as  to  questions 
arising  out  of  application  for  compositions  or  discharges  ;- 
and  interlocutory  motions,  affecting  such  proceedings  except 
when  related  to  these  two  specified  exceptions,  should  be  ad- 
dressed to  him.^  Issues  of  fact  are  to  be  determined  by  him 
without  the  intervention  of  a  jury,  and  his  order,  if  affirmed 
on  review,  is  enforceable,  not  after  the  manner  of  courts  of 
law,  but  by  the  process  of  commitment.-*  The  bankrupt  is  sub- 
ject to  the  order  of  the  court  or  referee  from  the  day  he  is  re- 
quired to  attend  before  the  referee,  and  he  may  receive  from 
the  latter  a  protection  against  arrest.  After  the  petition  has 
been  referred,  all  proceedings  except  such  as  are  specifically 
required  to  be  had  before  the  judge,  must  be  had  before  the 
referee.*^ 

The  referee  is  an  officer  of  the  court  and  takes  judicial  notice 
of  its  judgment  and  decrees,^  and  exercises  much  of  the  ju- 
dicial authority  of  that  court."^  With  the  exercise  of  legal  dis- 
cretion, he  has  entire  control  over  proceedings  pending  before 
him,^  but  he  has  no  power  to  vacate,  modify  or  set  aside  any 
order  duly  made  by  the  court  of  bankruptcy,  or  to  deny  himself 

contempt  or  to  hear  a  disputed  ad-  es,  and  for  requiring  the  produc- 

judication,  or  any  question  of  the  tion    of    books,    papers   and    docu- 

allowance  or  suspension  of  an  or-  ments." 

der  of  discharge;    but  in  all  mat-  ^  In  re  Carter,  1  N.  B.  N.  162.  1 

ters  where  an  issue  of  fact  or  of  A.  B.  R.  160;   In  re  Huddleston,  1 

law  is  raised  and  contested  by  any  N.  B.  N.  214,  1  A,  B.  R.  572. 

party    to    the    proceedings    before  3  in  re  Huddleston,  supra;  Anon. 

him,  it  shall  be  his  duty  to  cause  1  N.  B.  N.  252. 

the  question  or  issue  to  be  stated  *  In   re  Gottardi,  114  F.  R.  328, 

by  the  opposing  parties  in  writing,  341. 

and  he  shall  adjourn  the  same  in-  5  G.  O.  XII    (1). 

to  court  for  decision  by  the  judge.  e  in  re  Scott,  15  N.  B.  R.  73,  F. 

"Sec.  5.     .     .     .     and  such  regis-  C.  12519. 

ter,  so  acting,  shall  have  and  exer-  7  White   v.    Schloerb,    178   U.    S. 

cise  all  powers,  except  the  power  542,  4  A.  B.  R.  178;  Mueller  v.  Nu- 

of  commitment,  vested  in  the  dis-  gent,  184  U.  S.  1,  7  A.  B.  R.  224. 

trict  court  for  the  summoning  and  «  Hyman,  2  N.  B.  R.  107,  3  Ben. 

examination  of  persons  or  witness-  28,  F.  C.  6984. 


436  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  38 

of  the  jurisdiction  granted  by  such  orders.-'  The  validity  of 
any  order  made  by  the  referee,  except  such  as  the  judge  alone 
has  power  to  make,  cannot  be  collaterally  attacked  in  the 
absence  of  a  showing  that  it  was  disproved  by  the  court.^*^  The 
referee  is  required^^  to  furnish  interested  parties  with  any 
desired  information  as  to  proceedings  before  him,  but  not 
copies  of  such  proceedings,  and  his  refusal  to  furnish  a  copy 
of  a  petition  and  order  of  reference  will  not  affect  his  juris- 
diction to  proceed  under  such  order.^^  The  referee  having  no 
authority  to  handle  the  money  of  an  estate  administered  be- 
fore him,  a  preference  cannot  be  surrendered  to  him  by  a 
creditor  in  order  that  such  creditor  may  prove  his  claim.i^ 

§  676.  Jurisdiction  over  petitions  for  adjudication.— If  the 
judge  is  absent  from  the  district  or  the  division  of  the  district 
in  which  an  involuntary  petition  is  pending,  on  the  next  day 
after  the  last  day  on  which  pleadings  may  be  filed,  and  none 
have  been  hied  by  the  bankrupt  or  any  of  his  creditors,  the 
clerk  must  forthwith  refer  the  case  to  the  referee,^ ^  who  must 
make  the  adjudication  or  dismiss  the  petition.  The  absence 
here  referred  to  means  from  the  judicial  district  or  division 
of  such  district  as  established  by  law,  and  not  the  county  or 
bankruptcy  division  of  a  district. 

Upon  the  filing  of  a  voluntary  petition,  if  the  judge  is  absent 
from  the  district  or  the  division  of  the  district  in  which  the 
petition  is  filed,  at  the  time  of  the  filing,  the  clerk  must  forth- 
with refer  the  case  to  the  referee,^^  who  must  make  the  adjudi- 
cation or  dismiss  the  petition. 

§  677.  Power  to  dismiss  petitions.— Under  this  section,  the 
referee  clearly  has  power  to  dismiss  a  petition  in  bankruptcy, 
though  a  petitioner  cannot,  either  for  want  of  prosecution  or 
by  consent  of  parties,  until  after  notice  to  the  creditors.^^ 

Unless  objections  are  raised  to  the  jurisdiction  at  an  early 
stage  of  the  proceedings,  they  will  be  considered  as  having 

9  In  re  Franklin  Syndicate,  2  N.  i4  18  b,  act  of  1898. 

B.  N.  R.  522,  101  F.  R.  402,  4  A.  B.  i5  18  g,  act  of  1898. 

R.  511.  16  59  g,  act  of  1898;    In  re  Mus- 

loGeisreiter   v.    Sevier,    33   Arlt.  sey,  2  N.   B.  N.  R.   113;    99   F.  R. 

522.  71,  3  A.  B.  R.  592;    In  re  Scott,  7 

11  Sec.  39  a  (3),  act  of  1898.  A.  B.  R.  35;    see  111  F.  R.  144,  7 

12  In  re  Lewin,  103  F.  R.  850.  A.  B.  R.  39. 

13  In  re  Thompson,  2  N.  B.  N.  R. 
1016. 


Uh.  38  REFEREES— JURISDICTION.  437 

been  waived  and  cannot  be  raised  for  the  first  time  on  the 
application  to  grant  the  discharge/^  although  it  has  been 
held  that  entire  want  of  jurisdiction  over  the  subject-matter 
may  be  taken  advantage  of  at  any  time.^^ 

§  678.  Jurisdiction  as  to  discharges  and  composition.— 
Though  questions  arising  out  of  applications  for  compositions 
or  discharges  are  expressly  excepted  from  a  referee's  jurisdic- 
tion, nevertheless  the  judge  may  refer  such  application,  or  any 
specified  issue  arising  thereon,  to  the  referee  to  ascertain  and 
report  the  facts,^*^  but  such  reference  is  made  to  him  in  the  ca- 
pacity of  special  master,  not  as  referee  in  bankruptcy,  and  for 
duties  independent  of  the  latter  office,  and  in  no  sense  incom- 
patible ;  in  such  a  case  his  report  is  only  advisory,  the  final 
hearing  being  before  the  judge. -*^  Whenever  legal  questions 
arise  in  considering  composition  before  a  referee,  the  better 
practice  is  for  him  to  appoint  a  day  for  bringing  the  composi- 
tion before  the  court  and  issue  the  required  notices  to  creditors, 
if  requested  to  do  so,  suggesting  in  his  report  to  the  judge  any 
questions  arising  or  doubts  as  to  the  procedure  adopted.-^ 
He  may  rule  upon  the  sufficiency  of  specification  of  objections 
and  should  not  take  evidence  on  such  as  are  clearly  insuffi- 
cient.-- It  is  his  duty  to  pass  upon  the  truth  or  falsity  of  evi- 
dence on  hearings  in  opposition  to  the  discharge  and,  if  a  speci- 
fication discloses  valid  objections  to  the  discharge,  prima  facie, 
the  case  will  be  referred  back  to  the  referee  for  rehearing.^^ 

§  679.  Power  over  examinations.— The  authority  of  a  referee 
is  not  limited  to  the  taking  and  reporting  of  the  evidence  and 
ruling  as  to  its  admissibility,  but  he  should,  also,  report  find- 
ings and  recommendations.  As  a  judicial  officer,  he  is  not 
required  by  custom,  the  act  or  the  rules,  to  take  notes  of  testi- 
ly In  re  Mason,  2  N.  B.  N.  R.  425,  20  Fellows  v.  Freudenthal,  102  F. 
99  F.  R.  256,  3  A.  B.  R.  599;  In  R.  731,  4  A.  B.  R.  490;  In  McDuff, 
re  Polakoff,  1  N.  B.  N.  232,  1  A.  B.  101  F.  R.  241,  4  A.  B.  R.  110. 
R.  358;  In  re  Clisdell,  2  N.  B.  N.  21  in  re  Hilborn,  3  N.  B.  N.  R. 
R.  638,  101  F.  R.  246,  4  A.  B.  R.  62,  104  F.  R.  866. 
95;  Allen  v.  Thompson,  10  F.  R.  22  in  re  Kaiser,  2  N.  B.  N.  R.  123, 
116;  In  re  Thomas,  11  N.  B.  R.  3  A.  B.  R.  767,  99  F.  R.  689;  con- 
330;  See  apparently  contra.  In  re  tra.  In  re  Leszynsky,  2  N.  B.  N.  R. 
Little,  2  B.  R.  298;   In  re  Penn.  3     738. 

B.  R.  582.  23  In   re  Wolfstein,   1   N.   B.   N. 

18  In  re  Mason,  supra.  202. 

i»  G.  O.  XII. 


438  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  38 

luoiiy  personally,  or  to  incur  the  expense  of  clerical  or  steno- 
graphic aid  without  indemnity  therefor;  but  he  should  super- 
vise the  taking  at  the  expense  of  the  interested  parties,  or 
allow  them  to  take  it  themselves.^* 

A  referee  is  authorized  to  pass  on  objections  made  to  a  ques- 
tion, but  such  question  must  be  answered  and  incorporated  in 
the  deposition,  although  the  decision  may  be  against  its  ad- 
missibility ;  in  such  case  the  exception  and  ruling  of  the  referee 
are  to  be  preserved  for  the  ultimate  decision  of  the  court,-^  the 
equity  rules  of  the  Supreme  Court  of  the  United  States  being 
followed  as  nearly  as  may  be  in  matters  of  this  nature.^^  The 
extent  to  which  an  examination  will  be  permitted  to  go,  for  the 
purpose  of  ascertaining  the  assets  of  the  estate,  must  be  deter- 
mined by  the  sound  judgment  of  the  officer  before  whom  it  was 
taken,27  A  referee  may  refuse  to  suspend  an  examination  un- 
til the  questions  certified  by  him  are  decided.-^  While  he  can- 
not compel  a  witness  to  answer,  if  he  refuses,^^  nor  commit 
him  for  derelictions,  he  does  have  the  power  to  certify  the 
facts  of  such  offense  to  the  judge,  who  may  proceed  in  a  sum- 
mary manner  and  inflict  such  punishment  as  if  the  contempt 
had  been  committed  before  the  court  itself,^^  or  if  the  question 
be  material  and  approved  by  the  court,  he  may  be  refused  a 
discharge.^i 

In  case  an  application  for  discharge,  with  the  specification 
in  opposition  thereto,  is  referred  to  the  referee,  his  authority 
is  not  limited  to  the  taking  and  reporting  of  the  evidence  ad- 
duced on  the  hearing  and  ruling  as  to  its  admissibility,  but 
he  should,  also,  report  findings  and  recommendations.  In  such 
a  case,  a  sufficient  specification  of  objection  is  a  necessary  pre- 
requisite to  the  introduction  of  any  evidence  by  the  objecting 
creditors  on  a  hearing,  and  the  evidence  should  be  confined  to 
the  material  facts  alleged  in  the  specification.^- 

24  In  re  Warszawiak,  1  N.  B.  N.  ■^-  In  re  Foerst,  1  N.  B.  N.  258, 
135.  93  F.  R.  190,  1  A.  B.  R.  259. 

25  G.  O.  XXII;  In  re  DeGottardi,  28  in  re  Tiff,  17  N.  B.  R.  550,  F. 
114  F.  R.  328.  395,  7  A.  B.  R.  723;  C.  14030. 

In  re  Lipset,   119  F.   R.  379,  9  A.  20  In  re  Koch.  1  N.  B.  R.  153,  F. 

B.  R.  32;   Dressel  v.   Lumber  Co.,  C.  7916. 

119    F.   R.   531;    see    In    re   Rosen-  so  See.  41  b,  act  of  1898. 

field,  1  N.  B.  R.  60,  F.  C.  12059;  31  Sec.  14  b  (6),  ante  §§346,  372. 

In   re  Bond,   3    N.   B.   R.   2,   F.   C.  32  in   re  Kaiser.    2   N.   B.   N.  R. 

1618.  123,  99  F.  R.  689,  3  A.  B.  R.  767. 

26  In  re  Lipsert,  supra. 


Ch.  38      REFEREES— JURISDICTION— OATHS— SEIZURES.  439 

The  referee  is  required  to  make  up  a  record  embodying  the 
evidence  or  the  substance  thereof  as  agreed  upon  by  the  par- 
ties in  all  contested  matters  arising  before  him,  whenever  re- 
quested by  either  of  the  parties,  which  must  be  transmitted 
to  the  judge,  together  with  the  findings  made  therein.^^ 

§  680.  To  administer  oaths.— Referees  are  also  authorized  to 
administer  such  oaths  as  are  required  by  this  act,  except  upon 
"hearings  in  court."  The  power  to  administer  oaths  by  ref- 
erees is,  therefore,  restricted  to  proceedings,  in  bankruptcy. 
The  adjudication  made  by  a  referee  upon  a  petition  duly  re- 
ferred to  him  is  in  no  sense  a  "hearing  in  court,"  but  is  purely 
an  ex  parte  proceeding.-^^ 

§  681.  Referee's  duties  as  to  seizure  and  possession  of  prop- 
erty— receivers. — This  power  of  taking  possession  and  releasing 
property  of  the  bankrupt  can  only  be  exercised,  in  case  of  the 
absence  of  the  judge  from  the  judicial  district,  or  the  division 
of  the  district,  or  his  sickness  or  inabilit}-  to  act.^^  This  was  ob- 
viously intended  to  cover  cases  of  the  taking  possession  of 
property  where  the  bankrupt  is  permitting  it  to  deteriorate 
in  value,  as  provided  in  section  69,^**  or  where  application  is 
made  to  take  charge  of  and  hold  the  property  of  a  bankrupt 
prior  to  the  adjudication  under  section  3e  of  the  law.^"^ 

As  distinct  and  independent  of  the  power  referred  to  above 
courts  of  bankruptcy  may  appoint  receivers  to  take  charge  of 
a  bankrupt's  property  whenever  the  exigencies  of  the  case  de- 
mand, and  after  the  petition  has  been  referred  to  the  referee, 
he  has  the  like  power."-^ 

A  referee  has  jurisdiction  of  an  application  by  a  trustee  in 
bankruptcy  for  an  order  requiring  the  bankrupt  to  surrender 
money  or  property  alleged  to  be  in  his  possession  or  control, 
and  withheld  or  concealed  from  the  trustee,  although  belong- 
ing to  the  estate,  or  to  appear  before  him  and  show  cause 
why  he  should  not  be  ordered  to  surrender  such  property  ;^^ 

33  Sec.  39  (5).  act  of  1898.  5  A.  B.  R.  802;   see  In  re  Scott.  7 

34  In  re  Kindt,  2  N.  B.  N.  R.  339.  A.  B.  R.  710. 

35  Subd.  3,  ante  §  674.  ■■■<  Mueller  v.   Nugent,   184   U.   S. 

36  In  re  Florcken,  107  F.  R.  241,  1,  7  A.  B.  R.  224;  In  re  Oliver,  1 
5  A.  B.  R.  802;  In  re  Carter,  1  A.  N.  B.  N.  329,  96  F.  R.  8.5.  2  A.  B.  R. 
B.  R.  160.  1  N.  B.  N.  162.  783;  In  re  Miller,  105  F.  R.  57;  In 

3T  Mueller  v.  Nugent,  184  U.  S.  1,  re  Speyer,  6  N.  B.  R.  255,  F.  C. 
7  A.  B.  R.  224.  13239;  but  see  In  re  Green,  108  F. 

3s  In  re  Florcken,  107  F.  R.  241,     R.  616,  6  A.  B.  R.  270. 


440  THE    NATIONAL   BANKRUPTCY    lAW.  Ch.  38 

and  to  make  an  order  in  accordance  with  his  findings  on  such 
application,  but  the  enforcement  of  the  order  devolves  upon 
the  reviewing  court."*^  The  court,  upon  review,  will  not  set 
aside  such  order  where  it  is  not  plain  that  the  referee  was  mis- 
taken in  his  judgment,  or  that  the  testimony  was  insufficient  to 
support  the  order.^^ 

§  682.  Jurisdiction  as  to  sale  and  appraisal  of  property.— 
Since  the  word  "court,"  as  used  in  the  act,  means  the  court  of 
bankruptcy  in  which  the  proceedings  are  pending  and  may 
include  the  referee^-  the  latter  has  authority  to  appoint  ap- 
praisers to  value  the  estate  of  the  bankrupt,  but  if  the  property 
is  in  the  hands  of  a  receiver  before  adjudication,  appraisement 
or  sale  can  be  ordered  only  by  the  court  of  bankruptcy .^^  Al- 
though a  sale  should  not  be  ordered  before  the  adjudication 
unless  it  is  necessary  to  preserve  the  value  of  the  property,  an 
order  of  sale  made  by  a  referee  before  the  adjudication,  while 
exercising  the  powers  of  the  judge,  will  not  be  disturbed,  where 
it  was  by  consent  and  no  prejudice  is  shown.^^  A  referee,  sit- 
ting as  a  court  of  bankruptcy,  has  power  to  order  and  to 
approve  a  sale  of  property  free  of  liens  or  incumbrance,^-'  in 
possession  of  the  trustee,  on  notice  to  the  incumbrancer,  if  in 
his  judgment  it  is  desirable,  which  w^ould  be  the  case  where 
there  was  doubt  as  to  the  property  covered  by  the  mortgage.*^ 

§  683.  To  grant  injunctions.— By  section  720  of  the  Revised 
Statutes  of  the  United  States,  federal  courts  can  only  grant 
the  writ  of  injunction  to  stay  proceedings  in  a  state  court, 
when  such  an  injunction  is  authorized  by  any  law  relating  to 
proceedings  in  bankruptcy.  This  section  remains  still  in  force 
notwithstanding  the  act  repealing  the  federal  bankruptcy  law 
of  1867  and  its  amendments.  In  view  of  which,  together  with 
the  fact  that  courts  of  bankruptcy  have  such  jurisdiction  at 

40  In  Mayer,  2  N.  B.  N.  R.  257,  45  in  re  Sanborn,  96  F.  R.  551,  3 
98  F.  R.  839;  In  re  Rosser,  1  N.  B.  A.  B.  R.  54;  In  re  Worland,  92  F. 
N.  469,  96  F.  R.  305,  2  A.  B.  R.  R.  893,  1  A.  B.  R.  450;  In  re  Styer, 
755,  3  A.  B.  R.  533.  98  F.  R.  290,  3  A.  B.  R.  424;   In  re 

41  In  re  Tudor,  2  N.  B.  N.  R.  168,  Matthews,  109  F.  R.  603,  6  A.  B.  R. 
96  F.  R.  942,  2  A.  B.  R.  808.  96;    In  re  Kellogg,  113  F.  R.  120, 

42  Sec.  1  (7),  act  of  1898.  122,  7  A.  B.  R.  623. 

43  In  re  Styer,  2  N.  B.  N.  R.  205,  46  in  re  Sanborn,  supra;  see  also 
98  F.  R.  290,  3  A.  B.  R.  424.  In  re  Christy,  3  How.  292;    Hous- 

44  In  re  Kelly  Dry  Goods  Co.,  102  ton  v.  Bk.,  6  How.  486;  Ray  v. 
F.  R.  747,  4  A.  B.  R.  528.  Norseworthy,  23  Wall.  128. 


Ch.  38  REFEREES— JURISDICTION— INJUNCTIONS.  441 

law  and  in  equity,  as  will  enable  them  to  exercise  original 
jurisdiction  in  bankruptcy  proceedings,^''^  the  power  to  grant 
injunctions  under  the  present  law  is  indisputable.  As  the 
word  "court,"  when  used  in  the  law,  is  defined  as  meaning 
"the  court  of  bankruptcy  in  which  the  proceedings  are  pend- 
ing and  may  include  the  referee, '  '■^^  and,  as  by  subdivision  4  of 
section  38,  in  addition  to  the  specifically  enumerated  duties  of 
the  referee  within  the  limits  of  their  district,  and  subject  to 
review,  they  are  invested  with  jurisdiction  "to  perform  such 
part  of  the  duties  except  as  to  questions  arising  out  of  appli- 
cations of  bankrupts  for  compositions  or  discharges,  as  are  by 
this  act  conferred  on  courts  of  bankruptcy,"  the  conclusion  is 
irresistible  that  a  referee  may  also  grant  an  in j unction.-* -^ 
This  has  been  held  to  be  true,  although  the  object  of  the 
injunction  was  to  restrain  foreclosure  proceedings  affecting 
property  outside  of  the  referee 's  district.^^ 

After  adjudication,  the  injunction  is  discretionary,  provided 
the  cause  of  action  is  one  dischargeable  in  bankruptcy  and  may 
be  granted:  (1),  if  the  bankrupt  is  threatened  with  an  arrest, 
or  will  be  needlessly  harassed;  (2),  if  the  suit  is  not  yet  in 
judgment,  and  (3),  even  after  judgment,  if  the  rights  of  the 
general  creditors,  not  parties  to  the  suit,  will  be  jeopardized 
by  further  proceedings  in  the  state  court,  or  the  judgment  is 
founded  on  a  transaction  which  is  an  act  of  bankruptcy,  or  a 
fraud  on  the  creditors  or  the  law,  and  it  has  been  held  that, 
in  the  absence  of  either  or  both  of  the  latter  elements,  it  should 
never  be  granted  after  the  judgment  has  ripened  into  an  execu- 
tion sale,  provided  the  state  court  has  or  can  be  given  jurisdic- 
tion of  all  parties  interested  in  the  distribution,  including  the 
general  creditors  represented  by  the  trustee  in  bankruptcy.'"'^ 

This  power  of  the  referee  to  grant  an  injunction  is  considered 
true    notwithstanding  the   evident    conflict  between   the  act 

4T  Sec.  2,  act  of  1898.  In  re  Booth,  96  F.  R.  943,  2  A.  B. 

48  Sec.  1  (7),  act  of  1898.  R.  770;  In  re  Steuer,  104  F.  R.  976, 

49  In  re  Northrop,  1  A.  B.  R.  427;  980,  5  A.  B.  R.  209;  In  re  Martin, 
In  re  Adams,  1  N.  B.  N.  167,  1  A.  105  F.  R.  753,  5  A.  B.  R.  423;  In  re 
B.  R.  94 ;  In  re  Rogers,  1  A.  B.  R.  Wilkes,  112  F.  R.  975,  7  A.  B.  R. 
541,  1  N.  B.  N.  211;   In  r«  Killian,  574. 

1  N.  B.  N.  267;   In  re  Kerski,  2  A.  so  in  re  Sabine,  1  N.  B.  N.  45,  1 

B.  R.  79;  In  re  Mussey,  2  N.  B.  N.  A.  B.  R.  315. 

R.  213;  In  re  Matthews,  109  F.  R.  si  in  re  Globe  Cycle  Wks.,  1  N. 

603.    6    A.    B.    R.    96;     Keegan    v.  B.  N.  421,  2  A.  B.  R.  447. 
King,  96  F.  R.  758,  3  A.  B.  R.  79; 


442  •  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  38 

giving-  the  referee  concurrent  jurisdiction  with  courts  of  bank- 
ruptcy, except  as  to  questions  affecting  discharges  and  com- 
positions, and  General  Orders  XII-3,  which  provides  that 
"application  for  an  injunction  to  stay  proceedings  of  a  court 
or  officer  of  the  United  States,  or  of  a  state,  shall  be  heard 
and  decided  by  the  judge,  but  he  may  refer  such  an  application 
or  any  specified  issue  arising  thereon  to  the  referee  to  ascer- 
tain and  report  the  facts." 

§  684.  To  employ  stenographic  and  clerical  help.— A  referee 
has  authority,  upon  the  application  of  the  trustee,  during  the 
examination  of  the  bankrupt,  or  other  proceedings,  to  author- 
ize the  employment  of  a  stenographer  at  the  expense  of  the 
estate  at  ten  cents  a  folio.^^  j^  the  absence  of  any  other  pro- 
vision with  reference  to  the  employment  of  a  stenographer 
than  as  thus  provided,^^  no  further  charge  for  such  fees  can  be 
imposed  even  though  it  be  for  a  copy  of  the  deposition  for  use 
of  the  court,  except  it  be  in  pursuance  of  some  stipulation  by 
the  parties  to  the  cause.^*  This  provision  had  been  held  inap- 
plicable where  the  expenses  were  incurred  at  the  instance  of 
counsel,  for  the  purpose  of  taking  testimony  necessary  because 
of  his  negligence,  which  invited' inquiry  concerning  the  accu- 
racy of  his  accounts  ;^-^  or  where  an  examination  is  undertaken, 
at  the  suggestion  of  trustee's  attorney,  to  discover  concealed 
assets,  against  the  objection  of  labor  claimants,  whose  claims 
Avould  absorb  the  admitted  assets,  and  which  resulted  in  no 
benefit  to  the  estate,  the  expense,  including  stenographer's 
charges  should  not  be  paid  out  of  the  estate.^*^ 

A  referee  is  required  to  keep  an  accurate  account  of  his  in- 
cidental and  traveling  expenses,  and  those  of  any  clerk  or  other 
officer  attending  him  in  the  performance  of  his  duties,^"  and 
it  has  been  held  that  he  is  not  required  to  take  notes  of  testi- 
mony personally  or  incur  the  expense  of  clerical  or  steno- 
graphic aid,  but  should  supervise  the  taking  of  testimony  at 
the  expense  of  the  parties,  or  permit  them  to  take  it.^^     His 

52  In  re  Todd,  109  F.  R,  265,  6  ss  in  re  Gerson,  2  N.  B.  N.  R. 
A.  B.  R.  88;  see  also  In  re  Mam-     493,  1  A.  B.  R.  251. 

•moth  Pine  Lumber  Co.,  116  F.  R.  se  in  re  Rozinsky,  2  N.  B.  N.  R. 

731,  8  A.  B.  R.  651.  787,  101  F.  R.  229,  3  A.  B.  R.  830. 

53  Sec.  38a  (5).  "  G.  O.  XXVI. 

54  In  re  Todd,  supra,  ^^  In  re  Warszawiak,  1  N.  B.  N. 

135. 


Ch.  38  REFEREES— JURISDICTION— INJUNCTIONS.  443 

compensation  does  not  include  expenses  incurred  in  publishing 
or  mailing  notices,  traveling,  perpetuating  testimony  or  other 
expenses  incurred  and  allowed  by  the  judge  j'^^  from  all  of 
which  his  authority  to  employ  a  clerk  at  the  expense  of  the 
estate  may  fairly  be  dedueed.^^ 

§  685.  Power  to  tax  costs.— The  statute  is  silent  upon  the 
right  of  a  referee  to  tax  costs  in  proceedings  before  him,  but 
in  explicit  terms  authorizes  the  court  of  bankruptcy  "to  tax 
costs  whenever  they  are  allowed  by  law,  and  render  judgment 
therefor  against  the  unsuccessful  party,  or  the  successful  party 
for  cause,  or  in  part  against  each  of  the  parties,  and  against 
estates,  in  proceedings  in  bankruptcy,  "^i  In  view  of  the  fact 
that  the  referee  exercises  much  of  the  judicial  authority  of  that 
court^-  there  is  a  clear  implication  that  he  exercises  a  like 
power  to  make  a  taxation  of  costs,  or  to  order  the  taxation  to 
be  made  by  the  clerk  of  the  court  of  bankruptcy.*'^ 

59  G.  O.  XXXV  (2).  62  Mueller  v.  Nugent,  184  U.  S.  1, 

60  In  re  Tebo,  101  F.  R.  119,  4  A.  7  A.  B.  R.  224;  White  v.  Schloerb, 
B.  R.   235;    In   re  Price,   91   F.   R.  178  U.  S.  542,  4  A.  B.  R.  178. 
635,  1  A.  B.  R.  419;   Contra,  In  re  es  in  re  Scott,  7  A.  B.  R.  710;  In 
Carolina  Cooperage  Co.,  2  N.  B.  N.  re  Todd,  109  F.  R.  265,  6  A.  B.  R. 
R.  23,  3  A.  B.  R.  154,  96  F.  R.  950.  88;    see  In  re  Ott,  95  F.  R.  274,  2 

61  Sec.  2a  (18),  act  of  1898.  A.  B.  R.  637. 


CHAPTER  XXXIX. 

DUTIES    OF    REFEREES. 

§686.     (39a)    Referee's    duties    de-       694.  Surrender  of  preferences. 

tailed.  695.  Review  of  referee's  decisions 

687.  Preside    at    first    meeting   of  or  rulings. 

creditors.  696.  Time  for  making  appli- 

688.  Declaration  of  dividends.  cation. 

689.  Notices.  697.  Hypothetical  questions. 

690.  Examination      and      amend-  698.  Taking  of  testimony. 

ments     of     schedules     and  699.  Orders  of  referees. 

lists.  700.  b.  Referee   not   to   act  if  in- 

691.  Preparation  of  schedules.  terested;  practice,  etc. 

692.  Records  of  referees.  701.  Effect  of  violation;    and  dis- 

693.  To  furnish  information.  qualification. 

§686.     (Sec.  39a)    Referees'  duties  detailed.— Referees  shall 

'(1)  Declare  dividends  and  prepare  and  deliver  to  trus- 
*tees  dividend  sheets  showing  the  dividends  declared  and  to 
'  whom  payable ; 

'  (2)  Examine  all  schedules  of  property  and  lists  of  credi- 
'tors  filed  by  bankrupts  and  cause  such  as  are  incomplete  or 
'defective  to  be  amended; 

'  (3)  Furnish  such  information  concerning  the  estates  in 
'process  of  administration  before  them  as  may  be  requested 
*by  the  parties  in  interest; 

'  (4)     Give  notices  to  creditors  as  herein  provided; 

*  (5)  Make  up  records  embodying  the  evidence,  or  the  sub- 
*  stance  thereof,  as  agreed  upon  by  the  parties  in  all  contested 
'matters  arising  before  them,  whenever  requested  to  do  so  by 
'either  of  the  parties  thereto,  together  with  their  findings 
'therein,  and  transmit  them  to  the  judges; 

'  (6)  Prepare  and  file  the  schedules  of  property  and  lists  of 
'creditors  required  to  be  filed  by  the  bankrupts,  or  cause  the 
'same  to  be  done,  when  the  bankrupts  fail,  refuse,  or  neglect 
'to  do  so; 

'(7^  Safely  keep,  perfect,  and  transmit  to  the  clerks  the 
'records,  herein  required  to  be  kept  by  them,  when  the  cases 
'are  concluded; 

'  (8)  Transmit  to  the  clerks  such  papers  as  may  be  on  file 
'before  them  whenever  the  same  are  needed  in  any  proceedings 

444 


Cii.  39 


DUTIES    OF    REFEREES. 


445 


'  iu  courts,  and  in  like  manner  secure  the  return  of  such  papers 
'  after  they  have  been  used,  or,  if  it  be  impracticable  to  transmit 
'  the  original  papers,  transmit  certified  copies  thereof  by  mail ; 

'  [9)  Upon  application  of  any  party  in  interest,  preserve  the 
'  evide'nce  taken  or  the  substance  thereof  as  agreed  upon  by  the 
'parties  before  them  when  a  stenographer  is  not  in  attendance; 
'and 

'  (10)  Whenever  their  respective  offices  are  in  the  same 
'cities  or  towns  where  the  courts  of  bankruptcy  convene,  call 
'upon  and  receive  from  the  clerks  all  papers  filed  in  courts  of 
'bankruptcy  which  have  been  referred  to  them.'^ 

§  687.     Preside  at  first  meeting  of  creditors.— At  the  first 


1  Analogous  provision  of  act  of 
1867.  "Sec.  4.  .  .  .  That  every 
register  in  bankruptcy,  so  appoint- 
ed and  qualified,  shall  have  power, 
and  it  shall  be  his  duty,  to  make 
adjudication  of  bankruptcy,  to  re- 
ceive the  surrender  of  any  bank- 
rupt, to  administer  oaths  in  all 
proceedings  before  him,  to  hold 
and  preside  at  meetings  of  cred- 
itors, to  take  proof  of  debts,  to 
make  all  computations  of  divi- 
dends, and  all  orders  of  distribu- 
tion, and  to  furnish  the  assignee 
with  a  certified  copy  of  such  or- 
ders, and  of  the  schedules  of  cred- 
itors and  assets  filed  in  each  case, 
to  audit  and  pass  accounts  of  as- 
signees, to  grant  protection,  to  pass 
the  last  examination  of  any  bank- 
rupt in  case  whenever  the  assignee 
or  a  creditor  do  not  oppose,  and  to 
sit  in  chambers  and  despatch  there 
such  part  of  the  administrative 
business  of  the  court  and  such  un- 
contested matters  as  shall  be  de- 
fined in  general  rules  and  orders, 
or  as  the  district  judge  shall  in 
any  particular  matter  direct;  and 
he  shall  also  make  short  memoran- 
da of  his  proceedings  in  each  case 
in  which  he  shall  act,  in  a  docket 
to  be  kept  by  him  for  that  pur- 
pose,   and    he    shall    forthwith,    as 


the  proceedings  are  taken,  forward 
to  the  clerk  of  the  district  court  a 
certified  copy  of  said  memoranda, 
which  shall  be  entered  by  said 
clerk  in  the  proper  minute-book  to 
be  kept  in  his  office,  and  any  reg- 
ister of  the  court  may  act  for  any 
other  register  thereof.     .     .     . 

"Sec.  6.  .  .  .  That  any  party 
shall  during  the  proceedings  be- 
fore a  register,  be  at  liberty  to 
take  the  opinion  of  the  district 
judge  upon  any  point  or  matter 
arising  in  the  course  of  such  pro- 
ceedings, or  upon  the  result  of 
such  proceedings,  which  shall  be 
stated  by  the  register  in  the  shape 
of  a  short  certificate  to  the  judge. 

"Sec.  27.  .  .  .  In  case  a  divi- 
dend is  ordered,  the  register  shall, 
within  ten  days  after  such  meet- 
ing, prepare  a  list  of  creditors  en- 
titled to  dividend,  and  shall  calcu- 
late and  set  opposite  to  the  name 
of  each  creditor  who  has  proved 
his  claim  the  dividend  to  which  he 
is  entitled  out  of  the  net  proceeds 
of  the  estate  set  apart  for  divi- 
dend, and  shall  forward  by  mail 
to  every  creditor  a  statement  of 
the  dividend  to  which  he  is  en- 
titled, and  such  creditor  shall  be 
paid  by  the  assignee  in  such  man- 
ner as  the  court  may  direct." 


440  THE    NATIONAL    BANKRUPTCY    LAW.  CiL  39 

meeting  of  creditors,  the  judge  or  referee  must  preside.^  If  the 
referee  presides  he  acts  instead  of  the  judge,  and  accordingly 
must  pass  upon  judicial  questions  arising  at  the  meeting,  in- 
eluded  within  which  is  the  power  to  determine  the  qualifica- 
tions and  right  to  vote.^  He  should  be  punctually  present  at 
the  time  and  place  specified  in  the  notice.  Since  his  duties  are 
judicial,  he  does  not  otherwise  participate.^ 

§  688.  Declaration  of  dividends.— The  referee  must  declare 
the  first  dividend  within  thirty  days  after  the  adjudication,  if 
there  is  money  sufficient  to  pay  the  debts  entitled  to  priority 
and  five  per  centum  on  claims  which  probably  will  be  allowed. 
Subsequent  dividends  may  be  declared  as  often  as  the  amount 
equals  ten  per  cent,  or  more  and  upon  closing  the  estate.^  He 
must  in  all  cases  ascertain  the  dividends  to  be  paid  to  creditors 
entitled  to  priority,  as  well  as  to  others,  and  place  them  all 
upon  the  dividend  sheets,*^  which  must  be  delivered  to  the 
trustee,"  and  which  services  involve  a  computation  of  the  per- 
centage to  which  creditors  are  entitled,  as  well  as  the  amount 
to  which  each  is  entitled,  according  to  such  percentage.''  He 
may  be  required  to  countersign  all  checks  for  dividends  and 
other  payments  by  the  trustee,^  which  duty  is  judicial  in  its 
character  and  not  ministerial.^^ 

§  689.  Notices. — Referees  are  required  to  give  creditors  at 
least  ten  days'  notice,  by  mail,  of  all  examinations  of  the  bank- 
rupt, applications  for  compositions  or  discharges,  creditors' 
meetings,  proposed  sales,  dividends,  filing  of  final  accounts, 
compromises,  and  proposed  dismissal  of  proceedings.^^  These 
notices  must  be  addressed  to  such  places  as  are  designated  by 
the  creditors,  otherwise  they  should  be  addressed  as  specified 
in  the  proof  of  debt,^  -  and  where  proof  has  not  been  made,  then 
as  they  appear  in  the  list  of  creditors  filed  with  the  papers  in 
the  case.^^     He  is,  also,  required  to  notify  trustees  of  their 

2  Sec.  55  b,  act  of  1898.  ^  In  re  Fort  Wayne  Electric  Cor- 

3  In  re  McGill,   106   P.  R.   57,  5     poration,  1  N.  B.  N.  356,  94  F.  R. 
A.  B.  R.  155.  109,  1  A.  B.  R.  706. 

i  Eagles  &  Crisp,   2  N.  B.  N.  R.  »  G.  0.  XXIX. 

462,  3  A.  B.  R.  733,  9  F.  R.  696.  lo  In  re  Clark,  9  N.  B.  R,  67,  F, 

5  Sec.  65  b,  act  of  1898.  C.  2810. 

6  Form  No.   40.  n  Sec.  58  a,  act  of  1898. 
Tin  re  Barber,   1   N.  B.  N.  559,  12  Q.  0.  XVI-2. 

97  F.  R.  547,  2  A.  B,  R.  307.  i3  Sec.  58  a,  act  of  1898. 


I  11.39      DUTIES    OF    REFEREE— DIVIDENDS— NOTICES.  447 

ai^pointment.^^  Before  incurring  any  expense  in  giving  notices, 
the  referee  may  require  of  the  person  in  whose  behalf  the  duty 
is  performed  indemnity  for  such  expense.^  ^ 

§  690.    Examination  and  amendments  of  schedules  and  lists. 

—  The  provision  requiring  the  referee  to  examine  schedules  and 
lists  of  creditors  and  cause  such  as  are  incomplete  or  defective 
to  be  amended  is  mandatory,  and  this  seems  to  be  true,  al- 
tliough  no  interested  party  moves  in  the  matter.^*^  In  partic- 
ulars in  which  he  finds  them  defective,  it  is  within  his  discre- 
tion to  order  them  to  be  amended  and  to  refuse  to  call  the  first 
meeting  of  creditors  until  such  amendments  are  made;^^  and 
he  may  allow  the  petition  to  be  amended  so  as  to  allege  addi- 
tional acts  of  bankruptcy,  originally  omitted  upon  reasonably 
fair  excuse;  though  it  might  be  improper  to  abandon  the 
original  allegations  and  substitute  entirely  new  ones.^^ 

§  691.  Preparation  of  schedules.— It  is  the  duty  of  the  bank- 
rupt, in  the  first  instance,  to  prepare  and  file,  within  ten  days 
after  an  adjudication,  in  case  of  involuntary  bankruptcy,  and 
with  the  petition  if  voluntary,  a  correct  schedule  of  his  prop- 
erty,^ ^  and  should  an  involuntary  bankrupt  fail  to  do  so,  the 
referee  is  required  by  the  law  to  prepare  and  file  the  same,  or 
cause  it  to  be  done,^*'  though  the  Supreme  Court,  by  its  Gen- 
eral Orders,  places  this  duty  upon  the  petitioning  creditor,  who 
is  required  to  file  the  same  within  five  days  after  the  adjudica- 
tion.-^ In  order  that  this  duty  may  be  properly  performed,  the 
referee  should  be  required  to  give  creditors  access  to  the  rec- 
ords of  the  bankrupt,  or  furnish  them  with  the  necessary  infor- 
mation to  enable  the  preparation  of  the  schedules  and  lists,  as 
it  is  not  to  be  presumed  that  this  information  is  otherwise 
within  their  cognizance.  The  preparation  of  the  schedules  and 
lists  by  others  than  the  debtor  is  not  required  until  all  neces- 
sary steps  to  compel  the.performance  of  this  duty  have  proven 
futile,  for  which  purpose  an  attachment  may  issue  against  the 
debtor,  in  case  of  his  failure,  after  proper  notice.22 

§692.     Records  of  referees.— The  records  of  all  proceedings 

14  G.  0.  XVI.  i«  In  re  Strait,  1  N.  B.  N.  354,  2 

15  G.  0.  X.  A.  B.  R.  308. 

ifiln  re  Mackey.  1  A.  B.  R.  593.         19  Sec.  7  (8),  act  of  1898. 
IT  In  re  Brumelkamp,  1  N.  B.  N.         2"  Sec.  39   (6).  act  of  1898. 
360,  95  F.  R.  814,  2  A.  B.  R.  318.  21  G.  O.  IX. 

22  G.  0.  IX. 


448  DUTIES    OF    REFEREE— DIVIDENDS— NOTICES.      Cli.  39 

ill  a  ease  before  a  referee  should  be  kept  as  nearly  as  may  be  in 
the  same  manner  as  records  are  now  kept  in  equity  eases  in 
the  Circuit  Courts  of  the  United  States.  They  should  be  kept 
in  a  book  or  books,  and,  when  the  case  is  concluded  before  the 
referee,  it  must  be  certified  to  by  him,  and,  with  such  papers 
as  are  on  file  before  him,  be  transmitted  to  the  court  of  bank- 
ruptcy and  there  remain  a  part  of  the  records  of  the  court.^-^ 
This  record  comprises  all  the  papers  pertaining  to  the  proceed- 
ings, including  the  orders  made  by  the  referee  and  a  transcript 
of  the  evidence.  All  papers  filed  either  with  the  clerk  or  the 
referee  must  have  indorsed  thereon  the  day  and  hour  of  filing 
and  a  brief  statement  of  their  character.-^  On  the  closing  of  an 
estate  the  records  should  be  sufficiently  full  and  complete,  to 
enable  one  to  ascertain  the  full  facts  in  regard  to  any  given 
transaction  without  recourse  to  extrinsic  explanation.^^ 

§  693.  To  furnish  information.— The  referee  is  required  to 
furnish  interested  parties  any  desired  information  as  to  pro- 
ceedings before  him,  but  not  copies  of  the  proceedings,-*^ 
though  there  appears  to  be  no  reason  why  copies  should  not  be 
furnished  upon  suitable  reimbursement  to  cover  the  expense 
incident  thereto. 

§  694.  Surrender  of  preference  and  collection  of  assets.— 
The  referee  has  no  authority  w^hatever  in  respect  to  the  collec- 
tion of  an  estate  administered  before  him,  nor  to  handle  the 
money  thereof  ;2'^  accordingly  a  creditor  cannot  surrender  a 
preference  to  him  in  order  to  enable  such  creditor  to  prove  his 
claim. -^ 

§695.  Review  of  referee's  decisions  or  rulings.— When  a 
bankrupt,  creditor,  trustee,  or  other  person  desires  a  review  by 
the  judge  of  any  order  made  by  the  referee,  he  must  file  with 
the  referee  his  petition  therefor  setting  out  the  error  com- 
plained of.  The  referee  must  forthwith  certify  to  the  judge  the 
question  presented,  a  summary  of  the  evidence  relating  thereto 
and  his  finding  and  order  thereon,-^  whose  duty  it  is  to  con- 
sider, confirm,  modify,  overrule  or  return  with  instruction  for 

23  Sec.  42,  act  of  1898.  27  in  re  Pierce,  111  F.  R.  516,  6 

24  G.  O.  II.  A.  B.  R.  747. 

23  In  re  Carr,  116  F.  R.  556,  8  A.  2s  in  re  Thompson,  2  N.  B.  N.  R. 

B.  R.  635.  1016;    see  In  re  Pierce.  Ill  F.  R. 

20  In  re  Lewin,  103  F.  R.  850,  4  516,  6  A.  B.  R.  747. 

A.  B.  R.  632.  -«  G.  O.  XXVII. 


Ch.  39  DUTIES    OF    REFEREE.  449 

further  proceedings  such  records  and  findings.^^  Where  the 
specific  question  of  the  correctness  of  a  referee's  findings  is 
certified  to  the  court  for  decision  on  petition  of  a  party,  no 
formal  exceptions  to  such  findings  are  required  to  render  them 
reviewable.31  The  power  of  review  being  unlimited,^^  ques- 
tions of  fact  as  well  as  of  law  may  be  considered.^^ 

The  provision  as  to  the  petition  is  mandatory,  and,  conse- 
quently, on  a  review  of  the  referee's  decision,  the  court  will  not 
consider  exceptions  not  duly  filed  with  the  referee.^*  In 
default  of  the  petition,  the  application  for  review  will  be  dis- 
missed.^*'^ It  has  been  held,  however,  that  a  court  will  notice 
manifest  errors  in  a  record  that  is  certified  to  it,  although  not 
raised  by  counsel;-'^''  but  it  will  not  look  through  voluminous 
depositions  and  records  for  errors  which  are  not  plainly 
pointed  out.^'''  Irrelevant  issues  raised  by  a  party  not  in  court 
should  be  returned  without  decision.^s  Merely  filing  excep- 
tions to  a  referee 's  rulings  in  the  court  of  bankruptcy  does  not 
properly  bring  before  the  court  for  review  such  rulings,  but 
the  requirements  of  the  law  must  be  complied  with.^'^ 

A  general  review  of  the  proceedings  before  the  referee,  or 
rulings  not  directly  afi'ecting  an  order  made,  is  not  intended; 
but  specific  questions  arising  in  a  proceeding,  may  be  pre- 
sented for  review  of  the  court,  on  certificate  setting  forth  the 
question  involved,  which  should  be  signed  by  the  referee,  or 
in  case  of  orders  entered,  on  petition  for  review,  and  not  in  the 
form  of  assignment  of  errors.  Exceptions  to  a  determination 
by  the  referee  may  be  taken  by  any  person  in  interest.*^ 

Upon  an  application  to  review  an  order  made  by  a  referee, 
the  court  will  neither  vacate  nor  modify  it,  where  it  rests  upon 

30  Sec.  2  (10),  act  of  1898.  a«  In  re  Woodard,  95  F.  R.  955, 

31  In   re   Miner,   117    F.    K.    953;  1  N.  B.  N.  430.  2  A.  B.  R.  692. 
but  see  In  re  Carver,  113  F.  R.  138,  -'t  in  re  Richard,  1  N.  B.  N.  487, 
7  A.  B.  R.  539.  94  F.  R.  643.  2  A.  B.  R.  506;   In  re 

32  Sec.  38a.  Carver,  113  F.  R.  138,  7  A.  B.  R. 

33  In  re  Gottardi,  post.  539. 

3i  In    re    Scott   et    al.,    99    F.    R.         ss  Haskell  v.  Jones,   4   N.   B.   R. 

404,  2  N.  B.  N.  R.  440,  3  A.  B.  R.  481,  F.  C.  6191. 
625;  In  re  Gottardi,  114  F.  R.  328,         39  In  re  Hawley,   116  F.  R.   429, 

333;  In  re  Carver,  113  F.  R.  138,  7  8  A.  B.  R.  631;    Dressel  v.   North 

A    B.  R.  539.  State  Lumber  Co..  119  F.  R.  531. 

35  In  re  Schiller,  96  F.  R.  400,  2         4o  See  In  re  Kelly  Dry  Goods  Co., 

A.  B.  R.  704;  In  re  Russell.  105  F.  102  F.  R.  747,  4  A.  B.  R.  528;  In  re 

R.  501,  5  A.  B.  R.  566.  Reliance    Storage   and   Warehouse 


450  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  39 

a  matter  within  the  referee's  discretion,"  unless  abused,  nor 
will  it  interfere  with  his  decision  upon  questions  of  fact,  unless 
convinced  that  it  is  manifestly  against  the  weight  of  evi- 
dence,^2  or  there  is  clear  error.^"^  The  proceedings  will  not  be 
stayed  merely  because  an  appeal  has  been  taken  from  a  ref- 
eree's decision,  but  the  estate  will  be  protected  and  the  admin- 
istration proceeded  with.^^  Where  the  referee  takes  jurisdic- 
tion of  the  subject  matter,  a  party,  submitting  his  person 
thereto  and  inviting  action  on  his  rights,  cannot  for  the  first 
time  object  to  the  jurisdiction  and  the  way  he  was  brought 
into  court,  on  appeal  and  after  an  adverse  decision  ;^''5  and  an 
order  granting  a  discharge  is  proper,  notwithstanding  a  cred- 
itor objected  to  the  reference  of  the  case  to  a  referee  to  report 
the  facts,  which  objection  was  renewed  before  the  judge,  if  no 
legal  grounds  appear  for  opposing  the  discharge  and  the  cred- 
itor had  an  opportunity  to  present  such  grounds.^^ 

§  696.  Time  for  applying  for  review.— AA^hile  neither  the 
statute  nor  General  Orders  contain  any  provision  fixing  the 
time  within  which  an  application  for  a  review  of  the  referee's 
decisions  must  be  made,  if  exceptions  are  not  promptly  taken, 
but  there  is  an  apparent  acquiescence  in  a  decision,  some  good 
reason  should  appear  for  permitting  objections  to  be  made 
that  are  out  of  season.  The  circumstances  in  each  case  must 
therefore  determine  whether  the  right  to  review  is  deemed  to 
have  been  waived.^'^ 

§  697.  Hypothetical  questions.— A  question,  in  order  to  be 
certified  to  the  judge,  must  arise  in  the  course  of  the  proceed- 
ings before  the  referee  and  between  parties  having  a  right  to 

Ck).,  100  F.  R.  619,  4  A.  B.  R.  49.  F.  R.  143,  6   A.  B.  R.   373;    In   re 

41  In  re  Brumelkamp,  1  N.  B.  N.  Miner,  supra;  see  In  re  Swift,  118 
360,  95  F.  R.  814,  2  A.  B.  R.  318.  F.  R.  348. 

42  In  re  Waxelbaum,  101  F.  R.  a  In  re  Brown,  2  N.  B.  N.  R. 
228,  4  A.  B.  R.  120;    In  re  Ryder,  590. 

96  F.  R.  811,  3  A.  B.  R.  193;   In  re         ^s  In  re  Emrich,   2  N.   B.  N.   R. 

Richard,  1  N.  B.  N.  487,  94  F.  R.  656,  4  A.  B.  R.  89,,  101  F.  R.  231; 

633,  2  A.  B.  R.  506;    In  re  Miner,  Muller  v.  Nugent,  184  U.  S.   1;    7 

117  F.  R.  953,  9  A.  B.  R.  100.  A.  B.  R.  224;  In  re  Matthews,  109 

43  In  re  West,  116  F.  R.  767,  8  A.  F.  R.  603,  6  A.  B.  R.  96. 

B.  R.  564;   In  re  Stephens,  114  N.  46  in  re  McDuff,   101  F.  R.   241, 

R.    192,    8    A.    B.   R.    153;     In     re  4  A.  B.  R.  110. 

Boorstin,  114  F.  R.  696,  8  A.  B.  R.  47  in  re  Chambers,  Calder  &  Co., 

89;    In  re  Stout,  109  F.  R.  794,  6  6  A.   B.  R.   709;    In  re  Kelly  Dry 

A.  B.  R.  505;  In  re  Covington,  110  Goods  Co.,  102  F.  R.  747,  4  A.  B. 


Ch.  39  DUTIES    OF    REFEREE.  451 

raise  it,^**  as  an  opinion  will  not  be  given  on  an  abstract  ques- 
tion.49 

§  698.  Taking  of  testimony.— A  deposition  in  an  examination 
before  a  referee  must  be  taken  down  in  writing  by  him  or  under 
his  direction  in  the  form  of  narrative,  unless,  in  his  judgment, 
it  should  be  by  question  and  answer,  and  when  completed,  it 
must  be  read  over  to  the  witness  and  signed  by  him  in  the 
presence  of  the  referee.^*^  For  this  purpose,  he  is  authorized 
to  administer  oaths  or  affirmations,*"'^  and,  upon  request  of  the 
trustee,  may  authorize  the  employment  of  a  stenographer,  at 
the  expense  of  the  estate,  to  report  and  transcribe  the  proceed- 
ings.^2 

§  699.  Orders  of  referees.— In  all  orders  made  by  a  referee, 
it  must  be  recited,  according  as  the  fact  may  be,  that  notice  was 
given,  together  with  the  manner  thereof,  or  that  the  order  was 
made  by  consent,  or  that  no  adverse  opinion  was  represented 
at  the  hearing  or  that  the  order  was  made  after  hearing  ad- 
verse opinion.^2 

§  700.     'b.    Referees  not  to  act  if  interested— Practice,  etc.— 

'Referees  shall  not  (1)  act  in  cases  in  which  they  are  directly  or 
'indirectly  interested;  (2)  practice  as  attorneys  and  counselors 
'at  law  in  any  bankruptcy  proceedings;  or  (3)  purchase,  di- 
'rectly  or  indirectly,  any  property  of  an  estate  in  bank- 
'ruptey.'^^ 

R.  528;  In  re  Reliance  Storage  &  office,  be,  directly  or  indirectly,  in- 

Warehouse  Co.,  100  F.  R.  619,  4  A.  terested  in  or  benefited  by  the  fees 

B.  R.  49.  or   emoluments   arising   from   any 

*«  In  re  Wright,  1  N.  B.  R.  191,  suit    or   matter   pending   in    bank- 

F.  C.  18069 ;  In  re  Bray,  2  N.  B.  R.  ruptcy,    in    either    the    district   or 

53,  F.  C.  1818;   In  re  Freedenburg,  circuit  court  in  his  district. 

1   N.   B.   R.   34,   2   Ben.   133,   F.   C.  "Sec.  4.    ...    No  register  shall 

5075.  be  of  counsel  or  attorney,  either  in 

*»  In  re  Sturgeon,  1  N.  B.  R.  131,  or  out  of  court,  in  any  suit  or  mat- 

F.  C.  13564.  ter     pending     in     bankruptcy     in 

■"'"  G.  0.  XXII.  either  the  circuit  or  district  court 

•"'1  Sec.  20,  act  of  1898.  of   his   district,   nor   in   an   appeal 

•^'-' Sec.  38    (5),  act  of  1898;    see  therefrom,  nor  shall  he  be  execu- 

also  as  to  referee's  power  of  over  tor,  administrator,  guardian,  com- 

examination,   ante   §  679.  missioner,    appraiser,    divider,    or 

53  G.  O.  XXIII.  assignee   of   or   upon    any    estate 

f^*  Analogous  provision  of  act  of  within  the  jurisdiction  of  either  of 

1867.      "Sec.    3.     .     .     .     That    he  said  courts  of  bankruptcy,  nor  be 

will  not,  during  his  continuance  in  interested    in    the    fees   or   emolu- 


452  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  39 

§701.     Effect  of  violation  and  disqualification.— Violations 

of  any  of  these  provisions,  or  a  refusal  to  i)erniit  a  reasonable 
opportunity  for  an  inspection  of  the  accounts  and  papers  relat- 
ing to  estates  by  parties  in  interest  may  be  tried  by  either  the 
Circuit  or  District  Courts,''"'  and,  upon  conviction,  the  referee 
becomes  liable  to  a  fine  and  the  forfeiture  of  his  office.^^ 

The  fact  that  a  referee  owes  bankrupt  a  debt  is  not  such  an 
interest  as  will  disqualify  him ;  but  he  must  be  directlj'  or 
indirectly  interested  in  the  proceedings  in  bankruptcy  or  the 
estate  of  the  bankrupt,  which  owing  the  debt  does  not  make 
him.'^^ 

ments  arising  from  either  of  said         ss  Sec.  29c,  act  of  1898. 
trusts."  57  Bray  v.  Cobb.  1  N.  B.  N.  209, 

55  Sec.  23c,  act  of  1898.  1  A.  B.  R.  153,  91  F.  R.  102. 


CHAPTER  XL. 


COMPENSATION    OF    REFEREES. 


1702.   (40a)   Compensation    of   ref- 
erees. 

703.  Fees  of  referees. 

704.  Fee  for  filing  proof  of  claim. 

705.  Expenses  of  referees. 

706.  Compensation       in       pauper 

cases. 

707.  Commission       on       secured 

claims. 


708.  On  priority  claims. 

709.  Rate   and    basis   of   commis- 

sions. 

710.  b.    Fee     where     case     trans- 

ferred. 

711.  c.  Where    reference    re- 

voked. 


§702.     (Sec.    40a)      Compensation    of    referees.— 'Referees 

'shall  receive  as  full  compensation  for  their  services,  payable 
•  after  they  are  rendered,  a  fee  of  fifteen  dollars  deposited  with 
'the  clerk  at  the  time  the  petition  is  filed  in  each  case,  except 
'when  a  fee  is  not  required  from  a  voluntary  bankrupt,  and 
'twenty-five  cents  for  every  proof  of  claim  filed  for  allowance, 
'to  be  paid  from  the  estate,  if  any,  as  a  part  of  the  cost  of 
'administration,  and  from  estates  which  have  been  admin- 
'  istered  before  them  one  per  centum  commissions  on  all  moneys 
'disbursed  to  creditors  by  the  trustee,  or  one-half  of  one  per 
'centum  on  the  amount  to  be  paid  to  creditors  upon  the  con- 
'firmation  of  a  composition. '^ 


1  Prior  to  the  enactment  of  the 
matter  in  the  text,  by  the  amenda- 
tory act  of  February  5,  1903,  Sec- 
tion 40a  provided  as  follows: 
'Referees  shall  receive  as  full 
'compensation  for  their  services, 
'payable  after  they  are  rendered, 
'a  fee  of  ten  dollars  deposited  with 
'the  clerk  at  the  time  the  petition 
'is  filed  in  each  case,  except  when 
'a  fee  is  not  required  from  a  vol- 
'untary  bankrupt,  and  from  es- 
'tates  which  have  been  adminis- 
'tered  before  them  one  per  centum 
'commissions  on  sums  to  be  paid 
'as  dividends  and  commissions,  or 
'one-half  of  one  per  centum  on  the 


'amount  to  be  paid  to  creditors 
'upon  the  confirmation  of  a  com- 
'position.' 

Analogous  provision  of  act  of 
1867.  "Sec.  4.  .  .  .  The  fee  of 
said  registers,  as  established  by 
this  act,  and  by  the  general  rules 
and  orders  required  to  be  framed 
under  it,  shall  be  paid  to  them  by 
the  parties  for  whom  the  services 
may  be  rendered  in  the  course  of 
proceedings  authorized  by  this  act. 

"Sec.  5.  .  .  .  That  the  judge 
of  the  district  court  may  direct  a 
register  to  attend  at  any  place 
within  the  district  for  the  purpose 
of  hearing  such  voluntary  applica- 


453 


454 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch.  40 


§  703.  Fees  for  referees.— The  clerk  is  re(iiiii-ed  to  collect  the 
referee's  fee  of  $15  in  each  case  instituted  before  filing  the 
petition,  except  the  petition  of  a  proposed  voluntary  bankrupt 
accompanied  by  a  pauper  affidavit,-  such  fee  to  be  in  full  for 
nil  services  performed  by  the  referee  under  the  act,  or  general 
orders.^  In  any  case  in  which  such  fee  is  not  required  to 
be  paid,  before  filing  the  petition,  the  judge  may  at  any  subse- 
quent time  order  it  paid  out  of  the  estate,  or,  after  notice  and 
proof  of  bankrupt's  ability,  require  him  to  pay  it.^  A  special 
allowance  to  a  referee  for  services  performed,  in  addition  to 
the  fees  fixed  by  law,  cannot  be  made,  even  with  the  consent  of 
the  attorneys  for  the  parties  in  interest.-'^ 

If  objections  are  filed  to  bankrupt's  discharge,  the  court  may 
refer  the  case  to  the  referee  as  special  master,  not  as  referee, 
for  a  duty  independent  of  the  latter  office,  but  not  incompati- 
ble ;  for  the  necessary  services  under  this  reference  the  ap- 


tions  under  this  act  as  may  not  be 
opposed,  of  attending  any  meeting 
of  creditors,  or  receiving  any 
proofs  of  debts,  and,  generally,  for 
the  prosecution  of  any  bankruptcy 
or  other  proceedings  under  this 
act;  and  the  traveling  and  inciden- 
tal expenses  of  such  register,  and 
of  any  clerk  or  other  officer  at- 
tending him,  incurred  in  so  act- 
ing, shall  be  set[lled]  by  said  court 
in  accordance  with  the  rules  pre- 
scribed under  the  tenth  section  of 
this  act,  and  paid  out  of  the  assets 
of  the  estate  In  respect  of  which 
such  register  has  so  acted;  or  if 
there  be  no  such  assets,  or  if  the 
assets  shall  be  insufficient,  then 
such  expenses  shall  form  a  part  of 
the  costs  in  the  case  or  cases  in 
which  the  register  shall  have  acted 
in  such  journey,  to  be  apportioned 
by  the  judge. 

"Sec.  47.  .  .  .  That  in  each 
case  there  shall  be  allowed  and 
paid,  in  addition  to  the  fees  of  the 
clerk  of  the  court  as  noV  estab- 
lished by  law,  or  as  may  be  estab- 
lished by  general  order,  under  the 


provisions  of  this  act,  for  fees  in 
bankruptcy,  the  following  fees, 
which  shall  be  applied  to  the  pay- 
ment for  the  services  of  the  regis- 
ters. (Here  follows  an  enumera- 
tion of  the  fees.)     .    .     . 

"Such  fees  shall  have  priority  of 
payment  over  all  other  claims  out 
of  the  estate,  and  before  a  warrant 
issues,  the  petitioner  shall  deposit 
with  the  senior  register  of  the 
court,  or  with  the  clerk,  to  be  de- 
livered to  the  register,  fifty  dollars 
as  security  for  the  payment  there- 
of; and  if  there  are  not  sufficient 
assets  for  the  payment  of  the  fees, 
the  person  upon  whose  petition  the 
warrant  is  issued,  shall  pay  the 
same,  and  the  court  may  issue  an 
execution  against  him  to  compel 
payment  to   the   register." 

2  Sec.  51a  (2),  act  of  1898,  §  795. 

•■*  Sec.  72,  act  of  February  5, 
1903;  In  re  Barker,  111  F.  R.  501, 
7  A.  B.  R.  132. 

4G.   0.   XXXV. 

r.  Dressel  v.  North  State  Lumber 
Co.,  119  F.  R.  531. 


Ch.  40  COMPENSATION    OF    REFEREES.  455 

pointee  is  entitled  to  a  reasonable  allowance,  in  addition  to 
the  statutory  fee,  unaffected  by  the  fact  that  he  is  a  referee.^ 
§  704.  Fee  for  filing  proof  of  claim.— Prior  to  the  amenda- 
tory act  of  February  5,  1903,  the  practice  with  reference  to 
the  fee  charged  by  referees  for  this  service  varied,  in  some 
states  no  fee  was  allowable,  while  in  others  it  was  permitted 
by  rule  of  court.  Referees  are  now  entitled  to  charge  for  every 
proof  of  claim  filed  for  allowance  twenty-five  cents,  though 
there  appears  to  be  no  warrant  for  exacting  an  additional  fee 
on  filing  an  amended  or  substituted  proof  of  claim.  This  fee 
is  not  to  be  paid  by  the  creditor  on  filing  the  proof,  but  the 
referee  is  entitled  to  charge  it  against  the  estate,  if  any  there 
be,  as  with  other  expenses  incurred,  as  part  of  the  cost  of 
administration. 

§  705.  Expenses  of  referees.— The  $15  fee  does  not  include 
expenses  of  publishing,  or  mailing,  notices,  traveling,  or  per- 
petuating testimony,  or  other  expenses  necessarily  incurred 
and  allowed  by  the  judge  ;■''  and,  before  incurring  any  of  these 
expenses,  the  referee  may  require  indemnity  from  the  person 
for  whom  the  service  is  to  be  rendered.®  ]\Ioney  advanced  for 
this  purpose  will  be  repaid  out  of  the  estate  as  a  part  of  the 
cost  of  administering  the  same.^  A  referee  may  employ  a 
clerk  for  the  performance  of  these  services  and  the  expense 
so  incurred  is  properly  allowable.^o 

Exceptions  to  the  referee's  charges  against  an  estate  in  bank- 
ruptcy for  his  expenses  therein  will  not  be  heard  by  the  court, 
when  his  account  therefor  has  been  duly  kept  and  returned 
to  the  court,  under  oath,  with  vouchers,^ ^  and  approved;  espe- 
cially when  distribution  has  been  made  before  such  exceptions 
were  presented.^-     He  must  keep  an  accurate  account  of  his 

6  Fellows  V.  Freudenthal,  102  F.  '-•  G.  0.  IV. 

R.  731,  4  A.  B.  R.  490;  In  re  Gross-  i"  In  re  Warszawiak,  1  N.  B.  N. 

man,  111  F.  R.  507,  6  A.  B.  R.  510;  135;  In  re  Price,  91  F.  R.  635,  1  A. 

In  re  Steed,  107  F.  R.  682,  6  A.  B.  B.  R.  419;    In  re  Tebo,  101  F.  R. 

R.  73;  Contra,  In  re  Troth,  3  N.  B.  419,  4  A.  B.  R.  235;   Contra,  In  re 

N.  R.  104,  F.  R.  291;    Bragassa  v.  Carolina  Cooperage  Co.,  2  N.  B.  N. 

St.  Louis  Cycle  Co.,  107  P.  R.  77,  R.  23,  3  A.  B.  R.  154,  96  F.  R.  (50). 

5  A.  B.  R.  700.  11  G.  0.  XXVI. 

-  G.  O.  XXXV;  In  re  Dixon.  114  12  in  re  Tebo,  101  F.  R.  419,  4  A. 

F.   R.  675,   8  A.  B.  R.   145;    In  re  B.  R.  235,  but  see  In  re  Mammoth 

Pierce,  111  F.  R.  516,   6  A.   B.  R.  Pine  Lumber  Co.,  116  F.  R.  731,  8 

747.  A.  B.  R.  651. 

s  G.  0.  X. 


45C  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  40 

lravclin<^'  and  ineith'Utal  expenses  and  oi'  those  of  any  elerk  or 
other  officer  attending  him  in  the  performance  of  his  duties  in 
any  case  which  may  be  referred  to  him  and  must  mak(;  return 
of  the  same,  under  oath,  to  the  judge  with  proper  vouchers, 
when  they  can  be  procured,  on  the  first  Tuesday  in  each 
month,' -"^  and,  if  approved,  they  will  be  paid  or  allowed  out  of 
the  estates  in  which  they  were  incurred.'^ 

§  706.  Compensation  in  pauper  cases.— No  provision  is  made 
for  the  payment  of  compensation  or  necessary  expenses  in  cases 
where  the  bankrupt  files  his  petition  in  forma  pauperis,^-'*  but 
if,  at  any  time  during  the  pendency  of  the  proceedings,  assets 
should  be  developed,  the  court  may  order  those  fees  to  be  paid 
out  of  the  estate,  or  may,  after  notice  to  the  bankrupt  and 
satisfactory  proof  that  he  has  or  can  obtain  the  money  order 
him  to  pay  such  fees,  and,  on  default,  dismiss  the  petition.^^ 

§  707.  Commission  on  secured  claims.— The  present  act 
establishes  a  new  rule  for  the  determination  of  the  compensa- 
tion due  to  officers  charged  with  the  administration  of  bankrupt 
estates,  difi'ering  from  the  preceding  acts,  and,  consequently, 
there  is  an  absence  of  precedent  touching  the  right  of  com- 
missions upon  secured  claims.  While  it  was  held  prior  to  the 
amendatory  act  that  the  use  of  the  term  "dividend"  in  this 
section  lijnited  the  commission  to  unsecured  claims  and  those 
not  entitled  to  priority  of  payment,'"^  there  seems  now  to  be 
no  question  in  view  of  the  change  of  phraseology  which  author- 
izes a  commission  "on  all  moneys  disbursed  to  creditors  by  the 
trustees,"  which  would  comprehend  the  case  of  a  secured  credi- 
tor who  submitted  his  securities  to  the  federal  jurisdiction, 
the  avails  of  the  property  being  disbursed  by  the  trustee  in 
bankruptcy,  in  which  event  a  commission  should  be  allowed 
thereon.'^ 

ii  G.  0.  XXVL  Mammoth  Pine  Lumber  Co.,  ante; 

li  Sec.  62,  act  of  1898.  see  In  re  Smith,  108  F.  R.  39,  5  A. 

15  Sec.  51,  act  of  1898.  B.  R.  559;   In  re  Barker,  111  F.  R. 

ICQ.  O.  XXXV-4;     see  also  Sec.  501,  7  A.  B.  R.  132. 

51,  act  of  1898.  is  See  In  re  Barber  et  al.,  1  N. 

IT  In    re    Fort    Wayne    Electric  B.  N.  559,  97  F.  R.  547,  3  A.  B.  R. 

Corporation,  1  N.  B.  N.  356,  94  F.  307;  In  re  Sabine,  1  N.  B.  N.  312,  1 

R.  109,  1  A.  B.  R.  706;  In  re  Field-  A.  B.  R.  322;  In  re  Coffin,  1  N.  B. 

ing,   2  N.  B.   N.  R.   735,   96  F.  R.  N.  507,  2  A.  B.  R.  344;   see  In  re 

800,  3  A.  B.  R.  135 ;  In  re  Utt,  105  Muhlhauser  Co.,  9  A.  B.  R.  80. 
F.   R.   754,   5  A.   B.  R.  383;    In  re 


ClI.  40  COMPENSATION    OF    REFEREE.  457 

A  dividend  in  bankruptcy  is  a  parcel  of  the  fund  arising 
from  the  assets  of  an  estate,  rightfully  allotted  to  a  creditor 
entitled  to  share  in  the  fund,  whether  in  the  same  proportion 
with  other  creditors,  or  in  a  different  proportion.  A  miscon- 
struction of  this  word  seems  to  have  arisen  from  the  mistaken 
idea  that,  instead  of  relating  to  a  division  of  the  fund,  accord- 
ing to  the  rights  of  the  several  creditors  of  different  classes, 
it  has  some  fanciful  relation  to  such  of  the  debts  as  are  not 
paid  in  full.  The  fund  is  the  thing  which  is  divided,  and  the 
dividends  are  the  parcelings  to  the  creditors  from  that  fund.^^ 
There  is  absolutely  no  warrant  for  saying  that  section  65a  is 
a  definition  of  what  shall  constitute  a  dividend;  it  is  merely 
a  rule  declaratory  of  the  method  of  payment.  The  setting 
apart  to  the  bankrupt  of  a  homestead  exemption  from  pro- 
ceeds of  property  sold  by  the  trustee  is  not  the  making  of  a 
dividend  nor  such  a  disbursement  as  would  entitle  the  referee 
to   a  commission  upon  the   same.^o 

§  708. On  priority  claims.— Prior  to  the  amendment  it 

was  held  that  priority  claims  with  reference  to  commissions, 
stood  on  a  different  footing  from  secured  claims,  and  that  the 
term  "dividends,"  as  used  in  section  65a,  could  have  no  appli- 
cation to  the  former  for  the  reason  that  the  statute  directed 
them  to  be  paid  out  of  the  estate  in  full,  seriatim,  before  the 
matter  of  declaring  and  paying  dividends  arose  and  the  referee 
was  denied  a  commission  thereon. -^  The  amendment,  however, 
removes  all  doubt,  and  the  referee  is  now  clearly  entitled  to 
commissions  on  moneys  disbursed  for  the  purpose  of  paying 
priority  claims. 

1  709. Rate  and  basis  of  commission.— The  referee  is 

entitled  to  one  per  centum  on  all  moneys  disbursed  by  the 
trustee  in  the  bankruptcy  proceedings,  and  to  one-half  of  one 
per  centum  on  the  amount  paid  under  a  composition.  The 
commission  with  the  filing  fee  is  to  be  in  full  compensation  for 
all  services  rendered. 

§  710.  'b.  Fee  when  case  transferred.— Whenever  a  case  is 
'transferred  from  one  referee  to  another  the  judge  shall  deter- 

19  In  re  Barber  et  al.,  supra.  In  re  Sabine,  supra;  Contra,  In  re 

20  In  re  Gardner,  2  N.  B.  N.  R.  Gerson,  1  N.  B.  N.  384,  2  A.  B.  R. 
796,  103  F.  R.  932,  4  A.  B.  R.  420.     352;  In  re  Muhlhauser  Co.,  9  A.  B. 

^1  In   re  Fielding,  2  N.  B.  N.  R.     R.  80. 
735,  96  F.  R.  800,  3  A.  B.  R.  135; 


458  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  40 

'mine  the  proportion  in  whieh  the  fee  and  commissions  therefor 
'shall  be  divided  between  the  referees.' 

§711.  'c.  Fee  where  reference  revoked.— In  the  event  of 
'the  reference  of  a  case  being  revoked  before  it  is  concluded, 
'and  when  the  case  is  specially  referred,  the  judge  shall  deter- 
'mine  what  part  of  the  fee  and  commissions  shall  be  paid  to  the 
'referee.' 


CHAPTER  XLI. 
CONTEMPTS   BEFORE    REFEREES. 

§712.   (41a)   Contempts  defined.  716.  Of  bankrupt. 

713.  When  witness  required  to  at-       717.  Of  witness. 

tend.  718.  b.  Proceedings  on  contempt. 

714.  Power  of  referee.  719.  Referee  cannot  punish. 

715.  What  constitutes  a  contempt.       720.  Judge  to  punish. 

§  712.  '  (Sec.  41a)  Contempts  defined.— A  person  shall  not, 
'in  proceedings  before  a  referee, 

*  (1)  Disobey  or  resist  any  lawful  order,  process,  or  writ; 

*  (2)  Misbehave  during  a  hearing  or  so  near  the  place  thereof 
'  as  to  obstruct  the  same ; 

'  (3)  Neglect  to  produce,  after  having  been  ordered  to  do  so, 
'any  pertinent  document;  or 

'  (4)  Refuse  to  appear  after  having  been  subpoenaed,  or, 
'upon  appearing:,  refuse  to  take  the  oath  as  a  witness,  or,  after 
'having  taken  the  oath,  refuse  to  be  examined  according  to 
'  law : 

§713.  'When  witness  required  to  attend.— Provided,  That 
'no  person  shall  be  required  to  attend  as  a  witness  before  a 
'referee  at  a  place  outside  of  the  state  of  his  residence,  and 
'more  than  one  hundred  miles  from  such  place  of  residence, 
'and  only  in  case  his  lawful  mileage  and  fee  for  one  day's 
'attendance  shall  be  first  paid  or  tendered  to  him.'i 

1  Analogous  provision  of  act  of  ing  or  affirming  falsely   before   a 

1867.     "Sec.  7.    And  be  it  further  register  shall  be  liable  to  all  the 

enacted.  That  parties  and  witness-  penalties,  punishments,  and  conse- 

es    summoned    before    a    register  quences  of  perjury.     If  any  person 

shall  be  bound  to  attend  in  pursu-  examined    before    a   register    shall 

ance  of  such  summons  at  the  place  refuse  or  decline  to  answer,  or  to 

and  time  designated  therein,   and  swear  to  or  to  sign  his  examina- 

shall  be  entitled  to  protection,  and  tion  when  taken,  the  register  shall 

be  liable  to  process  of  contempt  in  refer  the  matter  to  the  judge,  who 

like   manner   as   parties   and   wit-  shall  have  power  to  order  the  per- 

nesses   are   now   liable   thereto    in  son   so   acting    to    pay    the    costs 

case  of  default  in  attendance  under  thereby  occasioned,  if  such  person 

any  writ  of  subpoena,  and  all  per-  be  compellable  by  law  to  answer 

sons  wilfully  and  corruptly  swear-  such  question  or  to  sign  such  ex- 

459 


400  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  41 

j5  714.  Power  of  referee. — The  referee  is  included  within  the 
meaning  of  the  word  "court"  as  used  in  the  act^  and  exercises 
the  same  power  in  a  case  before  him  as  a  court  of  bankruptcy 
except  in  matters  relating  to  compositions  and  discharges'^ 
as  to  which  he  has  authority  to  do  only  what  the  order  refer- 
ring the  matter  to  him  prescribes."*  As  has  been  well  said, 
referees,  within  the  scope  of  their  authority,  act  in  lieu  of  the 
court  of  bankruptcy  and  their  orders  are  in  effect  the  orders 
of  the  court  and  a  violation  of  such  orders  will  subject  the 
offender  to  punishment  as  for  a  violation  of  an  order  of  the 
court  of  bankruptcy.^ 

§  715.  What  constitutes  a  contempt.— It  is  a  contempt  not 
to  obey  an  order  of  the  referee  relating  to  the  investigation  of 
a  bankrupt's  affairs  or  business;^  but  before  making  such 
order  evidence  should  be  produced  which  shows  not  only  infer- 
entially  and  possibly  but  so  as  to  convince  an  unprejudiced 
mind  beyond  a  reasonable  doubt  that  the  person  to  whom  the 
order  is  issued  is  able  to  obey  it.'''  This  section  does  not  create 
a  new  or  enlarged  jurisdiction  over  contempts,  nor  does  it 
confer  a  power  to  impose  a  punishment  which  might  not  rightly 
and  lawfully  be  imposed  on  a  similar  state  of  facts  by  any 
other  United  States  Court.* 

While  it  is  generally  true  that  one  accused  of  constructive 
contempt,  by  fully  answering  all  the  charges  on  his  oath,  is 
purged  thereof,  such  answers  can  not  be  considered  conclusive 
evidence  in  case  of  disobedience  of  orders  in  bankruptcy,  but 
they  may  be  contradicted  or  supported  by  other  testimony,  in 
which  event  the  question  whether  the  party  has  purged  him- 

amination,  and  such  person  shall  re  Mussey,  2  N.  B.  N.  R.  113,  99 

also  be  liable  to  be  punished   for  F.  R.  71,  3  A.  B.  R.  592. 

contempt.  -^  G.   O.   XII    (3). 

"Sec.  26.     .     .     .    The  bankrupt  ■'  In   re  Allen,   13    Blatch.    272 ; 

shall   at  all   times,   until   his   dis-  Mueller  v.  Nugent,  184  U.  S.  1,  7 

charge,  be  subject  to  the  order  of  A.  B.  R.   224;    In  re  Gettleston,  1 

the  court     .     .     .     and  for  neglect  N.  B.  R.  604;    In  re  Speyer.  6  N. 

or  refusal  to  obey  any  order  of  the  B.  R.  255,  F.  C.  13239. 

court,  such  bankrupt  may  be  com-  «  In  re  Tudor,  1  N.  B.  N.  476,  2 

mitted  and  punished  as  for  a  con-  A.  B.  R.  808.  96  F.  R.  942. 

tempt  of  the  court."  ^  In  re  Tischler,   2  N.  B.  N.  R. 

2  Sec.  1   (7),  act  of  1898.  549. 

3  Sec.  38a    (4),  act  of  1898;    In  «  Boyd   v.   Glucklich,   116   F.   R. 

131,  8  A.  B.  R.  393. 


Ch.  41        CONTEMPTS  BEFORE  REFEREES.  461 

self  is  to  be  decided  upon  a  careful  consideration  of  all  the 
evidence.'' 

§  716.  Contempt  of  bankrupt.— It  is  a  contempt  for  a  bank- 
rupt to  wilfully  disobey  an  order  of  the  referee  requiring  him 
to  turn  over  to  his  trustee  money  or  other  property,  proved 
by  evidence  beyond  a  reasonable  doubt  to  be  a  part  of  his 
estate  in  bankruptcy,  which  he  has  not  surrendered  or  ac- 
counted for,  and  to  be  actually  in  his  present  possession  or 
control,  or  that  any  alleged  transfer  or  other  disposition  of 
it  is  a  mere  subterfuge  which  does  not  prevent  his  producing 
it.  While  proceedings  in  bankruptcy  may  be  summary,  they 
should  not  be  so  summary  as  to  deprive  the  bankrupt  of  those 
fundamental  rights  and  privileges  that  belong  to  every  citizen, 
among  which  are  the  right  to  be  advised  of  the  demand  made 
upon  him,  and  the  right  after  being  so  advised  to  have  a  rea- 
sonable time  to  prepare  his  defense  and  produce  his  witnesses ; 
a  failure  to  give  such  notice  and  opportunity,  cannot  be  cured 
by  subsequently  permitting  the  bankrupt  to  introduce  evi- 
denced^ It  has  been  held  that  it  is  a  contempt  for  an  invol- 
untary bankrupt  to  neglect  to  pay  the  trustee  a  sum  in  his 
inventory  as  "cash  on  hand;"ii  but  where  the  bankrupt  was 
prevented  by  sickness  from  attending  as  required  by  the  ref- 
eree, he  was  not  in  contempt.^  ^ 

§  717.     Contempt  of  witness.— Witnesses  cannot  be  required 

9  See  Boyd  v.  Glucklich.  supra,  B.  R.  342,  97  P.  R.  930;  In  re 
opinion  of  Sanborn,  J.;  In  re  Got-  Mayer,  2  N.  B.  N.  R.  257,  98  F.  R. 
tardi,  114  F.  R.  328,  7  A.  B.  R.  723.      839,  3  A.  B.  R.  533;    In  re  Deuell, 

10  Boyd  V.  Glucklich,  supra;  Ex  100  F.  R.  633,  2  N.  B.  N.  R.  597,  4 
p.  Robinson,  19  Wall.  505;  In  re  A.  B.  R.  60;  In  re  Oliver,  1  N.  B. 
Levin,  6  A.  B.  R.  743;  In  re  Got-  N.  329,  2  A.  B.  R.  783,  96  F.  R.  85; 
tardi,  7  A.  B.  R.  723 ;  Ripon  Knit-  In  re  Friedman,  1  N.  B.  N.  332,  2 
ting  Wks.  V.  Schreiber,  2  N.  B.  N.  A.  B.  R.  301 ;  In  re  Kuntz,  1  N.  B. 
R.  899,  4  A.  B.  R.  299,  101  F.  R.  N.  256;  In  re  Pearson.  1  N.  B.  N. 
810;  In  re  Rosser,  101  P.  R.  562,  474,  2  A.  B.  R.  819;  Wayne  Knit- 
41  C.  C.  A.  497,  4  A.  B.  R.  153;  ting  Mills  v.  Nugent,  2  N.  B.  N.  R. 
s.    c.    below    1    N.    B.    N.    469;     2  714;    but  see  In  re  Ogles,  1  N.  B. 

A.  B.  R.  746,  96  F.  R.  305,  308;  N.  400,  2  A.  B.  R.  514;  In  re  Sal- 
In  re  Tischler,  2  N.  B.  N.  R.  key,  11  N.  B.  R.  423,  516,  521,  F.  C. 
549;  In  re  Purvine,  1  N.  B.  N.  12253;  In  re  Speyer,  6  N.  B.  R. 
326,  2  A.  B.  R.  787,  96  F.  R.  192;  255,  F.  C.  13239. 

In  re  Tudor,  1  N.  B.  N.  476,  2  A.  n  In  re  Dresser,  3  N.  B.  R.  138. 

B.  R.  808,  96  P.  R.  942;   In  re  Mc-     F.  C.  4077. 

Cormick,  2  N.  B.  N.  R.  104,  3  A.         12  In  re  Carpenter,  I  N.  B.  R.  51, 
B.    R.    340,    97    P.    R.    566;    In    re     P.  C.  2427. 
Schlesiger,  2  N.  B.  N.  R.  169,  3  A. 


462  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  41 

to  attend  before  a  referee  outside  the  state  of  their  residence, 
nor  more  than  a  hundred  miles  from  their  residence,  nor  until 
their  hiwful  mileage  and  fee  for  one  day's  attendance  have 
been  paid.  The  power  here  conferred  to  compel  the  attend- 
ance of  witnesses  is  not  to  be  considered  as  changing  or  enlarg- 
ing the  power  of  the  federal  courts  to  compel  their  attendance 
as  defined  in  section  876  of  the  Revised  Statutes  of  the  United 
States,  but  is  a  limitation  upon  pre-existing  rights,  so  that  one 
cannot  be  compelled  to  attend  a  reference  in  bankruptcy  within 
the  state  of  his  residence,  if  at  a  distance  of  more  than  one 
hundred  miles  therefrom.  If  the  testimony  of  such  witnesses 
is  desired  it  must  be  pursuant  to  section  21  of  the  law.^^ 

A  witness  is  entitled^ ^  for  each  day's  attendance  in  court, 
or  before  any  officer  pursuant  to  law,  to  one  dollar  and  fifty 
cents,  and  five  cents  a  mile  for  going  from  his  place  of  resi- 
dence to  the  place  of  trial  or  hearing,  and  five  cents  a  mile  for 
returning.  By  the  act  of  August  3,  1892,^^  witnesses  in 
courts  in  Wyoming,  Montana,  Washington,  Oregon,  California, 
Nevada,  Idaho,  Colorado,  New  ^lexico,  Arizona  and  Utah  are 
entitled  to  receive  fifteen  cents  for  each  mile  necessarily  trav- 
eled over  any  stage  line  or  by  private  conveyance  and  five 
cents  for  each  mile  over  any  railroad  in  going  to  and  returning 
from  said  court.  But  no  officer  of  a  United  States  court  is 
entitled  to  witness  fees  for  attending  before  any  court  or  com- 
missioner where  he  is  officiating.^*^ 

No  extra  allowance  can  be  made  to  an  expert  witness,  but 
it  is  a  matter  for  private  contract  between  the  witness  and 
the  party  summoning  him,  and  such  contract  will  not  bind  the 
court  nor  will  it  be  regarded  under  any  circumstances  unless 
in  writing  and  signed  by  the  parties.^'''  If  the  referee  is  in  the 
state  of  witness'  residence  within  a  hundred  miles  thereof 
and  witness  has  been  paid  his  mileage  and  fee  as  stated,  he 
will  be  guilty  of  contempt  if  he  wilfully  disobeys  any  lawful 
order,  misbehaves  so  as  to  obstruct  the  hearing,  fails  to  pro- 
duce any  pertinent  document  which  he  has  been  ordered  to 
produce  or  refuses  to  appear  after  being  subpoenaed  or  to  take 
the  oath  after  appearing  or  to  testify  after  being  sworn.    The 

13  In  re  Hemstreet,  117  F.  R.  568,  le  Sec.  849,  U.  S.  Rev.  Stat. 

8  A.  B.  R.  760.  IT  In  re  Carolina  Cooperage  Co., 

1*  Sec.  848,  U.  S.  Rev.  Stat.  1  N.  B.  N.  534,  3  A.  B.  R.  154,  96 

15  1  Supp.  Rev.  Stat.  165.  F.  R.  604. 


Ch.  41        CONTEMPTS  BEFORE  REFEREES.  4G3 

examinations^^  are  for  the  purpose  of  furnishing  creditors  and 
the  officers  administering  the  estate  full  information  as  to 
bankrupt's  assets.  A  witness  is  guilty  of  contempt  if  he  re- 
fuses to  attend  or  obey  an  order  made  on  the  application  of 
a  receiver,  for  his  examination  or  to  produce  books  or  docu- 
ments tending  to  show  the  disposition  of  property  purchased 
from  the  bankrupt  when  fraud  against  the  purchaser  is 
alleged  ;i^  or  to  attend  a  hearing  in  one  city  in  opposition  to 
a  discharge  when  summoned  from  another  ;2o  or,  on  being 
examined  as  to  where  he  obtained  the  money  with  which  he 
purchased  claims  against  the  bankrupt  and  answering  on 
cross-examination  that  he  did  not  get  it  from  the  bankrupt, 
if  he  does  not  state  where  he  did  get  it  ;-^  but  he  has  been  held 
not  in  contempt  where  he  did  not  appear  but  filed  objections 
declining  to  submit  to  examination  until  the  question  raised 
had  been  decided.-^  See  Evidence,  Sec.  21,  of  the  law, 
ante,  §  518. 

§  718.  'b.  Proceedings  on  contempt.— The  referee  shall  eer- 
'tify  the  facts  to  the  judge,  if  any  person  shall  do  any  of  the 
'things  forbidden  in  this  section.  The  judge  shall  thereupon, 
"in  a  summary  manner,  hear  the  evidence  as  to  the  acts  com- 
'  plained  of,  and,  if  it  is  such  as  to  warrant  him  in  so  doing, 
'  punish  such  person  in  the  same  manner  and  to  the  same  extent 
'as  for  a  contempt  committed  before  the  court  of  bankruptcy, 
'or  commit  such  person  upon  the  same  conditions  as  if  the 
'doing  of  the  forbidden  act  had  occurred  with  reference  to  the 
'process  of,  or  in  the  presence  of,  the  court. '-^ 

§719.  Referee  cannot  punish.— The  referee  cannot  pun- 
ish for  contempt,  but  when  committed  before  him,  he 
should  enter  the  fact  on  the  record  and  then  certify  the  facts 
to  the  judge,  who  is  authorized  to  impose  punishment  as  for 
similar   offenses   committed  before   a  court  of  bankruptcy.-^ 

18  Sec.  7g,  and  21a,  act  of  1898.  1867.      "Sec.    4.     .     .     .     Provided, 

19  In  re  Fixen  &  Co.,  1  N.  B.  N.  however.  That  nothing  in  this  sec- 
568,  2  A.  B.  R.  822,  96  F.  R.  748.  tion    contained    shall    empower    a 

20  In  re  Woodward,  12  N.  B.  R.  register  to  commit  for  contempt, 
297,  8  Ben.  112.  or  to  hear  a  disputed  adjudication. 

21  In  re  Lathrop,  4  N.  B.  R.  93,  or  any  question  of  the  allowance 
F.  C.  8106.  or  suspension  of  an  order  of  dis- 

22  In  re  Dole,  7  N.  B.  R.  538,  F.  charge." 

C.  3965.  2*  Sees.  2  (13)  and  2  (16),  act  of 

23  Analogous  provision  of  act  of     1898;      In    re    Miller,     105    F.    R. 


464  '      THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  41 

The  court  of  bankruptcy  has  no  authority  to  refer  the  question 
of  the  commitment  of  a  person  guilty  of  contempt  to  the  dis- 
cretion of  the  referee,  since  the  court  alone  is  authorized  to 
exercise  the  power  of  commitment.^^ 
See  Contempt,  Sec.  2,  of  the  law,  ante,  §§  55-63. 

§  720.  Judge  to  punish.— It  is  not  to  be  inferred  that  for  a 
wilful  disobedience  of  a  lawful  order  of  a  referee,  there  is  no 
power  of  punishment,  and  that  the  only  course  is  to  obtain  a 
re-enactment  of  the  order  from  the  judge,  for  a  violation  of 
which  second  order,  a  punishment  may  be  inflicted.  The  stat- 
ute, which  places  so  large  a  part  of  the  details  of  settlement 
of  estates  in  the  referee's  hands,  evidently  intended  his  lawful 
orders  to  have  the  force  of  orders  of  the  judge ;  and  the  courts 
will  enforce  such  orders  by  contempt  proceedings  instituted 
directly  on  failure  to  obey  them. 2*5  Under  the  general  rules  of 
law  and  the  specific  provisions  of  the  bankrupt  act,  the  court 
of  bankruptcy  has  power  to  imprison  a  person  for  contumacy 
and  compel  obedience  to  a  referee's  order,  where  complete 
jurisdiction  of  the  bankrupt  and  his  estate  exists.  The  crim- 
inality of  his  conduct  and  his  liability  to  criminal  prosecution 
will  not  prevent  the  court  from  dealing  with  him  summarily 
for  contempt,  but  the  ability  to  comply  with  the  order  must 
be  shown  by  evidence  beyond  a  reasonable  doubt  and  that  he 
wilfully  disobeyed  the  order.  This  power  cannot  be  invoked 
to  reach  property  beyond  the  present  control  of  the  bankrupt 
and  in  the  hands  of  third  persons  claiming  title  derived  prior 
to  the  bankruptcy  proceedings,  although  the  transaction  is 
manifestly  fraudulent;  nor  to  punish  for  frauds  committed  by 
bankrupt  against  the  act  nor  to  coerce  him  or  transferees  to 
make  restitution.^'^ 

Imprisonment  as  a  means  of  compelling  a  person  over  whom 
the  court  has  jurisdiction  to  surrender  the  possession  of  money 
or  other  property  he  has  no  right  to  keep  is  not  imprisonment 
for  debt;  nor  does  the  constitutional  guaranty  of  the  right  to 

57,  5  A.  B.  R.  154;  Boyd  v.  Gluck-  re  Gettleston,   1   N.  B.  R.   604;    In 

lich,  116  F.  R.  131,  8  A.  B.  R.  393;  re   Speyer,   6  N.   B.   R.   255,   F.  C. 

In  re  Taylor,  5  A.  B.  R.  184,  105  13239. 
F.  R.  509.  27  In  re  Mayer,  2  N.  B.  N.  R.  257, 

25  Smith  V.  Belford,  106  F.  R.  98  F.  R.  839,  3  A.  B.  R.  533;  Boyd 
658,  5  A.  B.  R.  291.  v.  Glucklich,  supra;   In  re  Wilson, 

26  In  re  Allen,  3  Blatch.  272;  In  116  F.  R.  419.  8  A.  B.  R.  612. 


Ch.  41         CONTEMPTS  BEFORE  REFEREES.         ■  465 

a  trial  by  jury  apply  to  statutory  proceediugs  of  this  character 
in  which  the  court  exercises  the  powers  of  a  special  tribunal, 
as  where  acting  as  a  court  of  bankruptcy.^s  The  referee  can- 
not compel  a  witness  to  answer  if  he  refuses,^^  but  he  can  cer- 
tify the  matter  to  the  judge  for  punishment  as  for  a  con- 
tempt."° 

28  Muller  V.  Nugent,  184  U.  S.  1,        29  in  re  Koch,  1  N.  B.  R.  153. 
7  A.  B.  R.  224;  see  Smith  v.  Bel-        ;io  in  re  Rosenfield,  1  N.  B.  R.  60, 
ford,  supra.  p.  c.  12059. 


30 


CHAPTER   XLII. 

RECORDS   OF   REFEREES. 

§721.    (42a)     Manner     of     keeping       724.  b.  Case  to  be  kept  in  separate 
referee's  records.  book. 

722.  Weight    given    referee's    rec-       725.  Record  of  case. 

ords.  726.  c.    Record    books    to    be    re- 

723.  Statistical     information     re-  turned  to  the  clerk's  office. 

quired.  727.  Record  to  be  transmitted. 

§721.  '(Sec.  42a)  Manner  of  keeping  referees'  records.— 
'The  records  of  all  proceedings  in  each  case  before  a  referee 
'shall  be  kept  as  nearly  as  may  be  in  the  same  manner  as  rec- 
'ords  are  now  kept  in  equity  cases  in  circuit  courts  of  the 
'United  States.'^ 

§722.  Weight  given  referees'  records.— A  certified  copy  of 
the  proceedings  before  a  referee,  or  of  papers  when  issued  by 
the  clerk  or  referee,  will  be  admitted  as  evidence  with  like 
force  and  effect  as  certified  copies  of  the  records  of  district 
courts  of  the  United  States  are  now  or  may  hereafter  be  ad- 
mitted.^ The  referee's  record  must  be  taken  as  a  true  report 
of  the  proceedings  and  on  an  application  to  confirm  a  composi- 
tion, notwithstanding  that  opposing  creditors  offer  affidavits  to 
show  that  he  omitted  to  record  objections  and  other  proceed- 
ings and  misstated  what  took  place.^  A  certified  copy  of  the 
adjudication  is  the  best  evidence  of  the  fact  of  bankruptcy.^ 

§  723.  Statistical  information  required.— In  order  to  enable 
the  Attorney  General  to  report  annually  to  Congress  as  re- 
quired by  section  53  the  referees  are  required  to  furnish  him 
semi-annually  statistics  as  to  the  business  transacted  by  them.^ 

1  Analogous  provision  of  act  of  which    shall    be    entered    by    said 

1867.  "Sec.  4.     .     .     .     and  he  shall  clerk    in  the   proper   minute   book 

also  make  a  short  memoranda  of  to  be  kept  in  his  office.     .     .     ." 

his    proceedings    in    each    case    in  -  Sec.  21d,  act  of  1898. 

which  he  shall  act,  in  a  docket  to  3  In  re  Spencer,  18  N.  B.  R.  199, 

be  kept  by  him  for  that  purpose,  F.  C.  13229. 

and  he  shall  forthwith,  as  the  pro-  ^  Buck  v.  Winters,   15   N.  B.  R. 

ceedings  are  taken,  forward  to  the  140. 

clerk  of  the  district  court  a  certi-  "■  Sec.  54,  act  of  1898. 
fied     copy     of     said     memoranda. 

466 


ClI.  42  RECORDS  OF  REFEREES.  467 

§  724.  *b.  Cases  to  be  kept  in  separate  book.— A  record  of 
'the  proceedings  in  each  case  shall  be  kept  in  a  separate  book 
'or  books,  and  shall,  together  with  the  papers  on  file,  constitute 
'the  records  of  the  case.' 

§  725.  Record  of  a  case.— The  referee  is  required  to  indorse 
on  each  paper  filed  the  day  and  hour  of  filing,  and  a  brief 
statement  of  its  character,^  and  should  file  it  with  the  written 
authoritj'^  from  a  creditor  to  an  attorney,  agent  or  proxy  to 
represent  and  vote  for  him.'^  Upon  application  of  any  party 
in  interest,  he  is  required  to  preserve  the  evidence  taken  before 
him  or  the  substance  thereof  as  agreed  upon  by  the  parties 
when  a  stenographer  is  not  in  attendance  ;^  or  if  in  attendance 
a  transcript  of  his  notes  f  and  these,  with  any  orders  or  notices, 
made  by  the  referee,  constitute  the  record  of  the  proceedings, 
and  should  be  neatly  bound  together  as  the  record  when  the 
case  is  closed.  The  referee's  entries  will  as  a  rule  prove  what 
proceedings  have  taken  place  before  him.^^  If  a  review  of  any 
order  made  by  the  referee  is  desired,  a  petition  should  be  filed 
with  him,  when  he  is  required  to  certify  to  the  judge  the 
question  presented,  a  summary  of  the  evidence  relating  there- 
to and  his  finding  and  order  thereon.^i  Whenever  papers 
on  file  before  him  are  needed  in  any  proceeding  in  court  he 
should  transmit  them  to  the  clerk  and  secure  their  return 
after  they  have  been  used,  or  transmit  certified  copies  by  mail 
when  necessary.^- 

§726.     'c.    Record  books  to  be  returned  to  clerk's  office.— 

'The  book  or  books  containing  a  record  of  the  proceedings 
'shall,  when  the  case  is  concluded  before  the  referee,  be  cer- 
tified to  by  him,  and,  together  with  such  papers  as  are  on  file 
'before  him,  be  transmitted  to  the  court  of  bankruptcy  and 
'shall  there  remain  as  a  part  of  the  records  of  the  court. '^^^ 

§  727.     Record  to  be  transmitted.— When  a  case  is  closed  the 

6G.  O.  II.  11  Sec.  39  (5),  act  of  1898;  G.  O. 

T  In  re  Eagles  &  Crisp,  2  N.  B.  XXVII. 

N.  R.  462,  3  A.  B.  R.  733,  99  F.  R.  12  Sec.  39   (8),  act  of  1898. 

696.  13  Analogous  provision  of  act  of 

8  Sec.  39   (9),  act  of  1898;  G.  O.  1867.      "Sec.    5.     .     .     .     Provided, 

22.  always,  That  all  depositions  of  per- 

8  Sec.  38  (5),  act  of  1898.  sons   and   witnesses   taken   before 

if>In  re  Crane,  15  N.  B.  R.  120,  said  register,  and  all  acts  done  by 

F.  C.  3352.  him,  shall  be  reduced  to  writing, 


468 


THE    NATIONAL    BANKRUPTCY    LAW. 


Ch.  42 


referee  should  bind  the  loose  sheets  neatly  together  if  he  has 
so  kept  the  record,  attach  his  certificate  thereto,  or  to  the  book 
as  the  case  may  be,  and  send  them  with  the  papers  in  the  case 
to  the  clerk.  Papers  exhibited  become  a  part  of  the  deposi- 
tions and  cannot  be  withdrawn  and  a  copy  substituted  there- 
for except  upon  application  of  one  able  to  show  a  proper  use.^* 


and  be  signed  by  him,  and  shall  be 
filed  in  the  clerk's  office  as  a  part 
of  the  proceedings.     .     .    . 

"Sec.  38.  .  .  .  the  proceedings 
in  all  cases  of  bankruptcy  shall 
be  deemed  matters  of  record,  but 
the  same  shall  not  be  required  to 
be  recorded  at  large,  but  shall  be 
carefully  filed,  kept,  and  numbered 


in  the  office  of  the  clerk  of  the 
court,  and  a  docket  only,  or  short 
memorandum  thereof,  kept  in 
books  to  be  provided  for  that  pur- 
pose, which  shall  be  open  to  pub- 
lic inspection." 

14  In  re  McNair,  2  N.  B.  R.  109, 
F.  C.  8908. 


CHAPTER  XLIII. 

REFEREE'S   ABSENCE    OR   LIABILITY, 

§728.   (43a)    Referee's    absence    or       729.  Fees. 

disability.  730.  Special  referee. 

§728.     '(Sec.  43a)     Referee's  absence  or  disability.— When- 

'ever  the  office  of  a  referee  is  vacant,  or  its  occupant  is  absent 
*or  disqualified  to  act,  the  judge  may  act,  or  may  appoint  an- 
'  other  referee,  or  another  referee  holding  an  appointment  under 
'the  same  court  may,  by  order  of  the  judge,  temporarily  fill  the 
'  vacancy. '1 

§  729.  Fees. — The  judge  may,  at  any  time,  for  the  conven- 
ience of  parties  or  for  cause,  transfer  a  case  from  one  referee 
to  anotlier,2  and  when  so  transferred  the  judge  determines  the 
proportion  in  which  the  fee  and  commissions  are  to  be  divided,^ 
or,  in  case  the  reference  of  a  case  is  revoked,  he  determines 
what  part  of  the  fee  and  commissions  shall  be  paid  to  the 
referee.'* 

§  730.  Special  referee.— "When  the  referee  to  whom  a  case 
would  regularly  be  referred  is  absent  or  disqualified,  the  court 
may  act  or  appoint  a  special  referee  and  refer  the  case  to  him. 
This  may  be  done  before  the  answer  of  the  bankrupt  is  filed 
and  does  not  require  the  consent  or  approval  of  the  respondent 
or  his  attorney.^ 

1  Analogous  provision  of  act  of  other  fit  persons,  unless  said  court 

1867.    "Sec.  5.     .     .     .     Such  regis-  shall  deem  the  continuance  of  the 

ter  shall  be  subject  to  removal  by  particular  office  unnecessary." 

the   judge    of    the    district    court,  -  Sec.  22b,  act  of  1898. 

and    all    vacancies    occurring    by  3  Sec.  40b,  act  of  1898. 

such   removal,  or   by   resignation,  *  Sec.  40c,  act  of  1898. 

change  of  residence,  death  or  disa-  •''  Bray  v.  Cobb,  1  N.  B.  N.  209, 

bility.  shall  be  promptly  filled  by  91  F.  R.  102,  1  A.  B.  R.  153. 


469 


CHAPTER  XLIV. 


APPOINTMENT    OF   TRUSTEES. 


§731.   (44a)  Appointment. 

732.  Official  or  general  trustee. 

733.  Creditors  entitled  to  vote. 

734.  Election  of  trustee  in  bank- 

rupt's interest. 

735.  Majority,  number  and  amount 

required. 

736.  To  be  chosen   at  first  meet- 

ing. 

737.  Attorney  for  trustee  chosen 

at  same  time. 


738.  Appointment     by    judge     or 

referee. 

739.  Approval    or    disapproval   of 

trustee. 

740.  Vacancy  in  office  of  trustee. 

741.  No  trustee  to  be  appointed  in 

certain  cases. 

742.  Attorneys  may  vote  for  cred- 

itors. 

743.  Additional  trustees. 

744.  Removal  of  trustees. 

745.  Proceedings  for  removal. 


§731.  '(Sec.  44a)  Trustees'  appointment.— The  creditors 
'of  a  bankrupt  estate  shall,  at  their  first  meeting  after  the 
'adjudication  or  after  a  vacancy  has  occurred  in  the  office  of 
'trustee,  or  after  an  estate  has  been  reopened,  or  after  a  com- 
'  position  has  been  set  aside  or  a  discharge  revoked,  or  if  there 
'is  a  vacancy  in  the  office  of  trustee,  appoint  one  trustee  or 
'three  trustees  of  such  estate.  If  the  creditors  do  not  appoint 
'a  trustee  or  trustees  as  herein  provided,  the  court  shall  do  so.'^ 


1  Analogous  provision  of  act  of 
1867.  Sec.  13.  And  be  it  further 
enacted,  That  the  creditors  shall, 
at  the  first  meeting  held  after  due 
notice  from  the  messenger,  in  pres- 
ence of  a  register  designated  by  the 
court,  choose  one  or  more  assign- 
ees of  the  estate  of  the  debtor;  the 
choice  to  be  made  by  the  greater 
part  in  value  and  in  number  of 
the  creditors  who  have  proved 
their  debt.  If  no  choice  is  made 
by  the  creditors  at  said  meeting, 
the  judge,  or  if  there  be  no  oppos- 
ing interest,  the  register,  shall  ap- 
point one  or  more  assignees.  If  an 
assignee,  so  chosen  or  appointed, 
fails  within  five  days  to  express  in 
writing  his  acceptance  of  the  trust. 


the  judge  or  register  may  fill  the 
vacancy.  All  elections  or  appoint- 
ments of  assignees  shall  be  subject 
to  the  approval  of  the  judge;  and 
when  in  his  judgment  it  is  for  any 
cause  needful  or  expedient,  he  may 
appoint  additional  assignees,  or 
order  a  new  election. 

Sec.  18.  ...  '  That  the  court, 
after  due  notice  and  hearing,  may 
remove  an  assignee  for  any  cause 
which,  in  the  judgment  of  the 
court,  renders  such  removal  neces- 
sary or  expedient.  At  a  meeting 
called  by  order  of  the  court  in  its 
discretion  for  the  purpose,  or 
which  shall  be  called  upon  the  ap- 
plication of  a  majority  of  the  cred- 
itors   in    number   and    value,    the 


470 


Ch.  44 


TRUSTEES. 


471 


§  732.  Official  or  general  trustee.— No  official  trustee  shall 
be  appointed  by  the  court,  nor  any  general  trustee  to  act  in 
classes  of  cases.- 

§  733.  Creditors  entitled  to  vote.— A  creditor  to  participate 
in  and  vote  at  the  first  meeting  for  a  trustee  must  own  an  unse- 
cured claim,  provable  in  bankruptcy,  and  must  not  only  have 
proved  such  claim,  but  have  had  it  allowed  and  be  in  actual 
attendance.3  A  creditor  whose  claim  is  secured  or  has  priority 
cannot  vote  unless  such  claim  exceeds  the  security,^  and  then 
only  for  the  excess,  unless  the  security  is  on  a  third  person's 
property,  or  exempt  property,  when  he  may  vote  the  whole  ;^ 
or  for  so  much  of  his  debt  as  is  unsecured,  when  the  security 
applies  only  to  a  specific  portion  of  the  debt  f  and  a  preferred 

any,  with  the  same  powers  and 
duties  relative  thereto  as  if  they 
were  originally  chosen.  Any  for- 
mer assignee,  his  executors  or  ad- 
ministrators, upon  request,  and  at 
the  expense  of  the  estate,  shall 
make  and  execute  to  the  new  as- 
signee all  deeds,  conveyances,  and 
assurances,  and  do  all  other  lawful 
acts  requisite  to  enable  him  to  re- 
cover and  receive  all  the  estate. 
And  the  court  may  make  all  or- 
ders which  it  may  deem  expedient 
to  secure  the  proper  fulfillment  of 
the  duties  of  any  former  assignee, 
and  the  rights  and  interests  of  all 
persons  interested  in  the  estate. 

"Sec.  13.  .  .  .  If  the  assignee 
fails  to  give  the  bond  within  such 
time  as  the  judge  orders,  not  ex- 
ceeding ten  days  after  notice  to 
him  of  such  order,  the  judge  shall 
remove  him  and  appoint  another 
in  his  place." 

-'  G.  O.  XIV. 

3  In  re  Richards,  2  N.  B.  N.  R. 
1027,  103  F.  R.  849,  4  A.  B.  R.  631. 

4  Sec.  56b,  act  of  1898. 
-'  In  re  Stillwell,  7  N.  B.  R.  226, ' 

F.  C.  13448. 

c  In  re  Parker,  10  N.  B.  R.  82, 
F.  C.  10754. 


creditors  may,  with  consent  of 
[the]  court,  remove  any  assignee 
by  such  a  vote  as  is  hereinbefore 
provided  for  the  choice  of  assignee. 
An  assignee  may,  with  the  consent 
of  the  judge,  resign  his  trust  and 
be  discharged  therefrom.  Vacan- 
cies caused  by  death  or  otherwise 
in  the  office  of  assignee  may  be 
filled  by  appointment  of  the  court, 
or  at  its  discretion  by  an  election 
by  the  creditors,  in  the  manner 
hereinbefore  provided,  at  a  regular 
meeting,  or  at  a  meeting  called  for 
the  purpose,  with  such  notice 
thereof  in  writing  to  all  known 
creditors,  and  by  such  person  as 
the  court  shall  direct.  The  resig- 
nation or  removal  of  an  assignee 
shall  in  no  way  release  him  from 
performing  all  things  requisite  on 
his  part  for  the  proper  closing  up 
of  his  trust  and  the  transmission 
thereof  to  his  successors,  nor  shall 
it  affect  the  liability  of  the  prin- 
cipal or  surety  on  the  bond  given 
by  the  assignee.  When,  by  death 
or  otherwise,  the  number  of  as- 
signees is  reduced,  the  estate  of 
the  debtor  not  lawfully  disposed 
of  shall  vest  in  the  remaining  as- 
signee or  assignees,  and  the  per- 
sons selected  to  fill  vacancies,  if 


472  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  44 

creditor  can  only  vote  by  surrendering  such  preference^  A 
creditor  inhibited  from  proving  his  debt  cannot  vote  for  the 
trustee,^  nor  a  secured  creditor  who  sold  his  security,  bid  it 
in  himself  and  proved  his  claim  for  the  difference  between 
the  face  of  the  claim  and  the  amount  bid  at  the  sale.*^  Firm 
creditors  only  can  vote  for  a  trustee  for  the  firm.^"  The  mere 
filing  of  objections  to  a  claim  should  not  exclude  a  creditor 
from  voting,  if  he  is  qualified,  but  the  action  of  the  referee  so 
excluding  him  will  not  be  reviewed  when  no  objection  is  made 
to  the  election  and  no  facts  presented  raising  the  question 
of  the  rights  of  creditors  in  such  cases.^^ 

§  734.  Election  of  trustee  in  bankrupt's  interest.— The  trus- 
tee is  the  representative  of  the  creditors  and  in  his  capacity 
as  such  he  is  frequently  required  to  act  in  opposition  to  the 
bankrupt.  The  authorities  under  the  present  law,  as  well  as 
under  the  act  of  1867,  are  uniform  in  maintaining  the  proposi- 
tion that  the  bankrupt  has  no  right  to  influence  nor  has  he  a 
voice  in  the  choice  of  a  trustee.  Accordingly  interference  by 
the  bankrupt,  the  voting  of  claims  in  his  interest  or  at  his 
direction  should  be  discountenanced  and  held  to  invalidate  a 
choice  of  trustee  thus  secured.^-  The  referee  is  warranted, 
therefore,  when  presiding  at  the  first  meeting  of  creditors  to 
determine  whether  one  holding  a  proxy  obtained  in  the  interest 
of  the  bankrupt  should  be  permitted  to  vote  for  a  trustee  of 
his  choice,  and  if  convinced  that  the  party  offering  to  qualify 
as  a  voter  does  so  in  the  interest  of  the  bankrupt,  he  may  be 
refused  permission  to  vote,  and  should  not  be  counted  as  pres- 
ent and  necessary  for  a  choice  of  trustee.^s     "Where  a  vote  is 

7  Sees.  56,  57,  act  of  1898 ;  In  re  12  In  re  McGill,  106  F.  R.  57,  5 
Eagles  &  Crisp,  2  N.  B.  N.  R.  462,  A.  B.  R.  155.  aff'g  104  F.  R.  292,  4 
3  A.  B.  R.  733,  99  F.  R.  696;  In  re  A.  B.  R.  782;  In  re  Wooten,  118  F. 
Richards,  2  N.  B.  N.  R.  1027,  103  R.  670;  In  re  Lewensohn,  98  F.  R. 
F.  R.  849,  4  A.  B.  R.  631;  In  re  576,  3  A.  B.  R.  299;  In  re  Lemont, 
Malino,  118  F.  R.  368,  8  A.  B.  R.  2  N.  B.  N.  R.  291 ;  In  re  Wetmore, 
205.  F.  C.  17466;  In  re  Bliss,  F.  C.  1543; 

8  In  re  Stevens,  4  N.  B.  R.  122,  4  In  re  Dayville  Woolen  Co.,  114  F. 
Ben.  513,  F.  C.  13391.  R.  674,  8  A.  B.  R.  85;   In  re  Rek- 

9  In  re  Hunt,  17  N.  B.  R.  17205,  ersdres,  108  F.  R.  206,  5  A.  B.  R. 
F.  C.  6881.  811;  In  re  Henschel,  109  F.  R.  865, 

10  In  re  Scheiffer,  2  N.  B.  R.  179,  6  A.  B.  R.  305;  In  re  Morton,  118 
F.  C.  12445;  see  In  re  Beck,  110  P.  F.  R.  908;  but  see  In  re  Noble,  F. 
R.  140,  6  A.  B.  R.  554.  C.  10282. 

11  In  re  Kelly  Dry  Goods  Co.,  i3  In  re  McGill,  supra;  In  re 
102  F.  R.  747,  4  A.  B.  R.  528.  Dayville  Woolen  Co.,   supra. 


Ch.  44  TRUSTEES.  473 

cast  by  a  relative  of  the  bankrupt,  the  court  should  convince 
itself  before  approving  the  election,  that  the  trustee  so  elected 
is  not  in  the  interest  of  the  bankrupt,  but  will  perform  his 
duties  without  fear  or  favor. 

§  735.  Majority  in  number  and  amount  required.— A  major- 
ity vote  in  number  and  amount  of  claims  of  all  creditors  whose 
claims  have  been  allowed  and  are  present  is  required  ;^^  so 
that  if  there  is  a  majority  in  number  voting  for  one  person  and 
a  majority  in  amount  for  another  there  is  no  election,^-^  as 
where  fifty  creditors  representing  about  $1,000. of  claims  vote 
for  one  and  twenty  creditors  representing  about  $10,000  voted 
for  another.^ "^  If  only  one  creditor  prove  his  debt,  he  has  the 
right  to  choose  the  trustee.^  ^ 

§  736.  To  be  chosen  at  the  first  meeting.— The  trustee  is  to 
be  chosen  at  the  first  meeting  of  creditors  ;^^  and  the  vote 
should  be  taken  at  the  earliest  moment  praeticablci*^  The 
referee  will  not  be  held  to  have  abused  his  discretion  in  declin- 
ing to  postpone  the  election,  on  holding  proxies  disqualified, 
in  order  that  new  proxies  may  be  obtained.-^  Where  an 
adjudication  has  been  made  and  notice  of  the  first  meeting 
given  and  the  bankrupt  files  a  second  petition  in  which  the 
same  debts  are  set  out,  the  trustee  should  be  chosen  in  the  first 
proceeding.^i  Tha  creditors'  powers  are  limited  to  voting 
for  the  trustee  f^  and,  after  the  adjournment  of  the  meeting,  a 
creditor  will  not  be  permitted  to  change  his  vote,  on  the  ground 
of  his  own  mistake  so  as  to  give  the  referee  an  opportunity  to 
appoint  the  trustee.-^ 

It  is  the  duty  of  the  referee  to  notify  the  trustee  of  his 
appointment.^^ 

§  737.  Attorney  for  trustee  selected  at  same  time.— While 
there  is  no  warrant  in  the  law  or  orders,  it  has  been  held  on 

1^  Sec.    56a,  act  of   1898;    In   re  i9  in     re     Lake     Superior     Ship 

Mackellar,  116  F.  R.  547,  8  A.  B.  Canal,  R.   R.  &  Iron  Co,,  7  N.  B. 

R.  669;    In  re  Henschel,  113  F.  R.  R.  376,  F.  C.  7997. 

443,  7  A.  B.  R.  662.  20  in  re  McGill,  supra. 

i"'  In  re  Richards,  2  N.  B.  N.  R.  ^i  In  re  Wielarskie,   4   N.   B.   R. 

1027,  103  F.  R.  849,  4  A.  B.  R.  631.  130,  4  Ben.  468,  F.  C.  17619. 

10  In  re  Pearson,  2  N.  B.  R.  151,  22  in  re  Campbell,  17  N.  B.  R.  4, 

F.  C.  10878.  3  Hughes,  276.  F.  C.  2348. 

17  In  re  Haynes,  2  N.  B.  R.  78,  F.  ss  In  re  Scheiffer,  2  N.  B.  R.  179, 

C.  6269.  F.  C.  12445. 

1"  In  re  .Jones,  2  N.  B.  R.  20.  F.  24  g.  O.  XVI. 
C.  7447. 


474  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  44 

several  occasions  that  the  selection  of  an  attorney  for  the 
trustee  by  the  creditors  will  be  approved.--^'  The  custom  fol- 
lowed as  a  rule,  however,  is  for  the  trustee  to  select  his  own 
counsel. 

§  738.  Appointment  of  trustee  by  judge  or  referee.— Where 
the  creditors  fail  to  appoint  at  the  first  meeting,-*'  or  where 
the  referee 's  time  is  consumed  in  maneuvering  to  elect  a  special 
favorite,  or  to  elect  a  particular  trustee  for  merely  personal 
objects,^^  or  there  is  not  a  majority  in  number  and  amount  of 
claims  for  a  candidate,-^  or  where  the  trustee  offers  to  pay 
certain  creditors  in  full  for  their  support,^^  the  judge  or  referee 
may  appoint  the  trustee.  If  there  is  a  vacancy  in  the  office 
of  trustee  on  account  of  the  disapproval  of  the  election  by  the 
referee,  the  court  or  referee  can  appoint  another  only  after  the 
failure  by  the  creditors  to  appoint  after  a  full  opportunity.^*' 

§739.  Approval  or  disapproval  of  trustee.— The  creditor's 
selection  of  a  trustee  is  subject  to  the  approval  or  disapproval 
of  the  judge  or  referee,^!  and  when  they  fail  to  approve,  they 
have  no  power  to  appoint  a  trustee,  but  another  creditors' 
meeting  must  be  called  to  make  the  selection,  the  same  as  in 
the  case  of  a  vacancy.^^  Those  seeking  confirmation  of  trus- 
tees appointed  by  creditors  in  case  of  a  contest  are  the  moving 
parties  and  should  file  such  papers  as  they  see  fit  in  support 
of  the  motion.^3 

§  740.  Vacancy  in  office  of  trustee.— It  is  evidently  the  intent 
of  the  act  to  give  the  creditors  the  control  of  the  selection  of 
the  trustee  not  only  in  the  original  election  at  the  first  meet- 
ing, but  (1)  after  a  vacancy  has  occurred  in  the  office  of 
trustee;    (2)   after  an  estate  has  been  reopened;   (3)   after  a 

25  In  re  Smith,  1  N.  B.  N.  136,  1         28  in  re  Henschel,  109  F.  R.  861, 

A.  B.   R.   37;    In   re   Little   River     6  A.  B.  R.  305. 

Lumber  Co.,  101  F.  R.  558,  3  A.  B.  29  in  re  Haas,  8  N,  B.  R.  189,  F. 

R.  682;  but  see  In  re  Abram,  103  C.  5884. 

F.  R.  272.  3  N.  B.  N.  R.  28,  4  A.  B.  so  in  re  Hare,  119  F.  R.  246. 

R.  575.  31  G.  O.  XIII;  Morris  v.  Swartz. 

2GAnon.   1   N.   B.   N.    2;     In    re  10  N.  B.  R.  305. 

Brooke,  2  N.  B.  N.  R.  680,  4  A.  B.  3-  in  re  MacKellar,  supra ;  In  re 

R.  50,  100  F.  R.  32;  In  re  MacKel-  Lewensohn,  98  F.  R.  576,  3  A.  B.  R. 

lar,  116  F.  R.  547,  8  A.  B.  R.  669;  299;  In  re  Hare,  119  F.  R.  246. 

In  re  Newton,  107  F.  R.  429,  6  A,  ss  in   re   Am.   Waterproof   Cloth 

B.  R.  52;  see  In  re  Sumner,  4  A.  Co.,  3  N.  B.  R.  74,  1  Ben.  526,  F. 
B.  R.  123.  C.  318. 

27  In  re  Kuffler,  2  N.  B.  N.  R.  29, 
3  A.  B.  R.  162. 


Ch.  4J:  TRUSTEES— APPOINTMENT.  475 

composition  has  been  set  aside;  (4)  or  a  discharge  revoked,  or 
(5)  "if  there  is  a  vacancy  in  the  office  of  trustee;"  which 
seems  to  provide  for  all  possible  cases.  There  is  a  vacancy  in 
the  office  of  trustee  whenever  that  office  is  unoccupied  or  un- 
filled, as  when  the  trustee  chosen  refuses  the  office  or  fails  to 
qualify,  or  is  disapproved  by  the  court,  whether  the  office  has 
been  previously  filled  or  not,  and  in  such  case  the  judge  or 
referee  cannot  appoint  until  an  opportunity  has  been  given 
the  creditors  for  a  new  election  if  practicable.^^  After  an 
estate  once  closed  has  been  reopened,  the  creditors  have  the 
same  power  and  authority  with  respect  to  the  appointment 
of  a  trustee  as  is  conferred  upon  them  at  the  first  meeting  after 
the  adjudication.-^^  Where  a  trustee  dies  before  qualifying 
and  while  the  first  meeting  of  creditors  is  still  open,  having 
been  adjourned  for  the  bankrupt's  examination,  it  is  as  though 
no  trustee  had  been  chosen  and  the  creditor  who  chose  him 
may  choose  another.^^ 

In  the  case  of  the  vacancy  in  the  position  of  one  of  three 
trustees,  a  third  should  be  appointed,  since  there  must  be 
either  one  or  three  trustees. 

§  741.  No  trustee  to  be  appointed.— If  the  schedules  of  a 
voluntary  bankrupt  disclose  no  assets  and  if  no  creditor  ap- 
pears at  the  first  meeting,  no  trustee  should  be  appointed  ;^^ 
but,  if  assets  are  subsequently  discovered  one  should  be  ap- 
pointed. If  at  the  first  meeting  bankrupt  announces  his  pur- 
pose to  offer  a  composition,  the  appointment  of  a  trustee  may 
be  postponed  to  give  an  opportunity  to  file  such  composition, 
and,  when  filed,  the  appointment  may  be  further  postponed 
until  the  composition  is  refused  ;3^  or  if  approved,  the  necessity 
for  a  trustee,  of  course,  ceases  to  exist. 

§742.  Attorneys  may  vote  for  creditors.— Creditors  may  be 
represented  by  their  attorneys  in  the  voting  for  trustees;  but 
such  attorneys  should  produce  and  file  with  the  referee  to  be 
made  part  of  the  record  in  the  case,  a  written  authority  from 
their  principals. ^^ 

34  In  re  Lewensohn,  2  N.  B.  N.  R.  si  G.  0.  XV;  In  re  Levy.  101  F. 
315,  3  A.  B.  R.  299,  98  F.  R.  576;      R.  247. 

In  re  MacKellar,  116  F.  R.  547,  8         38  in  re  Rung  Bros.,  1  N.  B.  N. 
A.  B.  R.  669.  406,  2  A.  B.  R.  620. 

33  In  re  Newton,  107  F.  R.  429,  6  39  in  re  Eagles  &  Crisp,  2  N.  B. 
A.  B.  R.  52.  N.  R.  462,  3  A.  B.  R.  733,  99  F.  R. 

30  In  re  Wright,  1  N.  B.  N.  405,  696;  In  re  Blankfein,  2  N.  B.  N.  R. 
2  A.  B.  R.  497. 


476  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  44 

§  743,  Additional  trustees.— The  act  authorizes  the  appoint- 
ment of  one  or  three  trustees;  and,  if  it  should  be  found  that 
one  cannot  properly  attend  to  the  affairs  of  the  estate,  there 
is  no  reason  why  additional  trustees  should  not  be  chosen  sub- 
sequently, but,  in  that  case,  a  majority  would  be  required  to 
perform  any  act  required  of  them  as  trustees.  Under  the  act 
of  1867,  an  additional  trustee  was  obtainable  upon  a  petition 
to  the  court  showing  cause  for  his  appointment,**^  and  the  same 
course  would  be  proper  now;  but  a  resolution  of  creditors 
nominating  a  committee  to  supervise  the  trustee  will  not  be 
approved.*^ 

§  744.  Removal  of  trustee.— Courts  of  bankruptcy  have 
jurisdiction  upon  complaints  of  creditors,  to  remove  trustees 
for  cause  upon  hearings  and  after  notice  to  them,-*^  ^j^g  power 
being  vested  in  the  judge  alone  and  not  in  the  referee.*^  If 
the  creditors  at  their  first  meeting  do  not  choose  a  trustee, 
nor  request  that  an  election  be  had,  nor  nominate  a  candidate 
for  the  office,  and  the  referee,  presiding  at  the  meeting,  ap- 
points one,  his  appointment  will  not  be  set  aside  merely 
because  the  creditors  desire  a  different  person.**  The  removal 
of  a  trustee  rests  in  the  discretion  of  the  court,  but  it  is  a  legal 
discretion  and  cause  must  be  shown,  as  gross  neglect,  mis- 
management, fraud,  or  concealment  of  material  facts,  incom- 
petency or  want  of  integrity,*^  and  the  election  of  a  trustee 
will  not  be  set  aside  on  account  of  any  irregularity  in  a  claim 
when  its  exclusion  would  not  have  affected  the  result  ;*6  nor 
will  a  trustee  be  removed  in  the  absence  of  imputation  upon 
his  capacity  or  integrity.*'^    See  post,  §  750. 

49,  3  A.  B.  R.  165,  97  F.  R.  191;  B.  R.  162,  97  F.  R.  187;  Falter  v. 

In  re  Richards,  2  N.  B.  N.  R.  1027,  Reinhard,  2  N.  B.  N.  R.  1119,  104 

103  F.  R.  849;  but  see  In  re  Pauly,  F.  R,  292. 

1  N.  B.  N.  405,  2  A.  B.  R.  334;   In  «  In  re  Blodgett,  5  N.  B.  R.  472, 

re  Brown,  2  N.  B.  N.  R.  590.  F.  C.  1552;   In  re  Mallery,  4  N.  B. 

40  In  re  Overton,  5  N.  B.  R.  366,  R.  38,  F.  C.  8990;  In  re  Morse,  7 
F.  C.  10625.  N.  B.  R.  56,  F.  C.  9852;  In  re  Price, 

41  In  re  Stillwell,  2  N.  B.  R.  104,  4  N.  B.  R.  137,  F.  C.  11409;  In  re 
F.  C.  13447.  Sacchi,  6  N.  B.  R.  398,  F.  C.  12200; 

42  Sec.  2    (17),  act  of  1898.  In  re  Perkins,  8  N.  B.  R.  56,  F.  C. 

43  G.  O.  XIII;  In  re  Stokes,  1  N.  10982. 

B.  R.  130,  F.  C.  13475.  46  in  re  Jackson.  14  N.  B.  R.  449, 

44  In   re  Brooke,   2  N.  B.  N.  R.      7  Biss.  280,  F.  C.  7123. 

680,  4  A.  B.  R.  50,  100  F.  R.  432;  47  in  re  Lewensohn,  2  N.  B.  N.  R. 

In  re  Kuffler,  2  N.  B.  N.  R.  29,  3  A.     315,  3  A.  B.  R.  299,  98  F.  R.  576; 


L'H.  i4  TRUSTEES— REMOVAL.  477 

While  the  statute  is  silent  upon  the  point  as  to  whether  a 
trustee  may  resign  his  office  after  qualifying,  no  objection  ap- 
pears to  exist  to  granting  such  request,  unless  the  interests 
of  the  estate  would  be  injuriously  affected,  in  which  event  the 
court  would  undoubtedly  have  the  power  to  compel  the  trustee 
to  proceed  with  its  administration.  In  any  event  the  resigna- 
tion would  not  be  complete  until  acceptance. 

§  745.  Proceedings  for  removal.— If  it  is  desired  to  have  a 
trustee  removed,  a  petition  should  be  presented  setting  forth 
the  grounds  on  which  it  is  sought  to  have  him  removed.^^ 

In  re  McGlynn,  2  Lowell  127,  16  P.  1  N.  B.  R.  276,  5  F.  C.  810;    In  re 

C.  122;   In  re  Funkenstein,  9  F.  C.  Dewey,  4  N.  B.  R.  139,  F.  C.  3849. 
1004;  In  re  Barrett,  2  N.  B.  R.  533,  «  In  re  Hicks,  19  N.  B.  R.  449, 

2  F.  C.  909;  In  re  Grant,  2  N.  B.  F.    C.  6457. 
R.  35,  F.  C.  5292  •  In  re  Clairmont, 


CHAPTER  XLV. 

QUALIFICATIONS    OF    TRUSTEES. 

§746.   (45a)  Qualifications.  748.  Relationship  not  a  disquali- 

747.  Residence  or  citizenship.  fication. 

749.  Grounds  of  disqualification. 

§746,  '(Sec.  45a)  Qualifications  of  trustees.— Trustees 
'may  be  (1)  individuals  who  are  respectively  competent  to 
'perform  the  duties  of  that  office,  and  reside  or  have  an  office  in 
'the  judicial  district  within  which  they  are  appointed,  or  (2) 
'corporations  authorized  by  their  charters  or  by  law  to  act  in 
'such  capacity  and  having  an  office  in  the  judicial  district 
'within  which  they  are  appointed. '^ 

§  747.  Residence  or  citizenship.— Neither  residence  nor 
citizenship  is  required,  but  merely  that  the  proposed  trustee 
have  an  office  within  the  judicial  district  of  which  his  bank- 
ruptcy district  is  a  part.^ 

§  748.  Relationship  not  a  disqualification.— The  mere  fact  of 
relationship  on  the  part  of  the  proposed  trustee  to  the  bank- 
rupt or  a  creditor  will  not  necessarily  disqualify  him,^  if  he  is 
otherwise  qualified  and  satisfactory  to  the  creditors^  and  the 
court  is  satisfied  that  he  will  perform  the  duties  without  fear 
or  favor,  though  as  a  rule  such  selections  should  be  discounte- 
nanced.* A  son  of  one  member  of  a  bankrupt  firm,  who,  with 
the  other  members  of  bankrupt's  family,  have  presented  claims 
against  the  estate,  would  be  disqualified.^  The  fact  that  the 
trustee  chosen  by  a  majority  of  the  creditors  has  business  rela- 
tions with  or  is  a  blood  relation  of  the  referee,  would  not  dis- 

1  Analogous  provision  of  act  of  F.  C.  6231;  In  re  Loder,  2  N.  B.  R. 

1867.    "Sec.  18.     .     .     .     No  person  161,  F.  C.  8459. 

who  has   received   any   preference  s  in  re  Zinn,  4  N.  B.  R.  145,  4 

contrary  to  the  provisions  of  this  Ben.  500,  F.  C.  18215;  s.  c.  4  N.  B. 

act  shall  vote  for  or  be  eligible  as  R.  123,  F.  C.  18216;   In  re  Powell, 

assignee.     ..."  2  N.  B.  R.  17,  F.  C.  11354. 

^  In  re  Woodbury,  2  N.  B.  N.  R.  *  See  §  734,  ante. 

284,  98  F.  R.  833,  3  A.  B.  R.  457;  •';  In  re  Bogert,  3  N.  B.  R.  161,  F. 

see  In  re  Havens,  1  N.  B.  R.  126,  C.  1600. 

478 


Ch.  45  COMPENSATION    OF    TRUSTEES.  479 

qualify  him  f  nor  that  he  is  attorney  for  the  creditors,  if  other- 
wise unobjectionableJ 

§  749.  Grounds  of  disqualification.— The  choice  of  the  credi- 
tors should  not  be  interfered  with  on  slight  grounds  and,  imless 
incompetency,  want  of  capacity  or  integrity  or  lack  of  an 
office  or  residence  within  the  judicial  district  is  shown,  the 
appointment  should  be  approved.^  The  fact  that  one  solicits 
the  appointment  will  not  necessarily  operate  as  a  disqualifica- 
tion;^ but  where  proxies  to  vote  are  obtained  in  the  bankrupt's 
interest  or  at  his  solicitation  and  for  the  purpose  of  electing  a 
trustee  who  is  the  bankrupt's  choice  upon  objection  to  such 
votes,  the  proxies  should  be  rejected  ;i'^  nor  should  one  bank- 
rupt be  appointed  trustee  of  the  estate  of  another  bankrupt  ;ii 
or  a  director  of  a  bank  in  whose  favor  bankrupt  confessed 
judgment;^-  or  one  who  was  for  years  bankrupt's  bookkeeper 
and  voted  under  powers  of  attorney  from  different  creditors,^^ 
or  one  whose  interest  is  antagonistic  to  that  of  the  creditors. 

6  In  re  Brown,  2  N.  B.  N.  K.  590.         '■>  In  re  Brown.  2  N.  B.  N.  R.  590; 

'  In  re  Barrett,  2  N.  B.  R.  165,  but  see  In  re  "a  bankrupt,"  2  N. 

2   Hughes,    44,   F.    C.   1043;    In   re  B.  R.  100;   In  re  Smith,  1  N.  B.  R. 

Clairmont,  1  N.  B.  R.  42,  1  Lowell  25,  2  Ben.  133,  F.  C.  12971;    In  re 

230.  F.  C.  2781;    In  re  Lawson.   2  Haas,  8  N.  B.  R.  189.  F.  C.  5884. 
N.  B.  R.  44,  F.  C.  8150.  lo  Falter  v.  Reinhard,  104  F.  R. 

8  In  re  Lewensohn,  2  N.  B.  N.  R.  292.  2  N.  B.  N.  R.  1119. 
315,  3  A.  B.  R.  299,  98  F.  R.  576;  n  In   re   Smith,   1   N.   B.   N.   136, 

In  re  McGlynn,  2  Lowell  127,  16  F.  1  A.  B.  R.  37. 

C.   122;    In   re  Funkenstein,  F.   C.         12  In  re  Powell,  2  N.  B.  R.  17,  F. 

1004;    In    re   Barrett,    2   N.   B.    R.  C.   11354. 

533,  2  F.  C.  909;  In  re  Grant,  2  N.         is  in    re   Wetmore,   16   N.    B.    R. 

B.  R.  35,  F.  C.  5292;    In  re  Clair-  514,  F.  C.  17466. 
mont,  1  N.  B.  R.  276,  5  F.  C.  810. 


CHAPTER  XLVI. 

DEATH    OR   REMOVAL  OF   TRUSTEES. 

§750.   (46a)    Death   or   removal   of       751.  Effect  of  death  or  removal  of 
trustee.  trustees. 

§  750.  *  (Sec.  46a)  Death  or  removal  of  trustees.— The 
'death  or  removal  of  a  trustee  shall  not  abate  any  suit  or  pro- 
'ceeding  which  he  is  prosecuting  or  defending  at  the  time  of  his 
'death  or  removal,  but  the  same  may  be  proceeded  with  or 
'defended  by  his  joint  trustee  or  successor  in  the  same  manner 
'as  though  the  same  had  been  commenced  or  was  being  de- 
' fended  by  such  joint  trustee  alone  or  by  such  successor. '^ 

§  751.  Effect  of  death  or  removal  of  trustee.— This  provis- 
ion prevents  the  death  or  removal  of  a  trustee  from  interfering 
with  the  progress  of  the  administration  of  the  estate  and  avoids 
delay  and  additional  expense,  which  would  be  incurred  if  his 
successor  had  to  institute  new  suits,  or  proceedings,  besides 
the  possible  interposition  of  the  bar  of  the  statute  of  limita- 
tion. 


1  Analogous  provision  of  act  of 
1867.  "Sec.  14.  .  .  .  and  no  suit 
in  which  the  assignee  is  a  party 
shall  be  abated  by  his  death  or  re- 
moval from  office;  but  the  same 
may  be  prosecuted  and  defended 
by  his  successor,  or  by  the  surviv- 
ing or  remaining  assignee,  as  the 
case  may  be. 

"Sec.  15.     .     .     .     No  suit  pend- 


ing in  the  name  of  the  assignee 
shall  be  abated  by  his  death  or  re- 
moval; but  upon  the  motion  of  the 
surviving  or  remaining  or  new  as- 
signee, as  the  case  may  be,  he  shall 
be  admitted  to  prosecute  the  suit 
in  like  manner  and  with  like  effect 
as  if  it  had  been  originally  com- 
menced by  him." 


480 


CHAPTER  XL VII. 

DUTIES   OF    TRUSTEES. 

§752.   (47a)   Duties  in  general.  762.  Trustee  may  sue. 

753.  Acceptance    or    rejection    of       763.  Property  and  estates. 

trust.  764.  Creditors   must  act  through 

754.  Preparation  of  inventory,  trustee. 

755.  Accounts  and  reports.  765.  What  the  trustee  should  not 

756.  To  furnish  information.  do. 

757.  Deposit     and      payment  of       766.  Power  of  trustee. 

money.  767.  b.   Concurrence   of   majority 

758.  Dividends.  necessary. 

759.  Exemptions.  768.  Concurrence    of   two    out    of 

760.  Collect  and  reduce  estate  to  three  trustees. 

money.  769.  c.  Record  of  trustee's  title. 

761.  Employment  of  attorney.  770.  When  record  to  be  made. 

§752.  '(Sec.  47a)  Trustees'  duties  in  general.— Trustees 
'shall  respectively 

'  (1)  Account  for  and  pay  over  to  the  estates  under  their  con- 
*trol  all  interest  received  by  them  upon  property  of  such 
*  estates ; 

'  (2)  Collect  and  reduce  to  money  the  property  of  the  estates 
'for  which  they  are  trustees,  under  the  direction  of  the  court, 
'and  close  up  the  estate  as  expeditiously  as  is  compatible  with 
'  the  best  interests  of  the  parties  in  interest ; 

'  (3)  Deposit  all  money  received  by  them  in  one  of  the  desig- 
'nated  depositories; 

'  (4)  Disburse  money  only  by  check  or  draft  on  the  deposi- 
'tories  in  which  it  has  been  deposited; 

'  (5)  Furnish  such  information  concerning  the  estates  of 
'which  they  are  trustees  and  their  administration  as  may  be 
'requested  by  parties  in  interest; 

'  (6)  Keep  regular  accounts  showing  all  amounts  received 
'  and  from  what  sources  and  all  amounts  expended  and  on  what 
'  accounts ; 

'  (7)  Lay  before  the  final  meeting  of  the  creditors  detailed 
'statements  of  the  administration  of  the  estates; 

'  (8)  Make  final  reports  and  file  final  accounts  with  the 
'courts  fifteen  days  before  the  days  fixed  for  the  final  meet- 
'ings  of  the  creditors; 

31  481 


483 


THE    NATIONAL   BANKRUPTCY   LAW. 


ClI.  47 


'  (9)  Pay  dividends  within  ten  days  after  they  are  declared 
*by  the  referees; 

'  (10)  Report  to  the  courts,  in  Avriting,  the  condition  of  the 
'estates  and  the  amounts  of  money  on  hand,  and  such  other 
'details  as  may  be  required  by  the  courts,  within  the  first 
'month  after  their  appointment  and  every  two  u)onths  there- 
'  after,  unless  otherwise  ordered  by  the  courts ;  and 

'(11)  Set  apart  the  bankrupt's  exemptions  and  report  the 
'items  and  estimated  value  thereof  to  the  court  as  soon  as 
'practicable  after  their  appointment. '^ 

1  Analogous  provision  of  act  of     or  intended  to  be  assigned,  under 


1867.  "Sec.  14.  .  .  .  The  as- 
signee shall  have  authority,  under 
the  order  and  direction  of  the 
court,  to  redeem  or  discharge  any 
mortgage  or  conditional  contract, 
or  pledge  or  deposit,  or  lien  upon 
any  property,  real  or  personal, 
whenever  payable,  and  to  tender 
due  performance  of  the  condition 
thereof,  or  to  sell  the  same  subject 
to  such  mortgage,  lien  or  other  en- 
cumbrances. The  assignee  shall 
immediately  give  notice  of  his  ap- 
pointment, by  publication  at  least 
once  a  week  for  three  successive 
weeks  in  such  newspapers  as  shall 
for  that  purpose  be  designated  by 
the  court,  due  regard  being  had  to 
their  circulation  in  the  district  or 
In  that  portion  of  the  district  in 
which  the  bankrupt  and  his  cred- 
itors shall  reside,  and  shall,  with- 
in six  months,  cause  the  assign- 
ment to  him  to  be  recorded  in 
every  registry  of  deeds  or  other 
office  within  the  United  States 
where  a  conveyance  of  any  lands 
owned  by  the  bankrupt  ought  by 
law  to  be  recorded;  and  the  rec- 
ord of  such  assignment,  or  a  duly 
certified  copy  thereof,  shall  be  evi- 
dence thereof  in  all  courts. 

"Sec.  15.  .  .  .  That  the  as- 
signee shall  demand  and  receive, 
from  any  and  all  persons  holding 
the  same,  all  the  estate  assigned. 


the  provisions  of  this  act;  and  he 
shall  sell  all  such  unencumbered 
estate,  real  and  personal,  which 
comes  to  his  hands,  on  such  terms 
as  he  thinks  most  for  the  interest 
of  the  creditors;  but  upon  peti- 
tion of  any  person  interested,  and 
for  cause  shown,  the  court  may 
make  such  order  concerning  the 
time,  place,  and  manner  of  sale 
as  will,  in  its  opinion,  prove  to  the 
interest  of  the  creditors;  and  the 
assignee  shall  keep  a  regular  ac- 
count of  all  money  received  by 
him  as  assignee,  to  which  every 
creditor  shall,  at  reasonable  times, 
have  free  resort.     .     .     . 

"Sec.  16.  .  .  .  That  the  as- 
signee shall  have  the  like  remedy 
to  recover  all  said  estate,  debts 
and  effects  in  his  own  name,  as  the 
debtor  might  have  had  if  the  de- 
cree in  bankruptcy  had  not  been 
rendered  and  no  assignment  had 
been  made.     .     .     . 

"Sec.  17.  .  .  .  That  the  as- 
signee shall,  as  soon  as  may  be 
after  receiving  any  money  belong- 
ing to  the  estate,  deposit  the  same 
in  some  bank  in  his  name  as  as- 
signee, or  otherwise  keep  it  dis- 
tinct and  apart  from  all  other 
money  in  his  possession;  and 
shall,  as  far  as  practicable,  keep 
all  goods  and  effects  belonging  to 
the  estate  separate  and  apart  from 


Ch.  47  TRUSTEES'    DUTIES.  483 

§  753.  Acceptance  or  rejection  of  trust.— The  trustee  is  re- 
quired forthwith,  on  reeeii>t  of  notice  of  his  appointment,  to 
notify  the  referee  of  his  acceptance  or  rejection  of  the  trust.- 

§  754.  Preparation  of  inventory.— Immediately  on  entering 
upon  his  duties  he  should  prepare  a  complete  inventory  of  all 
the  property  of  the  bankrupt  that  comes  into  his  possession.^ 

§  755.  Accounts  and  reports.— He  is  required  to  keep  regu- 
lar accounts  showing  all  amounts  received  and  from  what 
sources  and  all  amounts  expended  and  on  what  accounts;  to 
report  to  the  court,  in  writing,  the  condition  of  the  estate  and 
the  amounts  of  money  on  hand,  and  such  other  details  as  may 
be  required  by  the  court,  within  the  first  month  after  his  ap- 
pointment and  every  two  months  thereafter,  unless  otherwise 
ordered  by  the  court ;  to  keep  separate  accounts  of  partnership 
property  and  of  the  property  belonging  to  the  individual  part- 
ners; to  lay  before  the  final  meeting  of  the  creditors  detailed 
statements  of  the  administration  of  the  estate;  and  to  make 
final  report  and  file  final  account  with  the  court  fifteen  days 
before  the  day  fixed  for  the  final  meeting  of  the  creditors.  All 
his  accounts  must  be  referred  as  of  course  to  the  referee  for 
audit,  unless  otherwise  specially  ordered  by  the  court."*     In 

all  other  goods  in  his  possession,  the  first,  as  may  be  ordered  by  the 

or      designated      by      appropriate  court. 

marks,  so  that  they  may  be  easily  "Sec.  28.     .     .     .     If  at  any  time 

and  clearly  distinguished,  and  may  there  shall  be  in  the  hands  of  the 

not  be  exposed  or  liable  to  be  taken  assignee  any  outstanding  debts  or 

as  his  property  or  for  the  payment  other   property,    due   or   belonging 

of  his  debts.   "When  it  appears  that  to  the  estate,  which  cannot  be  col- 

the  distribution  of  the  estate  may  lected  and  received  by  the  assignee 

be   delayed  by  litigation  or  other  without  unreasonable  or  inconven- 

cause,   the    court   may   direct   the  lent  delay  or  expense,  the  assignee 

temporary      investment      of      the  may,  under  direction  of  the  court, 

money  belonging  to  such  estate  in  sell  and  assign  such  debts  or  other 

securities   to   be   approved  by  the  property   in   such   manner   as   the 

judge  or  a  register  of  said  court,  court  shall  order." 

or  may  authorize  the  same  to  be  -  G.  0.  XVI. 

deposited  in  any  convenient  bank  •''  G.  0.  XVII. 

upon  such  interest,  not  exceeding  ^  g.  0.  XVII.   Form  49  and   50 ; 

the   legal   rate,    as   the   bank   may  In  re  Bazinsky,  Mitchell  &  Co.,  1 

contract  with  the  assignee  to  pay  N.  B.  N.  360,  2  A.  B.  R.  243;  In  re 

thereon.   He  shall  give  written  no-  Carr,  116  F.  R.  556,  8  A.  B.  R.  635; 

tice    to    all    known    creditors,    by  but  see  In  re  Hicks,  19  N.   B.  R. 

mail  or  otherwise,  of  all  dividends,  449,  F.  C.  6457:  In  re  Hubbel,  9  N. 

and  such  notice  of  meetings,  after  B.  R.  523,  F.  C.  6820;   In  re  Clark, 


484  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  47 

casi'  he  neglects  to  file  any  rei)ort  or  statement  reciuired  by  the 
act,  or  by  any  general  rule  in  bankruptcy,  within  five  days 
after  the  same  shall  be  due,  the  referee  must  make  an  order 
requiring'  him  to  show  cause  before  the  judge,  at  a  time  speci- 
fied in  the  order,  why  he  should  not  be  removed  from  office, 
and  cause  a  copy  of  such  order  to  be  served  on  him  at  least 
seven  days  before  the  time  fixed  for  the  hearing,  and  proof  of 
service  to  be  delivered  to  the  clerk.^  He  is  also  required  to  ac- 
count for  and  pay  over  to  the  estate  under  his  control  all 
interest  received  upon  property  of  such  estates,  implying  that 
such  property  may  be  temporarily,  at  least,  invested  so  as  to 
produce  interest,  as  was  expressly  authorized  by  the  former 
act.*5 

§  756.  To  furnish  information.— It  is  his  duty  to  furnish  such 
information  concerning  the  estates  of  which  he  is  trustee  and 
their  administration  as  may  be  requested  by  parties  in  inter- 
est ;  and  his  refusal  to  permit  a  reasonable  opportunity  for  the 
inspection  of  the  accounts  relating  to  the  affairs  of,  and  the 
papers  and  records  of,  estates  in  his  charge  by  parties  in  inter- 
est when  directed  by  the  court  so  to  do  will  subject  him  to 
a  fine  and  the  loss  of  his  office.'''  The  unlawfully  secreting  or 
destroying  any  document  belonging  to  a  bankrupt  estate  which 
came  into  his  hands  as  trustee  will  subject  him  to  imprison- 
ment,^ in  either  case  both  the  court  of  bankruptcy  and  the 
circuit  court  having  jurisdiction  to  try  him.^ 

§  757.  Deposit  and  payment  of  money.— He  is  required  to 
deposit  without  delay  all  money  received  by  him  in  one  of  the 
depositories,  designated  by  the  bankruptcy  court  ;^*^  and  to 
disburse  money  only  by  check  or  draft  on  such  depositories, 
which  check  or  draft  is  to  be  signed  by  him  and  countersigned 
by  the  judge  of  the  court,  or  by  a  referee  designated  for  that 
purpose,  or  by  the  clerk  or  his  assistant  under  an  order  made 
b}^  the  judge,  stating  the  date,  the  sum,  and  the  account  for 
which  it  is  drawn ;  and  an  entry  of  the  substance  of  such  check 
or  draft,  with  the  date  thereof,  the  sum  drawn  for,  and  the 

9  N.  B.   R.   67,  F.  C.  2810;  In   re     Blaisdell,    6    N.    B.    R.    78,    5    Ben. 

Peabody,    16    N.    B.   R.   243.  F.    C.     420,  F.  C.  1488. 

10866.  ^  Sec.  29a,  act  of  1898. 

n  G.  O.  XVII.  9  Sees.  2  (4)  and  23c,  act  of  1898. 

cAct  of  1867,  Sec.  17.  I'^Sec.    61,    act    of    1898;    In    re 

-  Sec.    29c,    act    of    1898 ;  In    re     Cobb,  112  F.  R.  655,  7  A.  B.*R.  202. 


Ch.  47  TRUSTEES'    DUTIES.  485 

account  for  which  it  is  drawn,  must  be  forthwith  made  in  a 
book  kept  for  that  purpose  by  the  trustee ;  and  all  cheeks  and 
drafts  must  be  entered  in  the  order  of  time  in  which  they  are 
drawn,  and  must  be  numbered  in  the  case  of  each  estate.^  ^ 

§  758.  Dividends.— He  is  required  to  pay  dividends  within 
ten  days  after  they  are  declared  by  the  referees,  of  which  no- 
tice^ ^  should  be  given;  and,  if  they  remain  unclaimed  for  six 
months  after  the  final  dividend  has  been  declared,  he  should 
pay  them  into  court.^^  Whenever  a  claim  shall  have  been  re- 
considered and  rejected,  in  whole  or  in  part,  upon  which  a 
dividend  has  been  paid,  the  trustee  may  recover  from  the  cred- 
itor the  amount  of  the  dividend  received  upon  the  claim  if  re- 
jected in  whole,  or  the  proportional  part  thereof  if  rejected 
only  in  part.^* 

§  759.  Exemptions.— It  is  the  trustee's  duty  to  set  apart  the 
bankrupt's  exemptions  and  to  report  to  the  court,  within 
twenty  days  after  receiving  notice  of  his  appointment,  the 
articles  set  off  to  the  bankrupt  with  the  estimated  value  of 
each,  when  any  creditor  may  except  to  the  same  within  twenty 
days  after  the  report  is  filed,  and  the  referee  may  require  the 
exceptions  to  be  argued  before  him,  and  shall  certify  them 
to  the  court  for  final  determination  at  the  request  of  either 
party. ^^  For  the  discussion  and  authorities  on  this  subject, 
see  Exemptions,  Sec.  6,  of  law,  ante,  §  185. 

§  760.  Collect  and  reduce  estate  to  money.— The  principal 
duty  of  the  trustee  is  to  collect  and  reduce  to  money  the  prop- 
erty of  the  estates  in  his  charge,  under  the  direction  of  the 
court,  and  close  them  up  as  expeditiously  as  is  compatible  with 
the  best  interests  of  the  parties  concerned.^^  For  this  purpose 
he  takes  not  only  all  the  rights  and  title  of  the  bankrupt,  but  he 
takes  also  all  the  rights  of  creditors  as  against  adverse  claim- 
ants to  the  estate.  He  takes  the  estate  free  from  all  claims 
that  are  not  valid  against  creditors  or  any  one  of  theni;^^  and 

11  G.  O.  XXIX;  In  re  Rude,  4  A.  derson,  113  F.  R.  115,  7  A.  B.  R. 
B.  R.  319;    In  re  Carr,  116   P.   R.     641. 

556,  8  A.  B.  R.  635.  i«  In  re  Stein,  1  N.  B.  N.  337,  1 

12  Form  No.  41.  A.  B.  R.  662,  94  F.  R.  124. 

13  Sec.  66a,  act  of  1898.  it  Sec.    67a,   act  of   1898;    In    re 
n  Sec.  57c,  act  of  1898;  see  Dec-     Kindt,   2   N.   B.   N.  R.   369;    In   re 

laration  and  Payment  of  Divi-  Bootli,  2  N.  B.  N.  R.  377,  98  F.  R. 
dends,  Sec.  65  of  act  of  1898.  975,  3  A.  B.  R.  574. 

ir.  G.   O.  XVII;    McGahan  v.  An- 


486  THE    NATIONAL   BANKRUPTCY    LAW.  Cu.  47 

he  may  set  aside  fraudulent  preferences,  or  fraudulent  convey- 
ances;^^ tlioufi:h  the  bankrupt  himself  iriig'ht  not  ])e  able  to  do 
so.  He  will  be  subrogated  to  and  may  enforce  the  rights  of  any 
creditor  who  is  prevented  from  enforcing  his  rights  as  against 
a  lien  created,  or  attempted  to  be  created,  by  his  debtor,  who 
afterwards  becomes  a  bankrupt  ;^^  reclaim  and  recover  by  le- 
gal proceedings  or  otherwise  any  property,  not  exempt,  trans- 
ferred within  four  months  of  the  bankruptcy  with  intent  to 
hinder,  delay  or  defraud  creditors,  except  as  to  purchasers  in 
good  faith  and  for  a  present  fair  consideration,  and  any  such 
i:)roperty  transferred  within  such  four  months  and  while  the 
debtor  was  insolvent  when  such  transfer  is  void  as  to  creditors 
by  the  state  law.-*^  He  takes  the  property  unaffected  by  any 
lien  obtained  through  legal  proceedings  against  an  insolvent 
within  four  months  of  bankruptcy,  except  as  against  a  bona 
lide  purchaser  for  value  without  notice  or  reasonable  cause  for 
inquiry,  or  be  subrogated  to  the  rights  of  the  lienor  ;2^  and 
recover  the  excess  over  a  reasonable  amount  where  a  debtor 
in  contemplation  of  bankruptcy  has  paid  money  or  transferred 
property  to  an  attorney  for  services  to  be  rendered.^- 

He  may  also  do  whatever  the  bankrupt  could  to  make  the  es- 
tate available  for  the  benefit  of  creditors,  as  prove  a  claim 
against  another  estate  in  bankruptcy  and  have  it  allowed  in  the 
same  manner  and  upon  like  terms  as  other  creditors.-^  Under 
the  order  of  the  court,  he  should  pay  all  taxes  legally  due  the 
United  States,  state,  county,  district,  or  municipality  in  ad- 
vance of  dividends,  and,  in  case  the  amount  or  legality  of  such 
tax  is  questioned,  have  it  determined  in  the  court  of  bank- 
ruptcy p^  pursuant  to  the  court's  direction,  submit  any  contro- 
versy arising  during  the  settlement  of  the  estate  to  arbitra- 

is  Sec.  60b,  and  70e,  act  of  1898;  R.  94;    Aiken  v.  Edrington.  15   N. 

In  re  Griffith.  1  N.  B.  N.  546;    In  B.  R.  271,  F.  C.  Ill;  In  re  Wynne, 

re  Gray,  3  A.  B.  R.  647;  In  re  Me-  4  N.  B.  R.  5,  F.  C.  18117;  Allen  v. 

Namara,  2  N.  B.  N.  R.  341;  Upton  Mussey,  4  N.  B.  R.  75,  F.  C.  231; 

V.    Jackson,    F.    C.    16802;     In     re  Thurmond  v.  Andrews,  13  N.  B.  R. 

Leland,  9  N.  B.  R.  209,  7  Ben.  156,  157. 

F.  C.  8230;  Bradshaw  v.  Klein,  F.  lo  Sec.  67b,  act  of  1898. 

C.  1790;    In  re  Metzer,  2  N.  B.  R.  20  Sec.    67e,   act   of   1898;    In    re 

114,  F.  C.  9510;    In  re  Duncan,  14  Gray,  3  A.  B.  R.  647. 

N.  B.  R.  18,  8  Ben.  365,  F.  C.  4131;  21  Sec.  67f,  act  of  1898. 

Barker  v.  Barker's  Ass.,  12  N.  B.  22  Sec.  60d,  act  of  1898. 

R.  474,  2  Woods,  87,  F.  C.  986;   In  23  See.  57m,  act  of  1898. 

re  Adams,  1  N.  B.  N.  167,  1  A.  B.  24  Sec.  64a,  act  of  1898. 


Ch.  47  TRUSTEES'    DUTIES.  487 

tion;25  and,  with  the  approval  of  the  court,  compromise  any 
controversy  upon  such  terms  as  he  deems  for  the  best  interests 
of  the  estate.26 

§  761.  Employment  of  an  attorney.— The  trustee  may  employ 
legal  assistance  when  necessary,  and  he  must  decide  in  the 
first  instance  himself  whether  it  is  necessary,  as  a  court  will 
not  give  him  directions  in  advance,-"  though  if  he  desires  he 
may  submit  the  question  of  such  employment  to  the  creditors 
at  the  first  meeting.^s  Attorney's  fees  to  a  reasonable  amount 
may  be  allowed  as  part  of  the  cost  of  administration  ;29  and  it 
has  been  held  that  if  he  is  a  lawyer,  he  may  perform  the  ser- 
vices himself  and  be  allowed  such  reasonable  compensation  as 
he  would  have  paid  had  he  been  obliged  to  employ  counsel.3<> 
The  court  of  bankruptcy  has  jurisdiction  to  pass  on  the  rea- 
sonableness of  a  contingent  fee  retained  by  an  attorney  under 
an  agreement  with  the  trustee  for  conducting  a  suit,  and,  if 
found  excessive,  to  require  the  excess  to  be  refunded  ;^i  and, 
where  the  trustee  obtained  authority  to  employ  an  attorney  on 
a  contingent  fee  but  suppressed  facts,  knowledge  of  which 
would  have  prevented  the  giving  of  such  authority,  the  con- 
tract may  be  set  aside  and  reasonable  compensation  awarded.^^ 

One  who  acted  as  bankrupt's  attorney  in  the  preparation  of 
the  case  cannot  subsequently  act  as  attorney  for  the  trustee  on 
being  relieved  by  the  bankrupt,  since  the  rule  with  reference 
to  the  confidential  nature  of  communications  between  attorney 
and  client  apply  with  equal  force  in  proceedmgs  in  bank- 
ruptcy.32 

25  Sec.    26,    act    of    1898;    G.    0.  N.  B.  R.  93;  In  re  Pegues,  3  N.  B. 

XXXIII.  R.  9;    In  re  Tully,  3  N.  B.  R.  19, 

-«  Sec.  27,  act  of  1898.  F.  C.   3587;    In  re  Noyes,  6  N.  B. 

27  In  re  Abram,  3  N.  B.  N.  R.  28,  R.  277. 

103  F.  R.  272,  4  A.  B.  R.  475;    In         3o  in  re  Mitchell,  1  N.  B.  N.  264. 

re  Baber,  119  F.  R.  520;  In  re  Bax-  1  A.  B.  R.  687,  citing  Perkin's  Ap- 

ter,  19  N.  B.  R.  295,  F.  C.  1122.  peal,  108  Pa.  St.  319;  and  Lowrie's 

28  In  re  Little  River  Lumber  Co.,  Appeal,  1  Grant  373;  In  re  Welge, 
101  F.  R.  558,  3  A.  B.  R.  682;  In  1  F.  R.  216;  but  see  In  re  Mel- 
re  Smith,  1  N.  B.  N.  136,  1  A.  B.  daur,  17  F.  C.  958. 

R.  37.  31  In  re  Brinker,  19  N.  B.  R.  195, 

20  In  re  Stotts,  1  N.  B.  N.   326,  F.   C.   1882. 

93  F.  R.  438,  1  A.  B.  R.  641;   In  re  32  Maybin  v.  Raymond,  15  N.  B. 

Pauly,  1  N.  B.  N.  405,  2  A.  B.  R.  R.  353,  F.  C.  9338. 

333;   In  re  Davenport,  3  N.  B.  R.  3,-?  in    re   Tenthorn,   5   A.   B.    R. 

18,  F.  C.  3587;    In   re  Colwell,  15  767. 


488  THE    national'  BANKRUPTCY    LAW.  Ch.  47 

§  762.  Trustee  may  sue.— It  is  not  the  duty  of  the  trustee  to 
litigate  every  question  that  may  be  called  to  his  notice  by  the 
creditors,  however  frivolous  or  apparently  lacking  in  support 
it  may  be,  and  on  the  other  hand  he  should  not,  by  requiring 
indemnity  in  every  instance  against  the  costs  and  expenses  of 
suit,  cast  the  risk  of  controversy  upon  the  particular  creditor 
who  may  request  that  it  be  undertaken.^^  The  trustee  may 
avoid  any  transfer  by  the  bankrupt  of  his  property  which  any 
creditor  of  such  bankrupt  might  have  avoided  ;2^  enter  his  ap- 
pearance and  defend  any  pending  suit  against  the  bankrupt, 
by  order  of  the  court  ;36  or,  with  the  approval  of  the  court, 
prosecute  any  suit  commenced  by  the  bankrupt  prior  to  the 
adjudication,  with  like  force  and  effect  as  though  commenced 
by  him.^^  He  may  institute  suits  for  the  purpose  of  reducing 
choses  in  action  to  money  or  recover  property  from  third  per- 
sons, or  to  set  aside  transfers  of  property  to  third  persons  al- 
leged to  be  fraudulent  as  to  creditors,  including  payments  in 
money  or  property  to  preferred  creditors,  or  to  foreclose  a 
mortgage,^^  and  in  such  case  it  is  not  necessary  for  him  first 
to  obtain  an  order  of  the  bankruptcy  court  to  justify  him  in 
maintaining  such  suit.^^  He  may  prosecute  suits  to  recover 
assets  in  a  district  other  than  that  in  which  the  decree  of  bank- 
ruptcy is  entered.^"^ 

It  is  sufficient  to  show  that  he  will  probably  succeed,  cer- 
tainty not  being  required,  when  he  applies  for  instructions 
relative  to  a  suit  the  creditors  wish  him  to  bring,  but,  if  an 
offer  of  settlement  has  been  made,  it  must  appear  that  the  suit 
will  probably  realize  more.^^ 

§  763.    Property  and  estates.— These  terms  are  used  in  the 

34  In  re  Baird,  112  F.  R.   960,  7     R.  421,  98  F.  R.  75;  Mather  v.  Coe, 

A.  B.  R.  448.  1  N.  B.  N.  554,  92  F.  R.  333,  1  A.  B. 

35  Sec.  70e,  act  of   1898.  R.   504;    In  re  Fowler,  1  N.  B.  N. 

36  Sec.  lib,  act  of  1898;  In  re  215,  1  A.  B.  R.  637;  In  re  Brod- 
Klein,  1  N.  B.  N.  486,  3  A.  B.  R.  bine,  1  N.  B.  N.  279,  326,  2  A.  B.  R. 
174,   97   F.    R.   31.  53.   93    F.   R.   643;    Burlingame    v. 

S7  Sec.  lie,  act  of  1898.  Parce,  17  N.  B.  R.  246;  Russell  v. 

3«  Bardes  v.  Bk.,  2  N.   B.  N.  R.  Owen,  15  N.  B.  R.  322. 

725,  3  A.  B.  R.  680,  178  U.  S.  524;  '!>  Chism     v.     Bank     of     Friars 

In  re  Gerdes,  102  F.  R.  318,  4  A.  Point,  5  A.  B.  R.  56. 

B.  R.  346,  rev'g  2  N.  B.  N.  R.  131,  4o  in  re   Phelps,    2    N.   B.   N.  R. 
Hicks  V.  Knost,  2  N.  B.  N.  R.  734,  484,  3  A.  B.  R.  396. 

178  U.  S.  541,  4  A.  B.  R.  178;   In         4i  Dutcher  v.  Wright,  16  N.  B.  R. 
re  Cohn,  2  N.  B.  N.  R.  299,  3  A.  B.     331,  94  U.  S.  553. 


Ch.  47  TRUSTEES'    DUTIES.  489 

broadest  sense  and  include  every  species  of  property,  not 
Jegally  exempt,  that  can  be  made  available  for  the  benefit  of 
creditors,  and  would  include  an  interest  under  a  will  ;^2  unpaid 
subscriptions  to  corporations  ;*^  the  excess  in  value  of  property 
over  the  amount  secured  on  it ;  besides  the  usual  visible  forms 
of  property.  It  is  the  trustee's  duty  to  investigate  the  securi- 
ties held  by  creditors  to  determine  their  value,  how  and  by 
what  right  they  are  held,  and  whether  anything  may  be  ob- 
tained from  them  for  the  general  creditors;  and  take  proper 
steps  to  have  the  securities  declared  invalid  if  they  are  so ;  or, 
if  they  are  valid,  redeem  the  property  from  the  lien  if,  after 
application  to  the  court,^^  that  seems  desirable,  in  which  case  he 
may  be  subrogated  to  the  rights  of  the  lienor  if  necessary,^'^ 
or  if  there  is  likely  to  be  a  surplus  and  a  foreclosure  suit  is 
pending,  intervene  in  such  suit  ;^^  but,  unless  the  estate  will  be 
benefited,  he  need  not  move  in  the  matter.-* '''  It  is  the  trustee's 
duty  to  decide,  within  a  reasonable  time,  whether  a  lease  is  ben- 
eficial to  the  estate  and  he  will  therefore  accept  it  or  not.^^  He 
should  sell  bankrupt's  property  under  the  order  of  the  court 
and  subject  to  its  approval,  or,  if  sold  otherwise  than  subject 
to  the  approval  of  the  court,  it  should  be  for  not  less  than 
seventy-five  per  centum  of  its  appraised  value ;  such  sales  to  be 
at  public  auction  unless  for  good  cause  shown  the  court  may 
authorize  a  private  sale,^'^  after  at  least  ten  days'  notice  by 
mail  to  creditors,^*^  or  an  immediate  sale  is  ordered  by  the  court 
on  account  of  the  perishable  nature  of  the  property  without 
notice.^^  After  the  sale  is  confirmed  by  the  court  the  trustee 
should  convey  the  property  to  the  purchaser.^- 

§  764.    Creditors  must  act  through  trustee.— The  trustee  is 

42  See  Suits  by  and  against  bank-  ^n  McLean  v.  Cadwalader,  15  N. 

rupts,  Sec.  11  of  the  law,  and  Juris-  B.  R.  383. 

diction  of  United  States  and  State  «  In  re  Holloway,  1  N.  B.  N.  264, 

Courts,  Sec.  23.  1  A.  B.  R.  659,  93  F.  R.  638;  Heath 

In  re  Baudouine,  1  N.  B.  N.  506,  v.  Shaffer,  1  N.  B.  N.  399,  2  A.  B.  R. 

3  A.  B.  R.  55,  96  F.  R.  536;   In  re  98,  93  F.  R.  647. 

Wood,  3  A.  B.  R.  572,  98  F.  R.  972;  *-  In  re  Lambert,  2  N.  B.  R.  138. 

In  re  Wetmore,  3  A.  B.  R.  700,  99  F.  C.  8026. 

P.  R.  703.  18  In  re  Schierman,  2  N.  B.  N.  R. 

*:!  In  re  Crystal  Springs  Bottling  118;   In  re  Laurie,  4  N.  B.  R.  7. 

Co.,  3  A.  B.  R.  194,  96  F.  R.  945;  49  G.  O.  XVIII. 

Michener  v.   Payson,   13    N.  B.   R.  so  Sec.  58a,  act  of  1898. 

49,  F.  C.  9524;  Myers  v.  Seeley,  10  si  G.  O.  XVIII. 

N.  B.  R.  411,  F.  C.  9994.  b2  Sec.  70c,  act  of  1898. 

44  G.   O.  XXVIII;    Form  No.   43. 


490  THE    NATIONAL.   BANKRUPTCY    LAW.  Ch.  47 

the  representative  of  all  the  creditors  and''''''  is  the  proper  person 
to  take  any  steps  that  become  necessary  in  the  course  of  ad- 
ministration of  a  bankrupt's  estate.  Proceedings  by  creditors 
after  the  appointment  of  a  trustee  are  irregular  -j^*  and,  if  he  re- 
fuses to  act,  a  i^etition  to  compel  him  to  act  should  be  filed.^^ 
In  the  discharge  of  his  quasi  official  duties,  the  court  will  pro- 
tect him.^^ 

§  765.  What  the  trustee  should  not  do.— It  is  not  the  trus- 
tee's duty  to  do  anything  towards  perfecting  an  imperfect 
lien,  or  asserting  a  perfect  one  in  behalf  of  creditors  ;^^  nor  to 
do  anything  if  bankrupt  states  at  the  first  meeting  of  creditors 
his  intention  of  offering  a  composition,  until  the  refusal  to  con- 
firm such  composition.^^  The  trustee  cannot  purchase  at  his 
own  sale,^^  nor  can  his  solicitor  bid  at  such  sale;^^  nor  can  he 
attack  the  trust  he  assumed  to  execute  and  defend,^^  nor  should 
he  refuse  to  contest  a  debt  which  he  knows  or  believes  to  have 
been  fraudulently  proved.^^  jjg  ig  ^ot  required  to  amend  his 
report  when  it  is  not  shovm  to  be  proper  or  that  it  will  affect 
the  bankrupt  either  way.^^  He  has  no  relation  whatever  to  the 
bankrupt  except  to  set  apart  his  exemption.^^ 

§  766.  Power  of  trustee.— The  trustee  has  no  judicial  author- 
ity, and  where  such  is  needed,  he  must  resort  to  the  court,  as 
the  bankrupt  would  have  been  compelled  to  do,  had  no  pro- 
ceedings been  instituted  ;^^  and  any  power  the  trustee  has  must 
be  found  in  the  bankrupt  law  itself.^^  He  is  an  officer  of  the 
court,  and  is  strictly  limited  to  powers  conferred  by  the  act 
and  orders  of  the  court.^'^ 

53  Atkins    V.    "Wilcox,    105    F.    R.  ^i  John   v.   Rogers,   15    N.   B.   R. 

595,  5  A.  B.  R.  313;  In  re  McLean  1,   F.  C.  7408. 

V.  Mayo,  7  A.  B.  R.  115.  «2  Bk.  v.  Cooper,  9  N.  B.  R.  529, 

^4  In  re  Carter,  1  N.  B.  N.  162,  1  20  Wall.  171. 

A.  B.  R.  160;   In  re  Pearson,  1  N.  os  in  re  Kingon,  3  N.  B.  R.  446, 

B.  N.   474,   2   A.   B.   R.   819;    In  re  F.  C.  7815. 

Adams,  1  A.  B.  R.  94,  1  N.  B.  N.    167.  o^  Aiken  v.  Edrington,   15  N.  B. 

•-•-.  Glenny  v.   Langdon,   19   N.   B.  R.  271,  F.  C.  111. 

R.  24,  98  U.  S.  20.  «•'>  In  re  Darby,  4  N.  B.  R.  98,  F. 

56  McLean  v.  Mayo,  supra.  C.  70. 

57  Goldman  v.  Smith,  1  N.  B.  N.  ee  Butcher  v.  Bk.,  11  N.  B.  R. 
291,  2  A.  B.  R.  104.  457,  12  Blatch.  436,  435,  F.  C.  423. 

58  In  re  Rung  Bros.,  2  A.  B.  R.  80.         e?  in  re  Ryan  &  Griffin,  6  N.  B. 
59Lockett  V.   Hoge,    9    N.   B.   R.     R.  235,  F.  C.  12182;  see  McLean  v. 

167,  F.  C.  8444.  Mayo,  7  A.  B.  R.  115;  U.  S.,  ex  rel. 

••0  Bk.  V.  Ober,  13  N.  B.  R.  328,  1  Schauffler  v.  Union  Surety  &  Guar- 
Woods,  80,  F.  C.  2731.  anty  Co.,  9  A.  B.  R.  114. 


Ch.  47  TRUSTEES'    DUTIES.  491 

§767.  'b.  Concurrence  of  majority  necessary.— Whenever 
'three  trustees  have  been  appointed  for  an  estate,  the  conciir- 
'renee  of  at  least  two  of  them  shall  be  necessary  to  the  validity 
'of  their  every  act  concerning  the  administration  of  the  es- 
'tate.' 

§768.  Three  trustees  appointed.— There  must  be  appointed 
at  least  one  or  three  trustees  ;*^^  and  the  death  or  removal  of 
one  shall  not  abate  any  suit  or  proceeding  which  he  is  prosecut- 
ing or  defending  at  the  time  of  his  death  or  removal,  but  the 
same  may  be  proceeded  with  or  defended  by  his  joint  trustee 
or  successor  in  the  same  manner  as  though  the  same  had  been 
commenced  or  was  being  defended  by  such  joint  trustee  alone 
or  by  such  successor.^^ 

§  769.  'c.  Record  of  trustee's  title.— The  trustee  shall,  with- 
'in  thirty  days  after  the  adjudication,  file  a  certified  copy  of 
'the  decree  of  adjudication  in  the  office  where  conveyances  of 
'real  estate  are  recorded  in  every  county  w^here  the  bankrupt 
'owns  real  estate  not  exempt  from  execution,  and  pay  the  fee 
'for  such  filing,  and  he  shall  receive  a  compensation  of  fifty 
'cents  for  each  copy  so  filed,  which,  together  with  the  filing 
'fee,  shall  be  paid  out  of  the  estate  of  the  bankrupt  as  a  part 
'  of  the  cost  and  disbursements  of  the  proceedings.  ''''^ 

§  770.  When  record  to  be  made.— The  trustee  becomes  vested 
by  operation  of  law  with  the  title  to  all  of  bankrupt's  property, 
real,  personal  or  mixed,  except  such  as  is  exempt,  that  may  be 
situated  within  the  United  States  or  its  territories,  as  of  the 
date  he  was  adjudged  a  bankrupt.  While  this  is  true,  if  bank- 
rupt owns  real  estate  out  of  the  jurisdiction  of  the  court  where 
the  proceedings  have  been  instituted,  the  record  title  to  such 
property  is  defective  without  some  such  notice  as  here  pro- 
vided, showing  that  the  title  has  passed  from  the  bankrupt. 
In  the  case  of  property  located  in  a  foreign  country  the  filing 
of  such  decree  is  unnecessary,  since  in  the  absence  of  a  treaty 
our  insolvency  laws  are  not  recognized  abroad,  and  the  only 
method  of  obtaining  title  to  bankrupt's  property  located  be- 
yond the  jurisdiction  of  the  United  States  is  through  a  proper 
conveyance  from  the  bankrupt.'^i 

This  record  need  only  be  made  in  cases  instituted  on  and  sub- 
sequent to  February  5,  1903. 

6s  Sec.  44,  act  of  1898.  was   inserted   by   the  amendatory 

C9  Sec.  46,  act  of  1898.  act  of  February  5.  1903. 

70  Subdivision    "C"    was    not    a  'i  Sec.  7a  (5),  act  of  1898. 
part  of  the  act  of  July  1,  1898,  but 


CHAPTER  XLVIII. 

COMPENSATION    OF    TRUSTEES. 

§771.   (48a)  Compensation.  775.  b.  Compensation  apportioned 

772.  Fees.  when  several  trustees. 

773.  Commissions.  776.  c.  When  compensation  with- 

774.  Trustee's  compensation.  held. 

§771.  '(Sec.  48a)  Compensation  of  trustees.— Trustees 
'sliall  receive  for  their  services,  payable  after  they  are  ren- 
'dered,  a  fee  of  five  dollars  deposited  with  the  clerk  at  the  time 
'the  petition  is  filed  in  each  case,  except  when  a  fee  is  not  re- 
'  quired  from  a  voluntary  bankrupt,  and  from  estates  which 
'they  have  administered  such  commissions  on  all  mor^eys  dis- 
'bursed  by  them  as  may  be  allowed  by  the  courts,  not  to  ex- 
'ceed  six  per  centum  on  the  first  five  hundred  dollars  or  less, 
'four  per  centum  on  moneys  in  excess  of  five  hundred  dollars 
'and  less  than  fifteen  hundred  dollars,  two  per  centum  on 
'moneys  in  excess  of  fifteen  hundred  dollars  and  less  than  ten 
'thousand  dollars,  and  one  per  centum  on  moneys  in  excess  of 
'ten  thousand  dollars.  And  in  case  of  the  confirmation  of  a 
'  composition  after  the  trustee  has  qualified  the  court  may  allow 
'him,  as  compensation,  not  to  exceed  one-half  of  one  per  cent- 
'i^m  of  the  amount  to  be  paid  the  creditors  on  such  composi- 
'tion.'i 

§  772.  Fees.— The  clerk  is  required  to  collect  the  fee  of  $5 
for  the  trustee  in  each  case  instituted  before  filing  the  petition, 
except  the  petition  of  a  proposed  voluntary  bankrupt,  which 

]  Section   48a   is   substituted   by  which    they     have     administered, 

the  act  of   February   5,   1903,   for  such  commissions  on  sums  to  be 

the   matter   following,    which    ap-  paid  as  dividends  and  commissions 

peared  in  the  act  of  July  1,  1898:  as  may  be  allowed  by  the  courts, 

"Trustees    shall    receive,    as    full  not  to  exceed  three  per  centum  on 

compensation    for    their    services,  the   first   five  thousand   dollars  or 

payable  after  they  are  rendered,  a  less,  two  per  centum  on  the  second 

fee  of  five  dollars  deposited  with  five  thousand  dollars  or  part  there- 

the  clerk  at  the  time  the  petition  of,   and   one  per  centum   on  such 

is  filed  in  each  case,  except  when  sums    in   excess   of   ten   thousand 

a  fee  is  not  required  from  a  volun-  dollars." 

tary   bankrupt,   and    from    estates  Analogous    provision    of    act    of 

492 


Ch.  48  COMPENSATION    OF    TRUSTEES.  493 

is  accompanied  by  an  affidavit  stating  that  the  petitioner  is 
■without,  and  cannot  obtain,  the  money  with  which  to  pay  such 
fee.2 

§  773.  Commissions. — The  commission  is  now  computed  and 
allowed  on  all  moneys  disbursed  by  the  trustee,  whether  on 
claims  which  are  secured  or  which  are  entitled  -to  priority  of 
payment  under  the  law,  and  thus  removes  the  doubt  which  ex- 
isted prior  to  the  amendment  upon  this  point.  The  trustee  is 
also  entitled  to  a  commission  in  the  case  of  a  confirmation  of  a 
composition  after  his  appointment.  This  computation  is  on 
the  same  identical  sums  as  those  of  the  referee  and  hence  the 
discussion  and  cases  cited  as  to  the  referee's  commission  apply 
equally  here.^ 

§774.  Trustee's  compensation.— The  compensation  provided 
for  trustees  is  in  full  for  the  services  performed  by  them,  but 
does  not  include  expenses  necessarily  incurred  in  the  perform- 
ance of  their  duties  and  allowed  upon  the  settlement  of  their 
accounts.  In  any  case  in  which  the  trustee's  fee  is  not  required 
to  be  paid  before  filing  the  petition,  the  judge  may  order  it 
paid  at  any  time  out  of  the  estate,  or,  after  notice  and  proof  of 
bankrupt's  ability  to  pay  it,  require  him  to  do  so  ;^  and,  before 
incurring  any  expense  in  publishing  and  mailing  notices,  or  in 
traveling,  or  in  procuring  the  attendance  of  witnesses,  or  in 
perpetuating  testimony,  indemnity  may  be  required  from  the 
person  for  whom  such  service  is  to  be  rendered.^     A  trustee 

1867.     "Sec.  17.     .     .     .     He  shall  sand   dollars,  two  and  a  half  per 

be  allowed,  and  may  retain  out  of  centum   on  the   excess     over    one 

the   money  in   his  hands,   all   the  thousand  dollars;  and  for  any  larg- 

necessary  disbursements  made  by  er  sum,   one   per  centum    on    the 

him  in  the  discharge  of  his  duty,  excess  over  five  thousand  dollars, 

and  a  reasonable  compensation  for  and  if,  at  any  time,  there  shall  not 

his  services,  in   the   discretion  of  be  in  his  hands  a  sufficient  amount 

the  court.  of  money  to  defray  the  necessai'y 

"Sec.  28.     .     .     .     In  addition  to  expenses  required  for  the  further 

all    expenses   necessarily   incurred  execution  of  his  trust,  he  shall  not 

by   him    in    the   execution    of   his  be  obliged  to  proceed  therein  until 

trust,    in    any    case,    the   assignee  the  necessary  funds  are  advanced 

shall  be   entitled  to  an  allowance  or  satisfactorily  secured  to  him." 

for  his  services  in  such  case  on  all  -  Sec.  51,  act  of  1898. 

moneys  received  and  paid  out  by  ">  Sec.  40,  act  of  1898. 

him  therein,  for  any  sum  not  ex-  +  g.  0.  XXXV;   Sec.  [73],  act  of 

ceeding  one  thousand  dollars,  five  1903. 

per  centum  thereon ;    for  any  lar-  s  g.  q.  X. 
ger  sum,  not  exceeding  five  thou- 


494  THE   NATIONAL   BANKRUPTCY    LAW.    •  ClI.  48 

is  not  required  to  serve  without  e()iii{)ensation  and,  it'  no  assets 
are  disclosed  and  creditors  insist  upon  the  appointment  of  a 
trustee,  they  must  provide  for  his  compensation."  While  Sec- 
tion [73]  of  the  amendatory  act  limits  the  compensation  of 
trustees,  it  would  seem  that  it  is  only  the  services  trustees  are 
required  to  perform  as  such  under  the  act,  for  which  the  com- 
pensation prescribed  is  in  full ;  and,  if  they  go  outside  of  such 
duties  and  perform  services  which  are  not  within  the  scope  of 
the  duties  of  a  trustee,  a  reasonable  allow^ance  should  be  made 
under  "expenses  necessarily  incurred  in  the  performance  of 
their  duties."^ 

§  775.  'b.  Compensation  apportioned  when  several  trustees. 
' — In  the  event  of  an  estate  being  administered  by  three  trus- 
'tees  instead  of  one  trustee  or  by  successive  trustees,  the  court 
'shall  apportion  the  fees  and  commissions  between  them  accord- 
'ing  to  the  services  actually  rendered,  so  that  there  shall  not 
'be  paid  to  trustees,for  the  administering  of  any  estate  a  greater 
'  amount  than  one  trustee  would  be  entitled  to. ' 

§776.  'c.  Compensation  withheld.— The  court  may,  in  its 
'discretion,  withhold  all  compensation  from  any  trustee  who 
'has  been  removed  for  cause.' 

6  In   re   Levy,   101   F.    R.    247,   4  raer,  2  N.  B.  N.  R.  292,  3  A.  B.  R. 

A.  B.  R.  108.  320;    In    re   Welge,    1    F.   R.    216; 

-  See  In  re  Mitchell,  1  N.  B.  N.  Contra,    In    re   Meldaur,    17    F.    C. 

264,  1  A.  B.  R.  687;   In  re  Plum-  958;   In  re  Epstein,  109  F.  R.  878. 


CHAPTER  XLIX. 

ACCOUNTS   AND   PAPERS    OF    TRUSTEES. 

§777.   (49a)  Inspection  of  trustees'       778  Accounts, 
papers  and  accounts. 

>;  777.  '  (Sec.  49a)  Inspection  of  trustees'  accounts  and  pa- 
'pers. — The  accounts  and  i)apers  of  trustees  shall  be  open  to 
'the  inspection  of  officers  and  all  parties  in  interest.'^ 

§  778.  Accounts. — The  trustee  is  required  to  keep  regular 
accounts  showing  all  amounts  received  and  from  what  sources, 
and  all  amounts  expended  and  on  what  aceounts,^  which  are 
referred  to  the  referee  for  audit  unless  otherwise  specially 
ordered  by  the  court,^  when  it  is  his  duty  to  approve  them  if 
correct,  which  discharges  the  trustee.^  In  case  of  a  partner- 
ship he  must  keep  separate  accounts  of  the  partnership  prop- 
erty and  of  the  property  belonging  to  the  individual  partners.^ 
He  must  make  final  reports  and  file  final  accounts  fifteen  days 
before  the  day  fixed  for  the  final  meeting,"  at  which  meeting 
he  is  required  to  present  a  detailed  statement  of  the  adminis- 
tration of  the  estate.'^  The  failure  of  the  trustee  to  permit  a 
reasonable  opportunity  for  the  inspection  of  the  accounts 
relating  to  the  afi'airs  of  the  estate  and  the  papers  and  records 
in  his  charge,  by  parties  in  interest,  when  directed  by  the  court 
so  to  do,  works  a  forfeiture  of  his  office  and  renders  him  liable 
to  punishment.^ 

1  Analogous  provision  of  act  of         s  g.  O.  XVII. 
1867.       "Sec.    15.     .     .     .     The    as-         i  Form  No.  5. 
signee  shall  keep  a  regular  account         s  Sec.  5d,  act  of  1898. 

of  all  money  received  by  him  as  e  Sec.  47e  (8),  act  of  1898. 
assignee,  to  which  every  creditor  t  Sec.  47a  (8),  act  of  1898. 
shall,   at   reasonable    times,    have         *  Sec.    29c,    act   of    1898;    G.    O. 

free   resort."  XVII. 

2  Sec.   47a  (6),  act  of  1898. 


495 


CHAPTER  L. 


BONDS   OF   REFEREES    AND    TRUSTEES. 


§779.   {50a)  Referees'  bonds. 

780.  b.  Trustees'  bonds. 

781.  c.  Amount  to  be  fixed. 

782.  d.  Value    of    sureties'    prop- 

erty. 

783.  e.  Number  of  sureties. 

784.  f.    Property  required  in  sur- 

eties. 

785.  g.  Corporation  as  surety. 

786.  Corporation     may     be     sole 

surety. 


787.  h.  Bonds  to  be  filed. 

788.  i.    Trustees     not    liable    for 

banlcrupt's  acts. 

789.  j.    Joint  and  several  bonds. 

790.  k.  Failure  to  give  bond. 

791.  Time  of  giving  and  effect  of 

failure  to  give. 

792.  1.    Limitation     of     suits     on 

referees'   bonds. 

793.  m. On  trustees'  bonds. 

794.  Where  suit  to  be  brought. 


§779.  '(Sec.  50a)  Referees'  bonds.— Referees,  before  as- 
'suming  the  duties  of  their  offices,  and  within  such  time  as  the 
'district  courts  of  the  United  States  having  jurisdiction  shall 
'prescribe,  shall  respectively  qualify  by  entering  into  bond  to 
the  United  States  in  such  sum  as  shall  be  fixed  by  such  courts, 
'not  to  exceed  five  thousand  dollars,  with  such  sureties  as  shall 
'be  approved  by  such  courts,  conditioned  for  the  faithful  per- 
'formance  of  their  official  duties. '^ 

§780.  'b.  Trustees'  bonds.— Trustees,  before  entering  upon 
'the  performance  of  their  official  duties,  and  within  ten  days 
'after  their  appointment,  or  within  such  further  time,  not  to 
'exceed  five  days,  as  the  court  may  permit,  shall  respectively 
'qualify  by  entering  into  bond  to  the  United  States,  with  such 
'sureties  as  shall  be  approved  by  the  courts,  conditioned  for 
'the  faithful  performance  of  their  official  duties.'- 

1  Analogous  provision  of  act  of        2  Analogous  provision  of  act  of 


1867.  "Sec.  3.  .  .  .  Before  en- 
tering upon  the  duties  of  his  office, 
every  person  so  appointed  a  regis- 
ter in  bankruptcy  shall  give  a  bond 
to  the  United  States,  with  condi- 
tion that  he  will  faithfully  dis- 
charge the  duties  of  his  office,  in  a 
sum  not  less  than  one  thousand 
dollars,  to  be  fixed  by  said  coairt, 
with  sureties  satisfactory  to  said 
court,  or  to  either  of  the  said  jus- 
tices thereof." 


1867.  "Sec.  13.  .  .  .  The  judge 
at  any  time  may,  and  upon  the  re- 
quest in  writing  of  any  creditor 
who  has  proved  his  claim  shall,  re- 
quire the  assignee  to  give  good  and 
sufficient  bond  to  the  United  States, 
with  a  condition  for  the  faithful 
performance  and  discharge  of  his 
duties;  the  bond  shall  be  approved 
by  the  judge  or  register  by  his  in- 
dorsement thereon,  shall  be  filed 
with  the  record   of  the  case,  and 


496 


Ch.  50  BONDS   OF   OFFICERS.  497 

§  781.  'c.  Amount  of  bond  to  be  fixed.— The  creditors  of  a 
'bankrupt  estate,  at  their  first  meeting  after  the  adjudication, 
'or  after  a  vacancy  has  occurred  in  the  office  of  a  trustee,  or 
'after  an  estate  has  been  reopened,  or  after  a  composition  has 
'been  set  aside  or  a  discharge  revoked,  if  there  is  a  vacancy  in 
'the  office  of  trustee,  shall  fix  the  amount  of  the  bond  of  the 
'trustee ;  they  may  at  any  time  increase  the  amount  of  the  bond. 
'If  the  creditors  do  not  fix  the  amount  of  the  bond  of  the  trus- 
'tee  as  herein  provided  the  court  shall  do  so.' 

§782.  'd.  Value  of  sureties'  property.— The  court  shall  re- 
'  quire  evidence  as  to  the  actual  value  of  the  property  of  sure- 
ties.' 

§  783.  'e.  Number  of  sureties.— There  shall  be  at  least  two 
'sureties  upon  each  bond.' 

§784.  'f.  Property  required  in  sureties.— The  actual  value 
*  of  the  property  of  the  sureties,  over  and  above  their  liabilities 
'  and  exemptions,  on  each  bond,  shall  equal  at  least  the  amount 
'of  such  bond.' 

§785.  'g.  Corporations  as  sureties.— Corporations  organ- 
*ized  for  the  purpose  of  becoming  sureties  upon  bonds,  or  au- 
'thorized  by  law  to  do  so,  may  be  accepted  as  sureties  upon 
'the  bonds  of  referees  and  trustees  whenever  the  courts  are 
'satisfied  that  the  rights  of  all  parties  in  interest  will  be  there- 
'by  amply  protected.' 

§  786.  Corporation  may  be  sole  surety.— Congress  has  pro- 
vided that,  whenever  a  bond  is  required  with  one  or  more  sure- 
ties, a  corporation,  organized  under  the  laws  of  the  United 
States  or  of  any  state,  having  power  to  execute  similar  bonds, 
may  be  the  sole  surety,  provided  the  court  approves  the  same  ;^ 
and  it  has  been  held  that  statutes  not  inconsistent  with  each 
other  and  relating  to  the  same  subject  matter  should  be  con- 
strued together  and  effect  given  to  all,  though  they  contain 

inure  to  the  benefit  of  all  creditors  judge  shall  remove  him  and  ap- 
proving their  claims,  and  may  be  point  another  in  his  place." 
prosecuted  in  the  name  and  for  the  The  notice  to  be  sent  to  the  trus- 
benefit  of  any  injured  party.  If  tee  of  his  appointment  should  con- 
the  assignee  fails  to  give  the  bond  tain  a  statement  of  the  penal  sum 
within  such  time  as  the  judge  or-  of  his  bond.  (G.  O.  XVI.) 
ders,  not  exceeding  ten  days  after  -i  Act  of  August  13,  1894,  28  U. 
notice  to  him   of   such  order,  the  S.  Stat.,  2  Supp.  R.  S.  237. 

32 


498  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  50 

no  reference  to  each  other  and  were  passed  at  different  times  ;* 
accordingly  the  requirement^  that  the  actual  value  of  the  prop- 
erty of  the  sureties,  over  and  above  their  liabilities  and  exemp- 
tions, on  each  bond  shall  equal  at  least  the  amount  of  such 
bond,  and*5  that  corporations  may  be  accepted  whenever  the 
courts  are  satisfied  that  the  rights  of  all  parties  in  interest  will 
be  thereby  amply  protected,  differentiates  corporate  security 
from  personal.  Hence  two  sjreties  are  required  if  they  are 
individuals  but  one  if  a  surety  company.'^ 

§787.  'h.  Bonds  to  be  filed.— Bonds  of  referees,  trustees, 
'and  designated  depositories  shall  be  filed  of  record  in  the 
'office  of  the  clerk  of  the  court  and  may  be  sued  upon  in  the 
'name  of  the  United  States  for  the  use  of  any  person  injured 
'by  a  breach  of  their  conditions.' 

§788.  'i.  Trustees  not  liable  for  bankrupt's  acts.— Trus- 
'tees  shall  not  be  liable,  personally  or  on  their  bonds,  to  the 
'United  States,, for  any  penalties  of  forfeitures  incurred  by  the 
'bankrupts  under  this  act,  of  whose  estates  they  are  respect- 
'ively  trustees.' 

§789.  'j.  Joint  and  several  bonds.— Joint  trustees  may 
'give  joint  or  several  bonds.' 

§790.  'k.  Failure  to  give  bond.— If  any  referee  or  trustee 
'shall  fail  to  give  bond,  a's  herein  provided  and  within  the 
'time  limited,  he  shall  be  deemed  to  have  declined  his  appoint- 
'ment,  and  such  failure  shall  create  a  vacancy  in  his  office.'^ 

§  791.  Time  within  which  bonds  must  be  given  and  effect  of 
not  giving. — The  bond  of  the  referee  must  be  given  before  he 
assumes  the  duties  of  the  office  and  within  such  time  as  the 
district  court  shall  prescribe,  while  a  trustee  must  give  it 
before  entering  upon  the  performance  of  his  duties  and  with- 
in ten  days  after  his  appointment.^  Failure  to  give  bond 
creates  a  vacancy,  to  be  filled  in  the  case  of  the  referee  by  the 
court  of  bankrupte3%^^  and  in  the  case  of  the  trustee  primarily 

4  In  re  Kalter,  1  N.  B.  N.  384 ;  signee  fails  to  give  the  bond  with- 
2  A.  B.  R.  590,  citing  A.  &  Eng.  in  such  time  as  the  judge  orders, 
Ency.  of  Law,  v.  23,  p.  311.  not   exceeding  ten   days  after  no- 

5  Sec.  50f,  act  of  1898.  tice  to  him  of  such  order,  the  judge 

6  Sec.  50g,  act  of  1898.  shall  remove  him  and  appoint  an- 

7  In  re  Kalter,  1  N.  B.  N.  384,  2  other  in  his  place. 

A.  B.  R.  590.  0  Sec.  50a,  b,  act  of  1898. 

s  Analogous  provision   of  act  of         lo  Sec.  34,  act  of  1898. 
1867.     "Sec.  13.     .     .     .     If  the  as- 


Ch.  50  BONDS   OF   OFFICERS.  499 

by  the  creditors,  or  if  they  fail  to  appoint  one,  or  it  is  imprac- 
ticable for  them  to  elect,  by  the  judge  or  referee." 

§792.  *1.  Limitation  of  suits  on  referees'  bonds.— Suits 
'upon  referees'  bonds  shall  not  be  brought  subsequent  to  two 
^years  after  the  alleged  breach  of  the  bond.' 

§793.  'm.  Limitation  of  suits  on  trustees'  bonds.— Suits 
'upon  trustees'  bonds  shall  not  be  brought  subsequent  to  two 
'years  after  the  estate  has  been  closed.' 

§  794.  Where  suit  to  be  brought.— A  trustee  in  bankruptcy 
may  institute  suit  in  the  district  court  in  the  name  of  the 
United  States  on  the  bond  of  a  former  trustee  to  recover  the 
value  of  property  for  which  he  has  failed  to  account.^^ 

11  Sec.  44,  act  of  1898;  In  re  anty  Co.,  9  A.  B.  R.  114,  118  F.  R. 
Lewensohn,  2  N.  B.  N.  R.  315,  3  A.  482;  see  Piatt.  Rec.  v.  Beach,  2 
B.  R.  299,  98  F.  R.  576.  Ben.   303. 

12  U.  S.  V.  Union  Surety  &  Guar- 


CHAPTER  LI. 
DUTIES   OF  CLERKS. 

§795.   (51a)    Duties.  798.  Inability  or  pauper  affidavit. 

796.  In  general.  799.  Custody  of  papers. 

797.  To  collect  fees. 

§795.  '(Sec.  51a)  Clerk's  duties.— Clerks  shall  respee- 
'tively 

'  (1)  Account  for,  as  for  other  fees  received  by  them,  the 
'clerk's  fee  paid  in  each  case  and  such  other  fees  as  may  be 
'received  for  certified  copies  of  records  which  may  be  prepared 
'  for  persons  other  than  officers ; 

'  (2)  Collect  the  fees  of  the  clerk,  referee,  and  trustee  in 
'each  case  instituted  before  filing  the  petition,  except  the  pe- 
'tition  of  a  proposed  voluntary  bankrupt  which  is  accompanied 
'by  an  affidavit  stating  that  the  petitioner  is  without,  and  can- 
'not  obtain,  the  money  with  which  to  pay  such  fees; 

'  (3)  Deliver  to  the  referees  upon  application  all  papers 
'which  may  be  referred  to  them,  or,  if  the  offices  of  such  ref- 
'erees  are  not  in  the  same  cities  or  towns  as  the  offices  of  such 
'clerks,  transmit  such  papers  by  mail,  and  in  like  manner  re- 
'turn  papers  which  were  received  from  such  referees  after  they 
'have  been  used; 

'  (4)  And  within  ten  days  after  each  case  has  been  closed 
'pay  to  the  referee,  if  the  case  was  referred,  the  fee  collected 
'for  him,  and  to  the  trustee  the  fee  collected  for  him  at  the 
'time  of  filing  the  petition.' 

§  796.  Duties  in  general.— The  clerk  is  required  to  keep  a 
docket  containing  certain  prescribed  entries;  to  indorse  on 
each  paper  filed  with  him  the  day  and  hour  of  filing,  and  a 
brief  statement  of  its  character  ;i  to  attest  all  process,  sum- 
mons and  subpoenas  issued  out  of  the  court,  under  the  seal 
thereof,  and,  on  application,  to  furnish  the  referees  blanks, 
Avith  the  signature  of  the  clerk  and  seal  of  the  coitrt.-  The 
fees  allowed  by  the  act  do  not  include  copies  furnished  to  per- 
sons other  than  officers,  or  expenses  necessarily  incurred  in 
publishing  and  mailing  notices  or  other  papers  :^  and,  before 

1  G.  O.  III.  3  G.  O.  XXXV. 

2G.  O.  III. 

500 


Ch.  51  DUTIES    OF   CLERK    OF    COURT.  501 

incurring  any  expense  of  this  nature  or  in  traveling,  or  in  pro- 
curing the  attendance  of  witnesses  or  in  perpetuating  testi- 
mony, the  clerk  may  require  from  the  person,  for  whom  the 
service  is  to  be  rendered,  indemnity  for  such  expense,  and  the 
money  so  advanced  shall  be  repaid  as  part  of  the  cost  of  admin- 
istration.^ Clerks  of  United  States  courts  are  entitled  to 
charge^  ten  cents  a  folio  of  one  hundred  words  for  making 
copies  of  papers  on  file,  or  of  any  entry  or  record ;  fifteen  cents 
for  each  certificate  and  twenty  cents  for  affixing  the  seal  of  the 
court. 

In  case  the  judge  is  absent  from  the  district,  the  clerk  has 
authority  to  make  the  order  of  reference,^  a  copy  of  which  he 
should  mail  forthwith  or  deliver  personally,  or  through  some 
other  officer  of  the  court,  to  the  referee.'^  It  is  also  his.  duty 
to  issue  a  certificate  showing  the  absence  of  the  judge,  or  his 
sickness  or  inability  to  act  as  authority  for  the  referee  to  take 
possession  or  release  bankrupt's  propert3^*  He  has  no  judicial 
powers,  but  is  a  ministerial  officer,  subject  to  the  orders  of  the 
judge. 

While  a  deputy  clerk  is  not  mentioned  in  the  act,  his  author- 
ity and  power  being  confined  to  those  conferred  by  statute,^ 
an  order  signed  by  the  judge  and  attested  by  the  deputy  clerk 
with  the  seal  of  the  court  is  valid,  but  alone  a  deputy  clerk  can- 
not make  an  order  of  reference  in  bankruptcy.  The  fact  that 
bankrupt  was  a  brother-in-law  of  the  deputy  clerk  in  whose 
office  a  petition  was  filed,  has  been  held  sufficient  cause  for 
transferring  the  case  and  record  to  another  seat  of  the  court 
in  the  same  district,  though  this  position  seems  questionable.^*^ 

§  797.  To  collect  fees.— The  clerk  is  required  to  collect  the 
fees  of  the  clerk,  $10,1^  referee  $15^2  ^nd  trustee  $5^^  [^  each 
case  instituted  before  filing  the  petition,  except  the  petition  of 
a  proposed  voluntary  bankrupt  accompanied  by  an  affidavit 
stating  that  the  petitioner  is  without,  and  cannot  obtain,  the 
money  with  which  to  pay  such  fees.  A  deposit  of  the  statutory 
filing  fee  by  a  proposed  voluntary  bankrupt,  not  within  the  ex- 
ception in  favor  of  paupers,  is  a  condition  precedent  to  the  fil- 

*  G.  O.  X.  10  Bray  v.  Cobb,  1  N.  B.  N.  209. 

5  Sec.  828,  U.  S.  Rev.  Stat.  1  A.  B.  R.  153,  91  F.  R.  102. 

6  Sec.  18f  &  g,  act  of  1898.  "  Sec.  52a,  act  of  1898. 
-  G.  O.  XII.  12  Sec.  40a,  act  of  1898. 

8  Sec.  38a  (3),  act  of  1898.  is  Sec.  48a,  act  of  1898. 

9  Sec.  558,  U.  S.  Rev.  Stat. 


502  THE   NATIONAL   BANKRUPTCY   LAW.  Ch.  51 

ijjg  of  the  petition.  In  the  case  of  a  firm  the  fee  must  be  col- 
lected from  each  member,  as  well  as  the  firm  where  the  part- 
nership applies  as  such  and  separate  petitions  with  separate 
schedules  are  filed  for  the  several  partners  ;^^  but  it  has  been 
lield  that  only  one  petition  in  the  name  of  both  the  partner- 
ship and  the  individual  partners,  accompanied  by  schedule 
setting-  out  the  debts  and  assets  of  the  firm  and  also  of  the 
partners  is  necessary  and  both  the  joint  and  separate  es- 
tates may  be  administered  upon  such  petition ;  and  it  is  but  one 
proceeding  requiring  only  one  filing  fee,^^  though  on  this  point 
the  courts  do  not  agree.^^  Upon  a  petition  in  involuntary  bank- 
ruptcy against  one  person  as  an  individual,  no  adjudication 
can  be  made  against  other  persons  who  were  in  partnership 
with  him,  even  though  the  latter  come  in  voluntarily  and  con- 
sent to  be  adjudged  bankrupt ;  but  they  must  file  their  individ- 
ual petitions,  deposit  the  fees  required  and  proceed  strictly 
according  to  law.^^ 

The  provision  for  the  repayment  of  money  advanced  for 
expenses  incurred  in  publishing  or  mailing  notices,  etc.,^^  does 
not  apply  to  the  filing  fee  of  $30  in  voluntary  cases,  which  is 
not  returned  to  the  bankrupt  ;^^  but,  in  involuntary  cases,  the 
filing  fee  of  $30,  the  marshal's  charges  and  the  indemnity 
deposit  are  all  returned  to  the  petitioning  creditors.^^ 

§798.  Inability  or  pauper  affidavit.— A  petitioner  who  has 
no  means  is  exempt  from  paying  the  filing  fee  of  $30  and  the 
statutory  affidavit  of  a  voluntary  bankrupt  is  prima  facie  evi- 
dence of  petitioner's  inability,  subject,  however,  to  investiga- 
tion ;  and,  if  the  inquiry  is  fairly  answered  respecting  available 
means,  and  none  appear  to  be  held  by  petitioner  when  the  pro- 
ceedings were  instituted,  nor  to  be  obtainable  through  his  indi- 
vidual earnings  or  efforts,  the  exemption  from  such  payment 
must  be  allowed.-^     It  has  been  held,  however,  that  if  upon  a 

14  In  re  Barden,  2  N.  B.  N.  R.  278,  2  N.  B.  N.  R.  538,  3  A.  B.  R. 
741,  101  F.  R.  553,  4  A.  B.  R.  51.         77. 

15  In  re  Gay,  98  F.  R.  870,  3  A.         is  G.  0.  X. 

B.  R.  529;  In  re  Langslow  et  al.,  1  i9  In  re  Matthews,  97  F.  R.  772. 

N.  B.  N.  232,  1  A.  B.  R.  258,  98  F.  3  A.  B.  R.  265. 

R.  869.  20  Sec.  64b    (2),  act  of  1898;    In 

16  In  re  Farley  &  Co.,  115  F.  R.  re  Silverman  et  al.,  2  N.  B.  N.  R. 
359,  8  A.  B.  R.  266;   In  re  Barden,  18.  3  A.  B.  R.  227,  97  F.  R.  325. 
101  F.  R.  555,  4  A.  B.  R.  31.  21  in   re  Levy,  101   F.  R.   247,  4 

"  Mahoney  v.   Ward,  100  F.  R.     A.  B.  R.  108. 


( 'II.  51  DUTIES    OF   CLERK    OF    COURT.  503 

reference  to  the  referee  to  take  proof,  and  report  the  facts 
showing  whether  bankrupt  is  unable  to  obtain  the  money, 
it  appears  that  he  is  employed  at  a  monthly  salary  though  as 
low  as  $30,  he  must  pay  the  $30,^^  for  the  liability  of  petitioner 
to  pay  the  filing  fee  does  not  depend  upon  his  having  prop- 
erty not  exempt  but  on  actual  inability.  He  may  be  ordered 
to  pay  such  fees  out  of  pension  money  received  from  the 
United  States  and  remaining  unchanged  in  his  hands  at  the 
time  of  filing  the  petition  ;^^  though  on  the  other  hand  it  has 
been  held  that  he  is  not  required  to  use  his  earnings  after  filing 
the  petition,  or  exempt  property  for  the  purpose,  nor  to  so- 
licit or  accept  the  amount  from  kindred  or  friends  f^  but 
this  position  does  not  seem  tenable.^^  Where  the  petitioner's 
family  lived  in  affluence  in  a  house  belonging  to  his  wife, 
and  it  was  evident  that  he  had  more  or  less  control  over  her 
property,  he  was  held  not  to  be  excused  from  paying  the 
filing  fee,  since  that  privilege  is  granted  only  to  paupers  in 
fact.26 

In  any  case  in  which  the  clerk's  fees  are  not  required  by  the 
act  to  be  paid  before  filing  the  petition,  the  judge,  at  any  time 
during  the  pendency  of  the  proceedings,  may  order  them  paid 
out  of  the  estate,  or,  after  notice  and  proof  of  petitioner's  abil- 
ity, require  him  to  pay  them.-"  The  petitioner  must  pay  the 
necessary  expenses  as  the  case  progresses,  and,  if  he  declines 
when  able  to  pay,  his  discharge  may  be  refused  and  his  peti- 
tion be  dismissed  or  his  discharge  may  be  postponed  until  he 
pays  the  compensation  allowed  the  clerk,  referee  and  trustee, 
or  else  satisfy  the  court  that,  by  reason  of  ill  health,  or 
peculiar  misfortune,  he  is  a  worthy  object  of  charity  ;28  but 
there  is  no  rule  or  law  authorizing  the  referee  to  make  such 
order.-^ 

§  799.  Custody  of  papers.— The  clerk  is  entitled  to  one  copy 
of  the  petition^^  and  of  the  schedule,^^  and  is  required  to  de- 
liver to  the  referees,  upon  application^^  q\\  papers  which  may 

22  In  re  Collier,  1  N.  B.  N.  257,         27  g.  O.  XXXV. 

1  A.  B.  R.  182,  93  F.  R.  191.  28  Anon.  1  N.  B.  N.  376,  2  A.  B. 

23  In  re  Bean,  100  F.  R.  262,  4  R.  527,  95  F.  R.  120;  In  re  Collins, 
A.  B.  R.  53.  1  N.  B.  N.  132;   In  re  Fininger,  Id. 

24  Sellers  v.  Bell,  2  A.  B.  R.  529,  29  in  re  Plimpton,  3  N.  B.  N.  R. 
94  F.  R.  802.  14,  103  F.  R.  775,  4  A.  B.  R.  614. 

25  In  re  Hines,  117  F.  R.  790,  'J         so  Sec.  59c,  act  of  1898. 
A.  B.  R.  27.  31  Sec.  7  (8),  act  of  1898. 

26  inreWilliams,2N.B.N.R.206.  '2  gee.  39  (10),  act  of  1898. 


504  THE    NATIONAL.   BANKRUPTCY    LAW.  Ch.  51 

be  referred  to  him,  or,  if  the  officers  of  such  referees  are  not  in 
the  same  city  or  town  as  the  office  of  the  clerk,  transmit  such 
papers  by  mail,  and  in  like  manner  return  papers  which  were 
received  from  such  referees  after  they  have  been  used.^^  He 
must  also  receive  and  file  the  records  and  papers  of  each  case 
after  it  is  concluded,"^  together  with  the  bonds  of  trustees, 
referees  and  designated  depositories.^'' 

as  Sec.  39   (8),  act  of  1898.  35  Sec.  50h,  act  of  1898. 

34  Sec.  39   (7),  act  of  1898. 


CHAPTER  LII. 

COMPENSATION    OF   CLERKS    AND    MARSHALS. 

§800.   (52a)   Clerk's    compensation.  804.  Fees  of  deputy  marshals. 

801.  What  ten  dollar  fee  covers.  805.  Fees  when  acting  as  keeper. 

802.  Marshal's  fee.  806.  Fees,  disposition  of — rate. 

803.  Fees  of  marshal.  807.  Fees  of  receivers. 

§800.  '(Sec.  52a)  Clerk's  compensation.— Clerks  shall  re- 
'spectively  receive  as  full  compensation  for  their  service  to 
'each  estate,  a  filing  fee  of  ten  dollars,  except  when  a  fee  is 
'not  required  from  a  voluntary  bankrupt.'^ 

§  801.  What  ten-dollar  fee  covers.— The  filing  fee  of  .$10  is  in 
full  compensation  of  all  services  in  filing  petitions  or  other 
papers  required  to  be  filed  with  the  clerk,  or  in  certifying  or 
delivering  papers  or  copies  of  records  to  referees  or  other  offi- 
cers, or  in  receiving  or  paying  out  money  or  otherwise,  unless 
the  clerk  is  able  to  specifically  point  out  an  exception;  the 
allowance  or  disallowance  of  costs  and  fees  is  not  a  matter  of 
equity  or  supposed  hardship,  but  purely  a  matter  of  statutory 
provision,^  This  filing  fee  does  not  include  the  charge  for 
copies  furnished  to  other  persons,  or  expenses  necessarily  in- 
curred in  publishing  or  mailing  notices  or  other  papers;  and 
it  has  been  held  that  the  clerk  is  entitled  to  charge  an  ad- 
ditional fee  for  each  notice  of  bankrupt's  application  for  dis- 
charge sent  to  creditors  and  such  fee  is  chargeable  against  the 
estate.^ 

In  any  case  in  which  the  fee  is  not  required  by  the  act  to  be 
paid  before  filing  the  petition,  the  judge  may,  at  any  time, 
order  it  paid  out  of  the  estate,  or,  after  notice  and  proof  of 
bankrupt's  ability  to  pay  it,  require  him  to  do  so.^     Before 

1  Analogous  provision   of  act  of  which  shall  be  applied  to  the  pay- 

1867.      "Sec.   47.     .     .     .    That   in  ment  for  the  services  of  the  reg- 

each   case   there  shall   be  allowed  isters."      (Here  follows  the  speci- 

and  paid,  in  addition  to  the  fees  of  fication  of  fees.) 

the  clerk  of  the  court  as  now  es-  -;  In   re  Durham,   2  N.  B.  N.  R. 

tablished    by  law,    or   as   may   be  1104. 

established  by  general  order,  under  •!  In  re  Durham,  supra, 

the  provisions  of  this  act,  for  fees  •*  G.  O.  XXXV. 
in  bankruptcy,  the  following  fees, 

505 


506  THE   NATIONAL   BANKRUPTCY   LAW.  Ch.  52 

incurring-  any  expense  for  copies  to  be  furnished  others  than 
to  the  officers  or  in  publishing  or  mailing  notice,  the  clerk  may 
require  from  the  person,  in  whose  behalf  the  duty  is  to  be  per- 
formed, indemnity  for  such  expense,  and  if  it  is  for  the  advan- 
tage of  the  estate  the  money  so  advanced  will  be  repaid  out 
of  the  estate  as  a  cost  of  administration.^  Though  a  voluntary 
bankrupt  might  furnish  the  filing  fee,  if  there  are  no  assets 
and  he  can  truthfully  swear  he  is  unable  to  pay  for  the  re- 
quired notices  to  creditors,  he  is  entitled  to  have  that  service 
performed  by  the  clerk  on  the  same  conditions  as  a  suit  con- 
ducted in  forma  pauperis.^ 

§802.  'Marshal's  fees.— IMarshals  shall  respectively  receive 
from  the  estate  where  an  adjudication  in  bankruptcy  is  made, 
except  as  herein  otherwise  provided,  for  the  performance  of 
their  services  in  proceedings  in  bankruptcy,  the  same  fees, 
and  account  for  them  in  the  same  way,  as  they  are  entitled  to 
receive  for  the  performance  of  the  same  or  similar  services  in 
other  cases  in  accordance  with  laws  now  in  force,  or  such  as 
may  be  hereafter  enacted,  fixing  the  compensation  of  mar- 
shals."^ 

§  803.  Fees  of  marshals.— Before  incurring  any  expense  in 
publishing  or  mailing  notices,  or  in  traveling,  or  in  procur- 
ing the  attendance  of  witnesses,  or  in  perpetuating  testi- 
mony, the  marshal  may  require  from  the  person  in  whose 
behalf  the  service  is  to  be  rendered  indemnity  for  such  ex- 
pense ;  and  the  money  so  advanced  shall  be  repaid  to  the  per- 

5  G.  0.  X.  rules    and    orders    in    accordance 

«  In   re  Durham,  2  N.  B.  N.  R.  with  the  provisions  of  section  ten, 

1104.  from   prescribing  a  tariff  of  fees 

T  Analogous  provision  of  act  of  for  all  other  services  of  the  offi- 

1867.  "Sec.  47.     .     .     .     Before  any  cers   of   courts   of  bankruptcy,    or 

dividend    is   ordered,  the  assignee  from  reducing  the  fees  prescribed 

shall  pay  out  of  the  estate  to  the  in  this  section  in  classes  of  cases 

messenger  the  following  fees,  and  to   be   named    in   their   rules   and 

no  more:     (Here  follows  specifica-  orders." 
tion  of  fees.)  As  under  the  act  of  1867   mar- 

"For    cause    shown,    and    upon  shals     received     compensation    as 

hearing  thereon,   such  further  al-  such  and  also  as  messengers,  the 

lowance  may  be  made  as  the  court,  provision    as   to    messengers'    fees 

in  its  discretion,  may  determine.  in   the  earlier  act  is  inserted,   al- 

"The   enumeration   of    the    fore-  though  under  the  present  law  no 

going   fees   shall    not  prevent  the  provision  is  made  for  the  service 

judges,   who   shall   frame   general  of  messengers. 


Ch.  53  FEES    OF   CLERK   AND   MARSHAL.  507 

son  advancing  it  out  of  the  estate  as  part  of  the  cost  of  admin- 
istering the  same.^  He  is  required  to  make  return,  under  oath, 
of  his  actual  and  necessary  expenses  in  the  service  of  every 
warrant  addressed  to  him,  and  for  custody  of  the  property, 
and  other  services,  and  other  actual  and  necessary  expenses 
incurred,  with  vouchers  therefor  whenever  practicable,  and 
also  with  a  statement  that  the  amounts  charged  by  him  are 
just  and  reasonable.^ 

By  the  Act  of  May  28,  1896,^*^  the  marshals  were  put  upon  a 
salary  and  required  to  account  for  and  turn  into  the  Treasury 
of  the  United  States  all  fees  taxable  under  the  law.  The  Bank- 
ruptcy Law  and  the  General  Orders  put  whatever  the  marshal 
may  earn  or  receive  for  services  rendered  in  a  bankruptcy 
proceeding  upon  the  same  plane  as  such  other  fees.  Hence 
it  becomes  necessary  to  examine  the  law  as  to  such  fees.  On 
a  petition  setting  forth  the  facts  under  oath,  a  court  is  vested 
with  discretion  to  allow  such  compensation  as  it  may  deem 
proper  for  the  keeping  of  personal  property  attached  on  mesne 
process,^  ^  and  the  Comptroller  has  held  that  in  litigation 
between  private  individuals,  where  property  has  been  seized 
by  the  marshal  (treating  the  word  "seized"  as  equivalent  to 
"attached"),  he  should  charge  himself  in  his  account  for  fees 
under  the  appropriation  "salaries,  fees  and  expenses  of  mar- 
shals," with  all  the  expenses  allowed  him  by  the  court  for  the 
keeping  of  said  property  under  said  paragraph,  that  are  not 
as  reimbursement  for  expenses  paid  to  outsiders  for  such 
keeping,  and  as  to  expenses  of  the  latter  character,  he  should 
not  charge  himself  or  pay  them  to  the  clerk.^^ 

§804.  Fees  of  deputy  marshals.— A  deputy  marshal,  when 
"engaged  in  service  or  attempted  service  of  any  writ,  process, 
subpoena,  or  other  order  of  the  court,  or  when  necessarily  ab- 
sent from  the  place  of  his  regular  employment,  on  official  busi- 
ness, will  be  allowed  his  actual  traveling  expenses  only,  and 
his  necessary  and  actual  expenses  for  lodging  and  subsistence 
not  to  exceed  $2  per  day  and  the  necessary  actual  expenses 
in  transporting  prisoners ;"^^  and  a  field  deputy  marshal  "as 

8  G.  0.  X.  11  2d    par.    Sec.    829   U.    S.    Rev. 

9  G.  O.  XIX.  Stat. 

10  Act  of  May  28,  1896,  29  Stat.         125  Comp.  Dec.  871. 

L.  140;    2  Supp.  R.  S.   479;    In  re  i.' Sec.  10  of  the  act  of  May  28, 

Comstock,  9  N.  B.  R.  88.  F.  C.  3075;  1896,  29  Stat.  L.  140,  2  Supp.  R.  S. 

In  re  Lowenstein.  3  N.  B.  R.  65,  3  483. 
Ben.  422,  F.  C.  3572. 


508  THE   NATIONAL   BANKRUPTCY    LAW.  Cli.  52 

compensation,  three-fourths  of  the  gross  fees,  including  mile- 
age as  provided  by  law,  earned  by  him,  not  to  exceed  one 
thousand  five  hundred  dollars  per  fiscal  year,  or  at  that  rate 
for  any  part  of  a  fiscal  year;  and  in  addition,  shall  be  al- 
lowed his  actual  necessary  expenses,  not  exceeding  $2  a  day 
while  endeavoring  to  arrest,  under  process,  a  person  charged 
Avith  or  convicted  of  crime ;  provided,  that  a  field  deputy  mar- 
shal may  elect  to  receive  actual  expenses  on  any  trip  in  lieu 
of  mileage."^*  The  law^^  seems  to  require  that,  if  the  mar- 
shal or  his  office  deputy  takes  charge  of  property^  ^  thej'  can 
be  personally  allowed  only  their  actual  expenses  and  any  com- 
pensation that  might  be  taxed  by  the  court  for  such  services 
must  be  turned  into  the  Treasury,  since  their  compensation 
is  restricted  to  their  salary,  and  in  addition  only  actual  ex- 
penses while  engaged  in  service.  A  field  deputy  marshal  can 
receive  nothing  for  this  work,  except  what  can  be  allowed  un- 
der the  law  mentioned.i^  There  is  no  precedent  for  the  allow- 
ance by  a  judge  under  this  paragraph  and  section  to  a  mar- 
shal of  anything  but  a  lump  sum  for  compensation,  three- 
fourths  of  which  the  accounting  officers  allow  the  field  deputy 
to  retain  if  he  performed  the  services.^ ^ 

If  a  court  should  allow  compensation  consisting  of  a  per 
diem  or  sum  as  a  fee  and  a  schedule  of  actual  expenses,  a 
question  would  arise  for  the  consideration  of  the  Comptroller 
of  the  Treasury  as  to  whether  the  expenses  would  be  allowed 
in  toto  as  in  other  expense  accounts,  or  whether  the  allowance 
would  be  lumped  and  three-fourths  of  it  only  paid  over  to  the 
deputy  marshal.  The  marshal  himself,  and  his  office  deputies, 
being  salaried  officers,  are  not  entitled  to  compensation  under 
paragraph  2,  of  Section  829,  U.  S.  Revised  Statutes,  but  it  has 
been  held  that,  where  the  petition  and  affidavits  for  an  order 
to  show  cause  are  required  by  rule  of  court  to  be  served  with 
the  order  and  such  service  is  made  by  a  marshal,  he  is  entitled 
to  a  reasonable  fee  in  addition  to  his  fee  for  serving  the  order 
under  this  subdivision,  although  the  petition  is  not  a  writ;^^ 
and  the  fee  fixed  by  the  latter  section  for  serving  a  writ  is  rea- 
sonable for  the  service.2" 

14  Sec.  11,  act  of  May  28,  1896.  is  Sec.  11,  act  of  May  28.  1896, 
supra.  supra. 

15  Act  of  May  28,  1896.  i9  Sec.  829,  U.  S.  Rev.  Stat. 

16  Par.  2,  Sec.  829,  U.  S.  Rev.  ^n  in  re  Damon,  104  P.  R.  775,  5 
Stat.  A.  B.  R.  133. 

IT  Par.    2,    Sec.    829.    U.    S.    Rev. 
Stat. 


Ch.  52  FEES    OF    MARSHAL.  509 

§  805.  Fees  when  acting  as  keeper.— When  the  marshal  him- 
self or  an  ofi&ce  deputy  acts  as  keeper,  the  keeper's  fees  al- 
lowed by  the  court  should  be  collected  by  the  marshal  and 
turned  over  to  the  clerk  of  the  court  for  deposit  in  the  United 
States  Treasury.  On  the  other  hand,  when  a  field  deputy 
marshal  acts  as  keeper  or  custodian,  the  marshal  should  pay 
the  deputy  three-fourths  of  the  compensation  allowed  by  the 
court,  the  difference  being  profit  made  by  the  Government. 
The  entire  amount  allowed  by  the  court  is  collected  and  turned 
over  to  the  clerk  of  the  court  for  deposit,  and  the  field  deputy 
marshal  is  paid  his  share— (three-fourths)  of  the  fees  from  the 
appropriation  "Salaries,  fees  and  expenses  of  marshals,"  as  in 
other  cases.  If  the  keeper  is  not  a  marshal  or  deputy  marshal, 
the  transaction  does  not  enter  into  any  Government  account; 
but  payment  should  be  made  by  the  litigants  to  the  keeper  or 
custodian  direct.-^ 

§  806.  Fee— Disposition  of— Rate,— The  fact  that  the  mar- 
shal is  not  personally  benefited  by  the  compensation  allowed 
does  not  prevent  his  havinc:  it.  He  does  get  personal  com- 
pensation for  all  services  rendered  hy  him  in  the  ^yay  of  sal- 
ary; as  does  his  office  deputy;  and  the  fees  formerly  allowed 
him  as  compensation  are  still  collected  in  suits  of  all  kinds  as 
a  fund  out  of  which  salaries  shall  be  paid,  and  the  three-fourths 
of  the  fees  earned  by  the  field  deputies,  so  the  fact  that  there 
is  a  salary  is  immaterial.  He  should  be  allowed  pay  the  same 
as  a  receiver  would  have  been,  had  one  been  appointed.  It 
has  been  held  in  a  case  where  he  took  possession  of  property 
and  held  it  17  days  that  $20  was  reasonable,  in  addition  to 
actual  expenses ;--  and  where  the  marshal  was  in  charge  of  the 
property  for  a  month  an  allowance  for  the  deputies,  actually  in 
charge,  of  $2.50  per  day  was  made  in  addition  to  actual  ex- 
penses ;-^  and  for  taking  an  inventory  and  otherwise  assist- 
ing, $3  a  day  and  actual  expenses  was  allowed.^*  When  a 
taxation  is  made  it  is  conclusive  and  the  marshal  is  entitled 
to  the  fees  taxed  unless  there  is  fraud  or  bad  faith  on  his 
part.-5    If  he  has  two  or  more  processes  in  his  hands  at  the 

21  4  Comp.  Dec.  637.  3  A.  B.  R.  625,  99  F.  R.  404. 

22  In  re  Adams  Sartorial  Art  24  in  re  Woodard.  1  N.  B.  N.  430, 
Co.,   2   N.  B.   N.  R.   535,,   101   F.   R.     2  A.  B.  R.  692,  95  F.  R.  955. 

215.  4  A.  B.  R.  107.  -■••  In  re  Rein,  13  N.  B.  R.  551,  8 

2:*  In  re  Scott,  2  N.  B.  N.  R.  440,     Ben.  384.  F.  C.  11678. 


510  THE   NATIONAL  BANKRUPTCY   LAW.  ClI.  53 

same  time  in  the  same  proceeding,  which  may  be  served  at 
the  same  time  and  place,  mileage  can  be  charged  only  once, 
but  if  additional  travel  is  necessary  such  additional  mileage 
may  be  charged.^"  It  has  been  held  that  he  is  entitled  to  make 
a  reasonable  charge  for  the  service  of  a  petition  upon  which 
has  been  granted  an  order  to  show  cause,  in  addition  to  the 
statutory  fee  for  the  service  of  the  order,  though  the  papers 
are  bound  together  and  served  at  the  same  time.^^ 

§  807.  Fees  of  receivers.— The  court  is  authorized  to  appoint 
receivers  or  the  marshal  to  take  charge  of  the  property  of  the 
bankrupt  between  the  filing  of  the  petition  and  the  appoint- 
ment of  the  trustee,  in  which  case  the  law  is  silent  as  to  the 
rate  of  compensation.  The  court  should,  how^ever,  in  its  dis- 
cretion, allow  for  such  services  a  just  and  reasonable  compen- 
sation payable  out  of  the  .estate,  which  need  not  necessarily  be 
a  per  diem  allowance,  but  should  be  governed  by  the  surround- 
ing circumstances.28  It  has  been  held  that  as  such  receivers 
are  appointed  only  under  special  circumstances,  an  unvarying 
rate  of  compensation  cannot  be  equitably  applied,  but  it 
should  be  left  to  the  court's  discretion.^^  If  a  creditor  desires 
to  object  to  a  receiver's  account  he  should  promptly  file  ex- 
ceptions thereto  with  the  referee.^o 

A  receiver  is  also  authorized  to  conduct  the  business  of  the 
bankrupt  for  a  limited  period,  if  necessary,  in  the  interest  of 
the  estate.  For  such  services  these  officers  are  entitled  to  com- 
pensation, but  the  statute  provides  that  the  rate  must  not  ex- 
ceed that  allowed  trustees  for  similar  services.  As  there  is 
nothing  in  the  law  which  provides  compensation  to  a  trustee 
other  than  the  usual  fees  and  commissions  for  taking  charge  of 
and  conducting  the  affairs  of  the  bankrupt,  the  evident  inten- 
tion of  Congress  was  that  the  fee  of  the  receiver  or  marshal 
should  not  exceed  that  allowed  to  the  trustee  in  representing 
the  estate,  to  which  they  would  be  entitled  in  addition  to  actual 
expenses. 

2«  In  re  Donohoe,  8  N.  B.  R.  453,  29  in  re  Gerson,  1  A.  B.  R.  251,  2 

F.  C.  3979.  N.  B.  N.  R.   483. 

2-  In  re  Damon,  5  A.  B.  R.  133.  ••"1  In  re  Reliance  Storage  &  Ware- 
as  In  re  Scott,  99  F.  R.  404,  3  A.  house  Co.,  100  F.  R.  619,  4  A.  B.  R. 
B.  R.  625.  49. 


CHAPTER  LIIL 

DUTIES    OF    ATTORNEY-GENERAL. 

§808.  (Sec.  53a)  'Statistics  of  bankruptcy  proceedings 
'for  Congress.— The  Attorney  General  shall  annually  lay 
'before  Congress  statistical  tables  showing  for  the  whole  comi- 
'try,  and  by  states,  the  number  of  cases  during  the  year  of 
'voluntary  and  involuntary  bankruptcy;  the  amount  of  the 
'  property  of  the  estates ;  the  dividends  paid  and  the  expenses 
'of  administering  such  estates;  and  such  other  like  informa- 
'tion  as  he  may  deem  important.' 


CHAPTER  LIV. 

STATISTICS    OF   BANKRUPTCY   PROCEEDINGS. 

§809.   (54a)    Officers  to  furnish  at-       810.  Failure  to  report, 
torney-general  information. 

§809.  (Sec.  54a)  'Officers  to  furnish  Attorney  General 
Information.— OflScers  shall  furnish  in  writing  and  transmit 
by  mail  such  information  as  is  within  their  knowledge,  and 
as  may  be  shown  by  the  records  and  papers  in  their  posses- 
sion, to  the  Attorney  General,  for  statistical  purposes,  within 
ten  days  after  being  requested  by  him  to  do  so.' 

§  810.  Failure  to  report.— The  neglect  of  either  the  referee, 
trustee,  receiver,  marshal  or  clerk  of  court^  to  furnish  such 
information  as  ma.y  be  called  for,  renders  such  officer  liable  to 
removal.-  These  reports  are  called  for  by  the  Attorney  Gen- 
eral, for  which  purpose  the  Department  of  Justice  furnishes 
the  necessary  blanks.  It  is  entirely  within  his  discretion  as 
to  when  and  what  reports  are  called  for. 
1  Sec.  1  (18),  act  of  1898.  2  Sec.  34a,  act  of  1898. 


511 


CHAPTER  LV. 

MEETINGS  OF    CREDITORS. 

§811.   (55a)   Time     and     place     of      819.  Appointment  of  trustee. 

creditors'  meetings.  820.  Duties  of  creditors  at  meet- 

812.  Practice.  ings. 

813.  First  meeting.  821.  Subsequent  meetings. 

814.  Adjournments.  822.  Practice. 

815.  Business  transacted.  823.  Called  meetings. 

816.  Judge  or  referee  to  pre-  824.  Final  meetings. 

side.  825.  Practice. 

817.  Bankrupt's  attendance.  826.  Dividend. 

818.  Allowance    or    disallow- 
ance of  claims. 

§  811.    '  (Sec.  55a)     Time  and  place  of  creditors'  meetings.— 

'The  court  shall  cause  the  first  meeting  of  the  creditors  of  a 
'bankrupt  to  be  held,  not  less  than  ten  nor  more  than  thirty 
'days  after  the  adjudication,  at  the  county  seat  of  the  county 
'in  which  the  bankrupt  has  had  his  principal  place  of  business, 
'  resided,  or  had  his  domicile ;  or  if  that  place  would  be  mani- 
'festly  inconvenient  as  a  place  of  meeting  for  the  parties  in 
'interest,  or  if  the  bankrupt  is  one  who  does  not  do  business, 
'  reside,  or  have  his  domicile  within  the  United  States,  the  court 
'shall  fix  a  place  for  the  meeting  which  is  the  most  convenient 
'for  parties  in  interest.  If  such  meeting  should  by  any  mis- 
'  chance  not  be  held  within  such  time,  the  court  shall  fix  the 
'date,  as  soon  as  may  be  thereafter,  when  it  shall  be  held.' 

§  812.  Practice. — After  adjudication  the  judge  may  refer 
the  case  either  generally  or  specially  to  any  referee  in  his  dis- 
trict;^ or  the  clerk  will  refer  the  case  in  the  judge's  absence, 
on  the  next  day  after  the  last  day  on  which  pleadings  may  be 
filed  in  involuntary  cases;  and  when  the  petitions  in  volun- 
tary cases  are  filed.^  The  order  of  reference  should  name  a  day 
for  the  bankrupt  to  attend  before  the  referee,  after  which  he 
will  be  subject  to  the  orders  of  the  court,  and  the  time  when 
and  place  where  the  referee  will  act  upon  the  matters  arising 
in  the  cases  before  him  shall  be  fixed  by  order  of  the  judge  or 
referee.^ 

1  Sec.  22,  act  of  1898.  s  G.  0.  XII. 

2  Sees.  18e,  f  and  g,  act  of  1898. 

512 


Ch.  55  CREDITORS'   MEETINGS.  513 

At  the  first  meeting  of  the  creditors  after  the  adjudication 
or  after  a  vacancy  has  occurred  in  the  office  of  trustee,  or 
after  the  estate  has  been  reopened,  a  composition  set  aside  or 
discharge  revoked,  they  should  appoint  one  or  three  trustees 
of  such  estate,^  and  fix  the  amount  of  their  bond,  which  may 
at  any  time  be  increased.^  Creditors  are  entitled  to  at  least 
ten  days'  notice  by  mail,  from  the  referee  to  their  respective 
addresses,  of  all  meetings  of  creditors,  in  addition  to  which 
notice  of  the  first  meeting  must  be  published  at  least  once,  and 
as  many  times  additional  as  the  court  may  direct,  the  last 
publication  to  be  at  least  one  week  prior  to  the  date  fixed  for 
the  meeting.^  Failure  to  give  such  notice  as  required,  would 
render  all  subsequent  proceedings  void."^ 

§813.  First  meeting.— The  term  "first  meeting"  does  not 
necessarily  mean  the  first  assembling  of  the  creditors,  but  refers 
to  the  meeting  called  to  choose  a  trustee;  for  there  may  be 
adjournments  if  required  as  may  readily  happen  where  the 
creditors  are  numerous  and  the  interests  involved  large,  but 
all  adjournments  are  the  same  meeting  in  contemplation  of 
law;  and  an  objection  to  the  appointment  of  a  particular  trus- 
tee made  at  that  stage  is  considered  as  continuing  unless  it 
appears  to  have  been  withdrawn.  The  meeting  is  for  business 
and  must  be  held  in  strict  accordance  with  the  notice,  at  the 
time  and  place  specified,  not  at  some  other  time,  sooner  or 
later,  or  another  place,  though  near  by;  and,  if  no  creditors 
appear,  the  meeting  is  as  effectual  as  if  they  were  present  or 
represented,  the  judge  or  referee  not  being  authorized  or  re- 
quired to  wait  for  or  ''count  a  quorum;"  and,  in  such  case, 
if  the  schedules  disclose  no  assets,  the  court  may  order  that  no 
trustee  be  appointed,^ 

§814.  Adjournments.— With  the  exercise  of  proper  legal 
discretion  a  referee  has  entire  control  over  proceedings  pend- 
ing before  him,  including  the  power  to  grant  or  refuse  adjourn- 
ments and  postponements  f  but  it  has  been  held  that  he  could 

^  Sec.  44,  act  of  1898.  96  F.  R.  696;  In  re  Phelps,  1  N.  B. 

•Sec.  50c,  act  of  1898.  R.  139,  F.  C.  11071;   In  re  Norton, 

'•  Sec.  58,  act  of  1898.  6  N.  B.  R.  297,  F.  C.  10348. 

-  In  re  Hall,  2  N.  B.  R.  68,  F.  C.  9  In  re  Hyman,  2  N.  B.  R.  107,  3 

5922.  Ben.  28,  F.  C.  6984;  In  re  Chemy, 

X  G.  O.  XV:  In  re  Eagles  &  Crisp,  19  N.  B.  R.  16,  F.  C.  2637. 
2  N.  B.  N.  R.  462,  3  A.  B.  R.  733. 

33 


514  THE   NATIONAL  BANKRUPTCY   LAW.  Ch.  55 

not  adjourn  a  meeting  fixed  for  a  certain  day,  on  which  he 
was  prevented  from  attending,  by  orders  of  adjournment  sent 
his  assistant,  while  he  remained  absent.^*^  An  adjournment 
will  not  be  granted  on  the  ground  of  surprise  where  the  sur- 
prise relied  upon  is  not  as  to  a  fact,  but  arises  from  an  over- 
sight of  a  provision  of  law.^^ 

§  815.  b.  'Business  at  first  meeting.— At  the  first  meeting  of 
'creditors  the  judge  or  referee  shall  preside,  and,  before  pro- 
'ceeding  with  the  other  business,  may  allow  or  disallow  the 
'claims  of  creditors  there  presented,  and  may  publicly  examine 
'the  bankrupt,  or  cause  him  to  be  examined  at  the  instance  of 
'any  creditor. '^^ 

§  816.  Judge  or  referee  to  preside.— Either  the  judge  or 
referee  presides  and  should  be  punctually  present  at  the  time 
and  place  specified  in  the  notice.  The  referee's  duties  being 
judicial,  he  does  not  otherwise  participate  in  the  meetings,  but 
should  conduct  himself  with  dignity  and  impartiality  as  most 
familiar  with  the  matters  in  question. 

§817.  Bankrupt's  attendance.— A  bankrupt  should  attend 
the  first  meeting,  if  required  by  the  court  to  do  so,  and  when 
present  at  such  meeting  and  at  such  other  time  as  the  court 
shall  order,  he  must  submit  to  an  examination  concerning  the 
conduct  of  his  business,  the  cause  of  his  bankruptcy,  his  deal- 
ings with  his  creditors  and  other  persons,  the  amount,  kind  and 
whereabouts  of  his  property,  and,  in  addition,  all  matters 
affecting  the  administration  and  settlement  of  his  estate.^ ^ 

§  818.  Allowance  or  disallowance  of  claims.— The  court 
should  be  able  without  difficulty  or  delay  to  pass  on  all  or  most 
of  the  claims  with  the  assistance  of  the  schedules,  the  bank- 
rupt, creditors  and  others  interested.  Claims  of  secured  cred- 
itors and  of  those  who  have  priority,  may  be  allowed  to  enable 
such  creditors  to  participate  in  the  proceedings  at  the  meetings 
held  prior  to  the  determination  of  the  value  of  their  securities 
or  priorities.^ ^    If  a  particular  claim  is  objected  to,  the  question 

10  In  re  Dickinson,  18  N.  B.  R.  1867.  "Sec.  4.  .  .  .  Every  reg- 
514,  F.  C.  3895.  ister   in   bankruptcy  shall     .     .     . 

11  In  re  Finlay,  104  F.  R.  675,  3  hold  and  preside  at  meetings  of 
A.  B.  R.  738.  3  N.  B.  N.  R.  78;  see  creditors." 

In  re  Blankfein,  2  N.  B.  N.  R.  49,         la  Sec.  7a,  act  of  1898. 
97  F.  R.  91,  3  A.  B.  R.  165.  i*  Sec.  57e,  act  of  1898. 

12  Analogous  provision  of  act  of 


C'H.  00  MEETINGS    OF   CREDITORS.  515 

should  be  heard  as  soon  as  feasible,  and,  if  the  judge  or 
referee  is  not  satisfied  with  the  weight  of  evidence,  the  hear- 
ing may  be  postponed  and  heard  at  some  subsequent  time  and, 
if  the  creditor  objects  to  such  postponement,  he  should  have 
the  objection  entered  and  the  question  certified  to  the  judge  in 
case  the  postponement  was  by  the  referee  ;i^  or  if  claims  are 
presented  which  do  not  appear  on  the  bankrupt's  schedules 
in  an  involuntary  proceeding  action  on  them  may  be  post- 
poned until  after  the  election  of  the  trustee.^  ^  It  has  been 
held  that  the  refusal  of  a  referee  to  postpone  the  first  meeting, 
after  holding  certain  proxies  invalid,  is  not  an  abuse  of  his  dis- 
cretion.^'^   See  also  proof  and  allowance  of  claims,  §  839  et  seq. 

§  819.  Appointment  of  trustee.— See  Chap.  44,  ante,  §§  731- 
744. 

§  820.  c.  'Duties  of  creditors  at  meetings.— The  creditors 
'shall  at  each  meeting  take  such  steps  as  may  be  pertinent  and 
'  necessary  for  the  promotion  of  the  best  interests  of  the  estate 
'and  the  enforcement  of  this  act.' 

§821.  d.  'Subsequent  meetings.— A  meeting  of  creditors, 
'subsequent  to  the  first  one,  may  be  held  at  any  time  and  place 
'when  all  of  the  creditors  who  have  secured  the  allowance  of 
'their  claims  sign  a  written  consent  to  hold  a  meeting  at  such 
'time  and  place. '^^ 

15  In  re  Jackson,  14  N.  B.  R.  449,  his  oath,  and  he  shall  also  produce 

7  Biss.  280,  F.  C.  7123;   see  In   re  and  file  vouchers  for  all  payments 

Stevens,  4  N.  B.  R.  122,  F.  C.  13391.  for    which    vouchers    shall    be    re- 

ifi  In  re  Milwain,  12  N.  B.  R.  358,  quired   by  any  rule  of  the  court; 

F.  C.  9623.  he  shall  also  submit  the  schedule 

IT  In  re  McGill,  106  F.  R.  57,  5  of    the    bankrupt's   creditors    and 

A.  B.  R.  155.  property  as  amended,  duly  verified 

i«  Analogous  provision  of  act  of  by  the  bankrupt,  and  a  statement 

1867.    "Sec.  27.     .     .     .     At  the  ex-  of  the  whole  estate  of   the   bank- 

piration  of  three  months  from  the  rupt   as    then    ascertained,    of   the 

date  of  the  adjudication  of  bank-  property  recovered  and  of  the  prop- 

ruptcy    in    any   case,    or   as   much  erty    outstanding,    specifying    the 

earlier  as  the  court  may  direct,  the  cause  of  its  being  outstanding,  al- 

court,  upon  request  of  the  assignee,  so  what  debts  or  claims  are  yet  un- 

shall  call  a  general  meeting  of  the  determined,  and  stating  what  sum 

creditors,     of    which     due    notice  remains   in   his   hands.      At   such 

shall    be   given,   and   the   assignee  meeting  the  majority  in  value  of 

shall   then   report,   and   exhibit  to  the   creditors   present   shall   deter- 

the  court  and  to  the  creditors  just  mine  whether  any  and  what  part 

and   true   accounts    of   all    his   re-  of  the  net  proceeds  of  the  estate, 

ceipts   and   payments,   verified  by  after    deducting   and    retaining  a 


51G 


THE    NATIONAL,   BANKRUPTCY    LAW. 


Cu.  55 


.^  822.  Practice.— In  the  event  that  no  trustee  is  appointed 
by  reason  of  the  fact  that  the  schedule  of  a  voluntary  bank- 
rupt discloses  no  assets,  and  if  no  creditor  appears  at  the  first 
meeting,  the  court  may  order  that  no  meetings  other  than  the 
first  meeting  shall  be  called.^'^  Whenever  by  reason  of  a 
vacancy  in  the  office  of  trustee,  or  for  any  other  cause,  it 
becomes  necessary  to  call  a  special  meeting,  the  court  may  call 
such  meeting.-^ 

§  823.  e.  'Called  meetings.— The  court  shall  call  a  meeting  of 
'creditors  whenever  one-fourth  or  more  in  number  of  those 
'who  have  proven  their  claims  shall  file  a  written  request  to 
'that  effect;  if  such  request  is  signed  by  a  majority  of  such 
'creditors,  which  number  represents  a  majority  in  amount  of 
'such  claims,  and  contains  a  request  for  such  meeting  to  be  held 
'at  a  designated  place,  the  court  shall  call  such  meeting  at  such 
'place  within  thirty  days  after  the  date  of  the  filing  of  the 
'  request. ' 

§824.  f.  'Final  meetings.— Whenever  the  affairs  of  the 
'estate  are  ready  to  be  closed  a  final  meeting  of  creditors  shall 
'be  ordered. '21 


sum  sufficient  to  provide  for  all 
undetermined  claims  which,  by 
reason  of  the  distant  residence  of 
the  creditor,  or  for  other  sufficient 
reason,  have  not  been  proved,  and 
for  other  expenses  and  contingen- 
cies, shall  be  divided  among  the 
creditors;  but  unless  at  least  one- 
half  in  value  of  the  creditors  shall 
attend  such  meeting,  either  in  per- 
son or  by  attorney,  it  shall  be  the 
duty  of  the  assignee  so  to  deter- 
mine.    .     .     . 

"Sec.  28.  .  .  .  If  by  accident, 
mistake,  or  other  cause,  without 
default  of  the  assignee,  either  or 
both  of  the  said  second  and  third 
meetings  should  not  be  held  with- 
in the  times  limited,  the  court 
may,  upon  motion  of  an  interested 
party,  order  such  meetings,  with 
like  effect  as  to  the  validity  of  the 
proceedings  as  if  the  meeting  had 
been  duly  held." 


19  G.  O.  XV. 

20  G.  0.  XXV. 

21  Analogous  provision  of  act  of 
1867.  "Sec.  28.  .  .  .  That  the 
like  proceedings  shall  be  had  at 
the  expiration  of  the  next  three 
months,  or  earlier,  if  practicable, 
and  a  third  meeting  of  the  credit- 
ors shall  then  be  called  by  the 
court,  and  a  final  dividend  then  de- 
clared, unless  any  action  at  law  or 
suit  in  equity  be  pending,  or  un- 
less some  other  estate  or  effects  of 
the  debtor  afterwards  come  to  the 
hands  of  the  assignee,  in  which 
case  the  assignee  shall,  as  soon  as 
may  be,  convert  such  estate  or  ef- 
fects into  money,  and  within  two 
months  after  the  same  shall  be  so 
converted,  the  same  shall  be  di- 
vided in  manner  aforesaid.  Fur- 
ther dividends  shall  be  made  in 
like  manner  as  often  as  occasion 
requires;  and  after  the  third  meet- 


(II.  ."ia  MEETINGS  OF  CREDITORS.  517 

§  825.  Practice. — The  trustee  must  lay  before  the  final  meet- 
ing a  detailed  statement  of  the  administration  of  the  estate; 
and  make  final  reports  and  file  final  accounts  with  the  court 
fifteen  days  before  the  day  fixed  for  such  meeting,-^  of  which 
ten  days'  notice  must  be  given  all  creditors.-^ 

§  826.  Dividend  and  final  meetings.— The  meeting  for  the 
declaration  of  a  dividend  may  properly  and  conveniently  be 
combined  ordinarily  with  the  meeting  for  the  payment  of  such 
dividend;  and,  where  there  is  but  one  dividend,  there  can  be 
no  objection  to  a  further  consolidation  in  the  interest  of  econ- 
omy, both  of  time  and  expense,  proper  notice  being  given.^^ 

ing  of   creditors   no  further  meet-  23  Sec.  58a,  act  of  1898. 

ing  shall  be  called,  unless  ordered  2*  In  re  Smith,  1  N.  B.  N.  404,  2 

by  the  court."  A.  B.  R.  648. 
22  Sec.  47a,  act  of  1898. 


CHAPTER  LVI. 


VOTERS   AT   MEETINGS  OF  CREDITORS. 


§827.   (56a)   Voters  at  meetings  of 
creditors. 

828.  Who  entitled  to  vote. 

829.  Powers  of  creditors. 

830.  Proof  as  to  voter's  qualifica- 

tion. 

831.  Creditors,      individual      and 

partnership. 

832.  What  claims  are  present. 


833.  Postponement   of    claims    as 

affecting  election. 

834.  Objections  to  claims. 

835.  Attorney,    creditor    may    act 

by. 

836.  b.    When    secured    creditors 

can  vote. 

837.  Secured,  meaning  of. 

838.  Extent  of  voting  power. 


§  827.     '  (Sec.  56a)    Voters  at  meetings  of  creditors.— Cred- 

'  iters  shall  pass  upon  matters  submitted  to  them  at  their 
'meetings  by  a  majority  vote  in  number  and  amount  of  claims 
*of  all  creditors  whose  claims  have  been  allowed  and  are 
'present,  except  as  herein  otherwise  provided. '^ 

§828.  Who  entitled  to  vote.— To  entitle  creditors  to  par- 
ticipate in  and  vote  at  meetings  of  creditors,  they  must  own 
claims,  provable  in  bankruptcy,  which  are  neither  secured, 
entitled  to  priority  of  payment,  nor  preferred,  and  must  not 
only  have  proved  such  claims  but  have  had  them  allowed.- 
Such  creditors  as  are  prohibited  from  proving  their  debts  will 
not  be  allowed  to  vote.^  The  mere  filing  of  objections  to  a 
claim  should  not  exclude  a  creditor  from  voting,  if  he  is 
otherwise  qualified.'* 

§  829.  Powers  of  creditors.— The  general  creditors  in  the 
election  of  the  trustee  have  power  only  to  vote  for  him.^  A 
creditor  has  a  right  to  change  his  mind  after  voting  provided 


1  Analogous  provision  of  act  of 
1867.  "Sec.  23.  .  .  .  And  any 
creditor  may  act  at  all  meetings 
by  his  duly  constituted  attorney 
the  same  as  though  personally 
present." 

For  the  time  and  place  for  hold- 
ing meetings  see  Sec.  55  of  the 
law. 

2  In  re  Eagles  &  Crisp,  2  N.  B. 
N.  R.  462,  3  A.  B.  R.  733.  99  F.  R. 
696;   In  re  Walker,  1  N.  B.  N.  510. 


3  A.  B.  R.  35,  96  F.  R.  550;  In  re 
Richards,  2  N.  B.  N.  R.  1027,  103 
P.  R.  849;  In  re  Brown,  2  N.  B 
N.  R.  590;  In  re  Brisco,  2  N.  B.  R 
78,  F.  C.  1886;  In  re  Hill.  F.  C 
6481;    In  re  Altenheim,  F.  C.  268 

^  In  re  Stevens,  4  N.  B.  R.  122 
F.  C.  13391. 

•i  In  re  Kelly  Dry  Goods  Co..  10? 
F.   R.   747,   4   A.  B.  R.   528. 

s  In  re  Campbell,  17  N.  B.  R.  4, 
3  Hughes,  276,  F.  C.  2348. 


518 


ClI.  56  VOTERS— ATTORNEYS.  519 

he  does  so  in  time;  and  a  corrupt  vote  should  be  rejected;  and 
il"  the  result  is  not  affected  by  such  rejection,  a  new  election 
need  not  be  ordered.^  A  creditor  cannot  change  his  vote  on 
the  ground  of  his  own  mistake,  after  the  meeting  has  ad- 
journed, and  thereby  give  the  court  of  bankruptcy  the  power 
to  appoint  a  trustee;  but  such  creditor  may  explain  his  mis- 
take, or  make  other  objection  as  to  the  choice  of  trustee  to  the 
court  having  to  approve  the  selection.^  The  fact  that  bank- 
rupt's friends  have  endeavored  to  buy  up  the  debts  against 
him  and  stop  the  bankruptcy  proceedings  constitutes  no  reason 
for  not  voting  upon  the  debts.'^ 

§  830.  Proof  as  to  voter's  qualification.— A  referee  should 
require  satisfactory  evidence  of  a  creditor's  right  to  vote  for  a 
trustee;^  and,  when  a  party  is  aggrieved  by  the  ruling  on  his 
application  for  an  opportunity  to  prove  his  right  to  vote,  the 
meeting  may  be  adjourned,  and  provision  made  for  the  deter- 
mination of  his  right  before  the  final  vote  is  taken.^^  The 
referee  is  not  required,  as  was  the  register  under  the  act  of 
1867,  to  certify  all  questions  of  fact  and  law  to  the  judge  for 
decision  and  hence  the  holding  that  a  register  could  not,  with- 
out special  order,  hear  testimony  as  to  creditor's  right  to  vote, 
no  longer  applies.^  ^ 

§  831.  Creditors,  individual  and  partnership.— Creditors  who 
have  proved  a  debt  against  a  partner  of  a  firm  in  bankruptcy 
have  no  right  to  vote  for  a  trustee  for  the  firm,  only  partner- 
ship creditors  being  so  entitled  ;i2  though,  in  case  of  the  sep- 
arate bankruptcy  of  one  member  of  a  firm,  both  individual 
and  joint  creditors  are  entitled  to  prove  their  claims  and  vote 
for  the  trustee,  but  the  joint  creditors  do  not  compete  in  the 
separate  assets.^  ^     A  letter  of  attorney  executed  on  behalf  of 

6  In  re  Pfromm,  8  N.  B.  R.  357.  12  In  re  Eagles  &  Crisp,  2  N.  B. 

F.  C.  11061.  N.  R.  462,  3  A.  B.  R.  733,  99  F.  R. 

Tin  re  Scheiffer,  2  N.  B.  N.  R.  696;   In  re  Phelps,  1  N.  B.  R.  139, 

179,  F.  C.  12445.  F.  C.  11071;  Sec.  5b,  act  of  1898. 

8  In  re  Frank,  5  N.  B.  R.  194,  5  13  In  re  Falkner,  16  N.  B.  R.  503. 
Ben.  164,  F.   C.  5050.  F.  C.  4624;  In  re  Webb,  16  N.  B.  R. 

9  In  re  Northern  Iron  Co.,  14  N.  258,  4  Sawy.  326,  F.  C.  17317;  Wil- 
B.  R.  356.  F.  C.  10322.  kins  v.   Davis,    15   N.   B.   R.  60,  2 

10  In  re  Spencer,  18  N.  B.  R.  199.  Lowell,  511,  F.  C.  17664;  see  Part- 
F.  C.  13229.  nership,  ante,  §  130,  et  seq. 

11  In  re  Noble,  3  N.  B.  R.  25,  3 
Ben.  332,  F.  C.  10282. 


020  THE   NATIONAL  BANKRUPTCY   LAW.  Cu.  5G 

a  partnership  must  contain  the  oath  of  the  person  executing 
it  showing  that  he  is  a  member  of  the  partnership.^^ 

§  832.  What  claims  are  present.— For  voting  purposes  a 
majority  in  number  and  amount  of  claims  of  all  creditors 
whose  claims  have  been  allowed  and  "are  present"  controls. 
The  purpose  of  this  clause  is  to  vest  the  power  of  voting  in 
those  creditors  who  are  present  and  not  to  allow  a  delay  of 
the  proceedings  by  those  who  are  not  sufficiently  interested 
to  participate  or  attend.  If  a  claim  is  allowed,  but  not  repre- 
sented by  proxy  or  by  the  creditor  in  person,  or  if  allowed, 
but  excluded  from  voting  because  of  defective  proxies,  they 
are  not  to  be  treated  as  present,  in  computing  the  number 
and  amount  of  claims  for  voting  purposes.^"' 

§  833.  Postponement  of  claim  as  affecting  election.— The 
effect  of  allowing  or  postponing  the  hearing  on  a  particular 
claim  affects  only  the  creditor's  right  to  vote  at  the  first  meet- 
ing, and,  if  it  appears  that  his  vote  would  not  have  affected 
the  result,  the  proceedings  will  not  be  disturbed  to  permit  him 
to  exercise  a  barren  right ;  but,  if  the  result  would  have  been 
affected  by  his  vote,  the  judge  or  referee  may  set  aside  the 
result,  and  order  a  new  vote  to  be  taken.^*^  Claims  proved 
after  the  election  of  a  trustee  will  not  entitle  claimant  to  vote 
thereon  to  change  the  result  though  an  appeal  has  been  taken 
from  the  election;^'  and  claims  proved  before  the  election  and 
sold  and  assigned  after  proof  must  be  voted  upon  by  the  owner 
and  not  by  the  original  creditor,  the  owner  being  entitled  to 
one  vote.^^  If  a  claim  is  split  up  for  the  purpose  of  increas- 
ing the  number  of  creditors,  either  before  or  after  proof,  they 
should  be  counted  as  but  one,  or  the  better  rule  would  be  to 
deny  them  the  privilege  of  voting.  Claims  proved  and  filed 
with  the  referee  may  be  postponed  for  investigation  by  the 
trustee,  and  not  allowed  to  be  voted,^'^  and  such  course,  for 
instance,  should  be  taken  where  the  officers  of  a  bankrupt 

1*  In  re  Finlay,  3  A.  B.  R.  738.  Canal,  R.  R.  &  Iron  Co.,  7  N.  B.  R. 

15  In  re  Henschel,  113  F.  R.  443,  376,  F.  C.  7997. 

7  A.  B.  R.  662;    In  re  McGill,  106  it  In     re     Lake     Superior,     etc.. 

F.  R.  57,  45  C.  C.  A.  218,  5  A.  B.  R.  supra. 

155;    In    re    Mackellar,    116    F.   R.  is  in  re  Frank,  5  N.  B.  R.  194,  5 

547,  8  A.  B.  R.  669.  Ben.  164.  F.  C.  5050. 

i«  In  re  Eagles  &  Crisp,  2  N.  B.  is  In    re   Frank,   supra:    but  see 

N.  R.  462,  3  A.  B.  R.  733.  99  F.  R.  In  re  Barbusch,  9  N.  B.  R.  478,  F. 

696;     In    re    Lake    Superior    Ship  C.  1086. 


Cli.  5G  VOTERS— ATTORNEYS.  5:21 

corporation  present  large  claims  against  it.^"  The  vote  for 
trustee  should  be  taken  at  the  earliest  practicable  moment, 
but  creditors  who  have  proved  their  claims  may,  if  they  choose, 
postpone  action  until  others  have  proved,  though  they  are  not 
compelled  to  do  so.-^ 

§  834.  Objections  to  claims.— When  objection  is  made  to  the 
proof  of  a  claim,  it  should  be  heard  in  order  to  determine  if 
made  in  good  faith,  and  if  well  founded,  the  claim  should  not 
be  allowed  for  voting  purposes.  It  does  not  rest  in  the  discre- 
tion of  the  referee  to  allow  claims  as  voting  bases  when  an  ap- 
parently genuine  objection  is  made,  though  in  proper  cases  a 
provisional  allowance  or  disallowance  may  be  made  in  order 
that  a  trustee  may  be  expeditiously  elected,  but  the  proceed- 
ings should  not  be  so  summary  as  to  exclude  consideration  of 
all  objections.-'-  The  court  should  not  permit  the  selection  of 
a  trustee  to  be  indefinitely  tied  up  by  obstructive  tactics,  and 
which  are  obviously  for  purpose  of  delay.^^  Creditors  cannot 
by  merely  filing  objections  to  a  claim  exclude  a  bona  fide 
claimant  from  voting  on  the  election  of  a  trustee,  though  such 
action  by  a  referee  will  not  be  reviewed  when  no  objection  is 
made  to  the  election  nor  facts  presented  on  which  to  raise  the 
question  of  the  rights  of  creditors  in  the  case.^^ 

For  a  discussion  of  objections  to  the  election  of  a  trustee  in 
bankrupt's  interest,  see  ante,  §  734. 

§  835.  Attorney,  creditors  may  act  by.— While  this  section 
does  not  in  so  many  words  provide  for  representation  at 
creditors'  meetings  otherwise  than  in  the  person  of  the  cred- 
itor, yet  in  view  of  the  fact  that  the  term  "creditor"  com- 
prehends any  one  who  owns  a  demand  or  claim  provable  in 
bankruptcy,  and  may  include  his  duly  authorized  agent, 
attorney  or  proxy.^-"-  it  is  clear  that  the  law-makers  intended 
to  sanction  a  mode  of  representation  through  a  duly  authorized 
agent,  attorney  or  proxy  and  this  was  so  understood  by  the 
Supreme  Coui't.^^'     This  is  further  borne  out  by  the  fact  that 

20  In  re  Lake  Superior,  supra;  23  in  re  Malino,  supra;  In  re 
see  In  re  Herman,  3  N.  B.  R.  153,  Sumner.  4  A.  B.  R.  123.  101  F.  R. 
F.  C.   6425;    In  re  Chamberlain,  3     224. 

N.  B.  R.  173,  F.  C.  2574.  24  in    re    Kelly    Dry    Goods    Co., 

21  In  re  Lake  Superior,  etc.,  su-     102  F.  R.  747,  4  A.  B.  R.  528. 
pra.  2r>  Sec.  1  '(9),  act  of  1898. 

-"-■  In  re  Malino.  118  F.  R.  368,  8         sr.  g.  O.  IV. 
A.  B.  R.  205. 


522  THE   NATIONAL  BANKRUPTCY   LAW.  Ch.  56 

a  penalty  is  provided  for  any  person  presenting  under  oath 
any  false  claim  for  proof  against  the  estate  of  a  bankrupt, 
or  using  any  such  claim  in  composition,  personally  or  by 
agent,  proxy  or  attorney,  or  as  agent,  proxy  or  attorney .^'^ 

An  attorney,  agent  or  proxy  should  be  required,  before  being 
permitted  to  vote,  to  produce  and  Hie  written  authority  from 
the  creditor,  which  should  be  filed  by  the  referee  as  part  of 
his  record.  While  the  authority  of  an  attorney  in  good  stand- 
ing to  appear  and  act  for  a  client,  whom  he  assumes  to 
represent,  is  presumed  and  may  be  presumed  in  the  ordinary 
matters  arising  in  bankruptcy  proceedingSj^s  this  presumption 
is  limited  to  an  attorney's  ordinary  duties,  and  voting  for  a 
trustee  in  bankruptcy  is  an  act  so  essentially  different  in  its 
nature  and  character  from  an  attorney's  ordinary  duties  and 
the  considerations  entering  into  the  choice  of  a  trustee  are 
so  foreign  to  a  lawyer's  ordinary  functions  or  presumed 
knowledge  or  skill,  that  the  right  to  vote  cannot  be  deemed 
to  be  a  part  of  his  implied  authority  nor  presumed  to  be  con- 
ferred upon  him  from  his  mere  retainer.^^  It  has  been  held 
that  such  power  of  attorney  should  be  acknowledged  ;3o  that 
execution  by  one  member  of  a  firm  for  the  firm  was  suffi- 
cient ;3i  and  that  power  to  attend  and  vote  did  not  authorize 
the  filing  of  objections  to  a  discharge.^^ 

The  general  rule  is  that  a  creditor  whose  claim  has  been 
allowed  should  be  permitted  to  vote  for  trustee  in  person  or 
by  proxy,  and  any  question  as  to  whether  his  vote  was  im- 
properly influenced  should  be  reserved  until  the  referee  is 
called  upon  to  approve  the  election,  though  he  will  not  be  held 
to  have  abused  his  discretion  in  refusing  to  allow  one  offering 
to  qualify  to  vote,  where  he  is  convinced  that  the  claims  are 

27  Sec.  29b    (3),  act  of  1898.  78;   In  re  Purvis,  1  N.  B.  R.  163. 

28  In  re  Pauly,  1  N.  B.  N.  405,  2  F.  C.  11476;  In  re  Knoepfel,  1  N. 
A.  B.  R.  333.  B.  R.   23,  1  Ben.  330,  F.  C.  7891; 

29  In  re  Eagles  &  Crisp,  2  N.  B.  s.  c.  1  N.  B.  R.  70,  F.  C.  7892;  Con- 
N.  R.  462,  3  A.  B.  R.  733,  99  F.  R.  tra.  In  re  Brown,  2  N.  B.  N.  R.  590. 
696;  In  re  Suganheimer,  1  N.  B.  so  in  re  Christley,  10  N.  B.  R. 
N.  59,  1  A.  B.  R.  425,  91  F.  R.  744;  268,  F.  C.  272;  Contra,  In  re  Pow- 
In  re  Blankfein,  2  N.  B.  N.  R.  49,  ell,  2  N.  B.  R.  17,  F.  C.  11351. 

3  A.  B.  R.  165,  97  F.  R.  191;  In  re  si  in  re  Barrett,  2  N.  B.  R.  165, 

Richards,  2  N.  B.  N.  R.  1027,  103  2  Hughes,  444,  F.  C.  1043;   see  In 

F.   R.  849,   4  A.  B.  R.*631;    In   re  re  Finlay,  3  A.  B.  R.  78. 

Scully,    108  F.  R.  372,  5  A.  B.  R.  32  Creditors  v.  Williams,  4  N.  B. 

717;    In  re  Finlay.  3  N.  B.   N.  R.  R.  187,  F.  C.  3379. 


Uli.  oli  VOTERS— SECURED    CREDITORS.  523 

not  proven  in  good  faith,  or  when  the  votes  are  in  the  interest 
of  the  bankrapt.^^ 

§  836.  'b.  When  secured  creditors  can  vote.— Creditors  hold- 
'ing  claims  which  are  secured  or  have  priority  shall  not,  in 
'respect  to  such  claims,  be  entitled  to  vote  at  creditors'  meet- 
'iugs,  nor  shall  such  claims  be  counted  in  computing  either 
'the  number  of  creditors  or  the  amount  of  their  claims,  unless 
'the  amounts  of  such  claims  exceed  the  values  of  such  securi- 
'ties  or  priorities,  and  then  only  for  such  excess. '^^ 

§  837.  Secured,  meaning  of.— The  term  "secured  creditors" 
in  the  bankruptcy  act  is  coniined  to  creditors  holding  securities 
on  the  bankrupt's  property  and  does  not  include  such  as  hold 
securities  on  the  property  of  third  persons,  so  that,  when  it 
comes  to  voting  in  cases  in  which  a  partnership  primarily  is 
in  bankruptcy  (though  the  individual  partners  may  be  also), 
the  bankrupt  is  the  partnership  and  only  such  securities  as 
are  upon  the  partnership  assets  are  to  be  considered  in  reduc- 
ing the  voting  powers  of  the  creditors  holding  securities.^^ 

§  838.  Extent  of  voting  power.— Creditors  having  claims 
which  are  secured  or  entitled  to  priority  may,  if  they  so 
desire,  under  the  terms  of  the  act,  prove  and  have  their  claims 
allowed  for  the  amount  of  the  estimated  excess  over  the 
security  or  priority  and  to  that  extent  vote  for  the  trustee,^^ 
or  in  case  of  preferred  creditors,  they  may  surrender  the 
preference,  prove  their  debts  and  participate  to  the  full 
amount.^"  A  creditor,  who  received  a  payment  under  an 
assignment  more  than  a  year  before  the  bankruptcy  proceed- 
ings, is  entitled  to  have  his  claim  counted  and  to  vote  on  it 
in  the  amount  less  the  credit.^^ 

••!3  Falter  v.  Reinhard,  2  N.  B.  N.  36  Sec.  57e,  act  of  1898. 

R.  1119,  104  F.  R.  292;   In  re  Hen-  37  See.   57g,   act   of    1898;    In   re 

schel,   109    F.    R.    861,    6   A.   B.    R.  Eagles  &  Crisp,  2  N.  B.  N.  R.  462.' 

305.  3  A.  B.  R.  733.  99  F.  R.  695;   In  re 

34  Analogous  provision  of  act  of  Parkes,  10  N.  B.  R.  82,  F.  C.  10754; 

1867.    "Sec.  18.     .     .     .     No  person  In  re  Bolton,  1  N.  B.  R.  83.  2  Ben. 

who  has   received   any   preference  189,  F.  C.  1614;    In  re  Parham,  17 

contrary  to  the  provisions  of  this  N.  B.  R.  300,  F.  C.  10712;   Contra, 

act  shall  vote  for  or  be  eligible  as  In  re  Stillwell,  7  N.  B.  R.  226,  F. 

assignee."  C.  13448. 

^■^'  In  re  Coe,  Powers  &  Co.,  1  N.  as  in  re  Folb,  1  N.  B.  N.  134,  1 

B.   N.   294,  1  A.   B.  R.   275;    In  re  A.  B.  R.  22,  91  F.  R.  107. 
Thomas  &  Sivyer,  8  Biss.  139. 


CHAPTER  LVII. 


PROOF  AND  ALLOWANCE  OF  CLAIMS. 


§839.  (57a)  What  constitutes  proof . 

840.  Nature  of  proof. 

841.  Manner  of  making  proof. 

842.  Secured    claims. 

843. Proof       as       unsecured 

through  ignorance. 

844.  Security  of  third  person 

— waiver. 

845.  Assigned    claims. 

846.  Persons  contingently  li- 
able. 

847.  The  consideration. 

848.  By  whom  made. 

849. Before  whom  made. 

850.  Action    on    proof    post- 
poned. 

851.  When  amended. 

852.  Effect  of  proof,  in  general. 

853.  On     collateral     proceed- 
ings. 

854.  May     still     oppose    dis- 
charge. 

855.  Of  failure  of. 

856.  Proof  not  dependent  on 

existence  of  assets. 

857.  b.    Claim    founded    upon    in- 

strument in  writing. 

858.  Instrument  in  writing. 

859.  c.  Proved  claims  may  be  filed 

for  allowance. 

860.  Where  proof  of  debt  filed. 

861.  d.  Allowance  of  claims. 

862.  Allowance     or     rejection     of 

claims. 

863.  Effect   of    receipt    and    filing 

of  proof — power  of  referee. 

864.  e.    Proportion     of     secured 

claims  allowed. 

865.  Secured  creditors,  allowance. 

866.  What  are  not. 

867.  Marshaling  of  assets. 

868.  f.   Objections,   early   hearing 

of. 

869.  Who  may  make. 

524 


870.  Effect    of    making    and 

before  whom  made. 

871.  Proof  in  case  of. 

872.  Cost  in  case  of. 

873.  g.  Preferences  to  be  surren- 

dered. 

874.  What  must  be  surrendered. 

875.  Surrender    prior    to    amend- 

ment.— Carson,  Pirie,  Scott 
V.   Trust  Co. 

876.  Involuntary  surrender. 

877.  Surrender  of  preference  giv- 

en within  four  months. 

878.  In  case  of  new  credit. 

879.  h.    Securities,      determining 

value. 

880.  Trustee's  duty  with  re- 
gard to. 

881.  Value  of. 

882.  On  whose  property. 

883.  Sale  of. 

884.  Purchase  of  by  credit- 
ors. 

885.  i.   Proof   where   claim  is  se- 

cured by  individual  under- 
taking. 

886.  Subrogation  of  surety. 

887.  j.    Penalties    or    Forfeitures 

accrued  to  Government. 

888.  k.   Allowed   claims    reconsid- 

ered for  cause. 

889.  Reconsideration  of. 

890.  Time  for  asking  reconsidera- 

tion. 

891.  1.  Recovery  of  dividend  paid. 

892.  m.  Proof  of  claim  of  one  es- 

tate against   another. 

893.  Undischarged  bank- 
rupt's claim  against  a  bank- 
rupt. 

894.  n.  Claims  to  be  proved  with- 

in year. 

895.  Limitation        for        proving 

claims. 


C'li.  5T 


PROOF    OF    CLAIMS. 


525 


j;  839.  '  (Sec.  57a)  What  constitutes  proof  of  claims.— 
'Proof  of  claims  shall  consist  of  a  statement  under  oath,  in 
'writing,  signed  by  a  creditor  setting  forth  the  claim,  the 
'consideration  therefor,  and  whether  any,  and  if  so,  what 
'securities  are  held  therefor,  and  whether  any,  and  if  so,  what 
'payments  have  been  made  thereon,  and  that  the  sum  claimed 
'is  justly  owing  from  the  bankrupt  to  the  creditor. '* 

§  840.  Nature  of  proof.— The  proof  and  allowance  of  claims 
are  distinct,  the  former  being  the  sworn  statement  by  which 
a  creditor  presents  his  claim,  the  latter  the  judicial  action  by 
which  it  is  established  in  the  proceeding  and  permitted  to 
participate  in  the  distribution.  Claims  may  be  allowed  con- 
ditionally or  temporarily  for  such  purposes  as  participating 
in  the  choice  of  a  trustee  or  where  some  question  may  remain 
to  be  determined  before  they  would  be  allowed  for  the  purpose 
of  distribution.^  The  creditor's  statement  under  oath,  in 
writing,  as  to  the  proof  of  his  claim,  if  it  contains  the  matter 
pointed  out  in  this  section,  is  at  once  the  claimant's  pleading 


1  Analogous  provision  of  act  of 
1867.  "Sec.  22.  .  .  .  That  all 
proofs  of  debts  against  the  estate 
of  the  bankrupt,  by  or  in  behalf  of 
creditors  residing  within  the  judi- 
cial district  where  the  proceedings 
in  bankruptcy  are  pending,  shall 
be  made  before  one  of  the  registers 
of  the  court  in  said  district,  and 
by  or  in  behalf  of  non-resident 
debtors  before  any  register  in 
bankruptcy  in  the  judicial  district 
where  such  creditors  or  either  of 
them  reside,  or  before  any  com- 
missioner of  the  circuit  court  au- 
thorized to  administer  oaths  in 
any  district.  To  entitle  a  claimant 
against  the  estate  of  a  bankrupt 
to  have  his  demand  allowed,  it 
must  be  verified  by  a  deposition  in 
writing  on  oath  or  solemn  aflSrma- 
tion  before  the  proper  register  or 
commissioner  setting  forth  the  de- 
mand, the  consideration  thereof 
( Here  follows  requirement  as  to 
contents    of    oath.)     .     .     .     Such 


oath  or  solemn  afBrmation  shall 
be  made  by  the  claimant,  testify- 
ing of  his  own  knowledge,  unless 
he  is  absent  from  the  United 
States  or  prevented  by  some  other 
good  cause  from  testifying,  in 
which  cases  the  demand  may  be 
verified  in  like  manner  by  the  at- 
torney or  authorized  agent  of  the 
claimant  testifying  to  the  best  of 
his  knowledge,  information,  and 
belief,  and  setting  forth  his  means 
of  knowledge;  or  if  in  a  foreign 
country,  the  oath  of  the  creditor 
may  be  taken  before  any  minister, 
consul,  or  vice-consul  of  the 
United  States;  and  the  court  may, 
if  it  shall  see  fit,  require  or  receive 
further  pertinent  evidence  either 
for  or  against  the  admission  of  the 
claim.  Corporations  may  verify 
their  claims  by  the  oath  or  solemn 
affirmation  of  their  president, 
cashier,  or  treasurer." 

2  In  re  Wise,  2  N.  B.  N.  R.  151. 


526  THE    NATIONAL   BANKRUPTCY   LAW.  I'll,  o? 

and  his  evidence,  and  makes  for  him  a  prima  facie  case-"^  and 
is  a  part  of  the  proceeding  in  bankruptcy.'*  It  is  not  the  duty 
of  a  referee  to  examine  claims  further  than  to  discover  whether 
or  not  the  deposition  contains  the  formal  requisites  prescribed 
by  the  law,  orders  and  forms,'''  and  questions  as  to  the  origin 
of  a  debt  are  immaterial.*'  A  debt  is  to  be  considered  as 
proved  when  it  is  duly  authenticated  and  sent  to  the  referee 
or  clerk.'^  The  court  has  no  discretion  as  to  receiving  and 
filing  a  proof  which  appears  on  its  face  to  have  been  taken 
by  a  proper  officer  and  to  be  correct  in  form  and  substance  ;^ 
nor  are  informalities  in  the  proofs  material  where  the  cred- 
itor, as  a  witness,  has  sworn  positively  of  his  own  knowledge.'* 
The  fact  that  the  petitioning  creditor  and  the  bankrupt  or 
the  bankrupt  and  the  party  offering  to  prove  a  claim  are 
relatives,  warrants  the  court  in  scrutinizing  the  claim  closely 
but  not  in  inferring  fraud  from  it  alone.^*^ 

§  841.  Manner  of  making  proof— in  general.— A  deposition 
to  prove  a  claim  against  a  bankrupt's  estate  must  be  correctly 
entitled  in  the  court  and  in  the  cause.  It  should  give  in  full 
at  least  one  Christian  name  of  the  affiant  and  of  the  bankrupt, 
in  addition  to  the  surname,^^  the  address  of  the  party  making 
proof,  and  be  specific  in  the  statement  of  the  consideration, 
and  the  account  should  be  itemized,!^  gyen  though  it  be  for 
legal  services.  When  made  to  prove  a  debt  due  to  a  partner- 
ship, it  must  appear  on  oath  that  the  deponent  is  a  member 
of  the  partnership;  when  made  by  an  agent,  the  reason  the 
deposition  is  not  made  by  the  claimant  in  person  must  be 
stated;  and  when  made  to  prove  a  debt  due  to  a  corporation, 
the  deposition  must  be  made  by  the  treasurer,  or,  if  the  cor- 
poration has  no  treasurer,  by  the  officer  whose  duties  most 
nearly  correspond  to  those  of  treasurer.     Depositions  to  prove 

:i  In   re   Sumner,    2  N.   B.   N.  R.  »  McKinsey  v.  Harding,  4  N.  B. 

681,  101  F.  R.  224,  4  A.  B.  R.  123.  R.  10,  F.  C.  8866. 

■i  Wiswell  V.   Campbell,  15  N.  B.  lo  In  re  Mendelsohn,  12  N.  B.  R. 

R.  421,  93  U.   S.  347.  533,  3  Sawy.  342.  F.  C.  9420;   In  re 

r>  In  re  Ankeny,  1  N.  B.  N.  511.  Wooten,  118  F.  R.  670,  9  A.  B.  R. 

fi  In  re  Lazarovic,  1  A.  B.  R.  476.  247. 

7  Ex  p.  Harris,  16  N.  B.  R.  432,  n  In  re  Valentine,  12  N.  B.  R. 
F.  C.  6109.  389,  4  Biss.  417,  F.  C.   16812. 

8  In  re  Merrick,  7  N.  B.  R.  459,  12  In  re  Scott,  1  N.  B.  N.  402,  1 
F.  C.  9463.  A.  B.  R.  553,  93  F.  R.  418;    In  re 

Chasnoff,  3  N.  B.  N.  R.  1. 


Ch.  57  PROOF     OF     SECURED     CLAIMS.  537 

debts  existing  in  open  account,  must  state  when  the  debt 
became  or  will  become  due ;  and  if  it  consists  of  items  matur 
ing  at  different  dates,  the  average  date  due  in  default  of 
which  it  will  not  be  necessary  to  compute  interest  upon  it.  If 
on  notes  some  of  which  are  payable  so  many  days  after  date, 
and  others  so  many  days  after  discount,  the  proof  should 
show  the  date  of  the  discounts,  the  amount  advanced  as  con- 
sideration for  each,  and  should  state  explicitly  the  action  taken 
to  fix  the  liability  of  the  bankrupt  on  those  upon  which  he 
was  indorser  only.^^  All  such  depositions  must  contain  an 
averment  whether  notes  have  been  received  for  such  account, 
or  judgment  rendered  thereon.  Proofs  of  debt  received  by  a 
trustee  must  be  delivered  to  the  referee  to  whom  the  cause 
is  referred.^  ^  A  material  fact  which  cannot  be  conclusively 
implied  from  the  statements  of  the  proof  of  a  claim,  must  be 
found  upon  a  trial  thereof. ^^ 

§  842.  Proof  of  secured  claims.— The  proof  must  show 
whether  the  claim  is  secured  or  unsecured.i*^  Unless  a  secured 
creditor  surrenders  his  security  and  proves  his  debt  as  un- 
secured^^ he  is  required  to  make  proof  of  the  whole  debt^^  as 
in  the  case  of  an  unsecured  debt,  except  that  a  statement  of 
all  securities  should  be  included  in  the  proof.  The  referee 
has  power  to  pass  upon  the  question  whether  a  claim  is  secured 
or  unsecured,  but  his  determination  Avill  in  no  wise  divest  the 
claimant  of  his  title  to  property  so  secured.^ ^ 

A  creditor  holding  a  secured  claim  has  three  alternatives 
with  reference  to  the  -proof  of  his  claim.  First,-*'  he  may  prove 
tor  the  full  amount  of  his  claim,  specifying  the  securities  held 
lor  the  debt,-^  in  which  event  he  will  participate  in  the  divi- 
dends to  the  extent  that  his  claim  is  greater  than  Lhe  value 
of  the  security,--  and  such  act  will  in  no  wise  be  deemed  an 
abandonment  of  the  security.^s     If  the  security  is  of  a  third 

13  In  re  Stevens.  104  F.  R.  325,  20  in  re  Bridgman,  1  N.  B.  R.  59, 
5  A.  B.  R.  11.  F.  C.  1866. 

14  G.  O.  XXI   (1).  21  Form  No.  32. 

15  In  re  Stevens,  107  F.  R.  243,  5  22  in  re  Rhoads,  2  N.  B.  N.  R. 
A.  B.  R.  806.  178;   Stewart  v.  Isador,  1  N.  B.  R. 

10  Cunningham  v.  Cady,  13  N.  B.  129;   In  re  Stewart,  1  N.  B.  R.  42. 

R.  525,  F.  C.  3480.  F.  C.  13418;    In  re  Winn,  1  N.  B. 

17  Sec.  57e,  act  of  1898.  R.  131,  F.  C.  17876;  In  re  Baldwin, 

18  Form  32.  19  N.  B.  R.  52.  F.  C.  796. 

19  In  re  Harrison,  2  N.  B.  N.  R.  23  in  re  Bolton,  1  N.  B.  R.  83, 
541.  2  Ben.  189,  F.  C.  1614. 


52S  THE    NATIONAL   BANKRUPTCY    LAW.  Cli.  o'i 

person,  the  creditor  can  prove  for  the  whole  debt  and  enforce 
the  security  against  such  third  person  at  the  same  tnne,  pro- 
vided he  does  not  take  from  both  sources  more  than  the  full 
amount  of  the  debt.-^  The  value  of  the  securities  is  deter- 
mined by  converting  them  into  money  as  provided,-"'  their 
value  to  be  credited  upon  such  claims  and  the  dividend  paid 
only  on  the  unpaid  balance.-^  It  is  not  necessary  if  he  has 
recovered  a  judgment  after  the  adjudication  of  the  debtor  to 
vacate  it  before  he  can  prove  the  claim  on  which  such  judg- 
ment is  based,  provided  the  claim  be  otherwise  valid  and 
properly  provable.-'  Second.  If  the  security  is  ample,  the 
creditor  may  rest  upon  the  lien  thus  created  and  not  prove 
his  claim.  In  such  case,  however,  before  enforcing  his  lien, 
authority  should  first  be  obtained  of  the  court  of  bankruptcy.-^ 
Third.  The  creditor  may  either  directly  or  indirectly  waive 
his  security  and  prove  his  claim  as  unsecured.  Thus,  one 
having  a  lien  upon  bankrupt's  estate  by  judgment,  execution, 
attachment,  creditor's  suit,  or  otherwise,  who  proves  the  claim 
without  disclosing  the  lien,  cannot  subsequently  enforce  it,--' 
but  will  be  deemed  to  have  surrendered  his  security,"^"  and 
which  may  ripen  into  a  conclusive  extinguishment.-*^  Where 
a  judgment  creditor  proved  his  claim  in  bankruptcy,  but 
finding  no  assets  to  pay  it,  his  lien  will  be  deemed  to  have 
been  waived  and  he  cannot  enforce  payment  by  means  of  a 
fi.  fa.32     go  where  a  part.y  who  took  a  bill  of  sale  as  security 

24  In  re  Cram,  1  N.  B.  R.  133,  1  so  in  re  Spring,  2  N.  B.  N.  R. 
Hask.  189,  F.  C.  3343;  In  re  For-  509;  In  re  Moyer,  97  F.  R.  324; 
sythe  et  al.,  7  N.  B.  R.  174,  F.  C.  Stewart  v.  Isador,  1  N.  B.  R.  129; 
4948;  In  re  Babcock,  F.  C.  696;  In  re  Granger,  8  N.  B.  R.  30,  F.  C. 
In  re  Headley,  2  N.  B.  N.  R.  250,  5684;  In  re  McConnell,  9  N.  B.  R. 
97  F.  R.   765,  3  A.  B.  R.  272.  387,  F.  C.  8712;  In  re  Jaycox  et  al., 

25  Sec.  5h,  act  of  1898.  8  N.  B.  R.  241,  F.  C.  7242;    In  re 
20  In    re  Morrison,   10    N.    B.    R.     Walker,  2  N.  B.  N.  R.  1014;  In  re 

105,  F.  C.  9839;   In  re  Winn,  1  N.  Bloss,  4  N.  B.  R.  147,  F.  C.  1562; 

B.  R.  131,  F.  C.  17876.  In  re  Brand,  3  N.  B.  R.  85,  F.  C. 

27  In  re  Stevens,  4  N.  B.  R.  122,  1809;    Franklin  Co.    Nat.  Bk.,  138 

F.  C.  13391.  Mass.  515;   In  re  Anson,  101  F.  R. 

^^  In  re  Sink,  2  N.  B.  N.  R.  645;  698,  2  N.  B.  N.  R.  567,  4  A.  B.  R. 

In  re  Frick,  1  N.  B.  N.  214,  1  A.  B.  231. 

R.  719;  In  re  Brown,  104  F.  R.  762.  •i  In  re  Parkes,  10  N.  B.  R.  82, 

See     "Enforcement     of     Mortgage  F.  C.  10754. 

Rights,"  post,  §  1092.  -^^  Heard   v.   Jones,    15   N.   B.   R. 

-■^  White     V.     Crawford.   9   F.    R.  402. 
371 :    In  re  Bear,  5  F,  R.  53,  aff'd 
7  F.  R.  583. 


Ch.  57  PROOF    OF    CLAIMS— CONTINGENT.  529 

deliberately  proved  his  debt,  which  assumes  that  he  is  the 
absolute  owner  of  the  goods,  and  persisted  in  such  false  claim 
in  an  action  by  the  trustee  to  recover  the  goods,  and  at- 
tempted to  support  it  by  his  own  oath,  he  was  held  to  be 
estopped  from  claiming  them  as  security.^^ 

§  843.  Proof  of  claim  as  unsecured  through  ignorance.— 
Notwithstanding  the  foregoing  rule,  where  a  creditor  without 
any  fraudulent  intent,  in  ignorance  of  his  rights,  has  proved  a 
secured  claim  as  unsecured,  he  will  be  allowed  to  withdraw 
his  proof  or  amend  by  setting  up  his  security ,2^  provided  no 
injury  has  resulted  to  the  unsecured  creditors  as  a  result  of 
such  pi'oof,'^"'  and  all  parties  can  be  placed  in  statu  quo,^" 
This  will  not  be  allowed,  however,  where  there  is  no  perfected 
lien  or  established  security,  but  only  a  .contingent  and  inchoate 
lien  in  the  effort  to  secure  a  preference  by  litigation.^^ 

§  844.  Security  on  property  of  third  person— Waiver.— If 
the  security  is  on  the  property  of  a  third  party  and  the  holder 
proves  as  unsecured,  he  only  forfeits  his  lien  in  case  those 
interested  in  the  estate  would  be  benefited  thereby  ;^^  or  by 
voluntarily  disclaiming  any  interest  under  a  preferential  deed 
of  trust  f^  or  where  judgment  is  recovered  against  two  co- 
defendants,  and  execution  thereon  is  levied  upon  the  property 
of  one  of  them,  and  the  other  is  adjudged  bankrupt,  the  claim 
may  be  proved  against  the  bankrupt  as  unsecured.^*^  Where 
execution  had  issued  and  levy  made  on  property  sufficient  to 
satisfy  the  judgment,  the  creditor  not  having  been  estopped 
thereby  from  proceeding  in  bankruptcy  it  would  operate  as 
a  waiver;^!  but  a  mortgage  is  not  extinguished  by  such 
waiver,  the  trustee  in  bankruptcy  being  subrogated  to  the 
rights   of  the  holder.^-     An  indorser  would  not   be   released 

33  Willis  V.  Carpenter,  14  N.  B.  629,  101  F.  R.  104,  3  A.  B.  R.  761. 
R.  521,  F.  C.  17770.  3s  Bassett  v.  Baird,  17  N.  B.  R. 

34  Ex   p.    Harwood.    F.    C.    6185;     177. 

In  re  Brand,  supra;  Exp.  Lapsley,  so  in  re   Saunders,   13  N.   B.   R. 

F.  C.  8083.  164,  2  Lowell   444,  F.  C.  12371. 

35  In  re  Friedman.  1  N.  B.  N.  40  in  re  Headley,  2  N.  B.  N.  R. 
208,  1  A.  B.  R.  510;  In  re  Jaycox  250,  3  A.  B.  R.  272,  97  F.  R.  765. 
et  al.,  8  N.  B.  R.  241,  F.  C.  7242;  41  In  re  Sheehan,  8  N.  B.  R.  345, 
In  re  Clark  et  al.,  5  N.  B.  R.  255,  F.  C.  12737;  In  re  Bloss,  4  N.  B. 
F.   C.  2806.  R.  37,  F.  C.  1562. 

■■'<■>  In  re  Parkes,  10  N.  B.  R.  82,  42  Hiscock  v.  Jaycox,  12  N.  B.  R. 
F.  C.  10754.  507,  F.  C.  6531. 

3Un   re  Wilder,   2  N.   B.  N.  R. 

34 


530  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  57 

though  all  the  creditor's  rights  and  claim  as  well  at  law  as 
in  equity  to  a  mortgage  given  for  the  purpose  of  indemnifying 
the  indorser  would  be.'*^ 

§  845.  Proof  of  assigned  claims.— A  claim  which  has  been 
assigned  before  proof  must  be  supported  by  deposition  of  the 
owner  at  the  time  of  the  commencement  of  proceedings,  set- 
ting forth  the  true  consideration  of  the  debt  and  that  it  is 
entirely  unsecured,  or  if  secured,  the  security,  as  is  required 
in  proving  secured  claims.  Thus  a  receiver  of  a  creditor's 
property ,^^  or  one  who  has  purchased  claims  against  bankrupt 
in  an  endeavor  to  settle  the  matter  out  of  court,^^  or  one  who 
holds  a  note  as  trustee  for  another,'*^  or  who  holds  an  account 
for  goods,  assigned  before  bankruptcy,^"  may  make  proof  of 
the  claim  so  held.  Upon  the  filing  of  satisfactory  proof  of 
the  assignment  of  a  claim  proved  and  entered  on  the  referee's 
(locket,  he  must  immediately  give  notice  by  mail  to  the 
original  claimant  of  the  filing  of  such  proof  of  assignment; 
and,  if  no  objection  be  entered  within  ten  days,  or  within 
such  further  time  as  is  allowed  by  the  referee,  he  must  make 
an  order  subrogating  the  assignee  to  the  original  claimant. 
If  objection  be  made,  he  should  proceed  to  hear  and  determine 
the  matter.^^  The  form  by  which  a  claim  against  a  bankrupt 
was  transferred  is  immaterial,  and  cannot  affect  the  right  of 
the  transferee  to  prove  the  claim,  where  it  is  sufficient  to  estop 
the  original  holder  from  asserting  a  right  to  it.^^ 

§846.    Proof  of  claims  of  persons  contingently  liable.— 

The  claims  of  persons  contingently  liable  for  the  bankrupt 
may  be  proved  in  the  name  of  the  creditor  when  known  by 
the  party  contingently  liable.  When  the  name  of  the  creditor 
is  unknown,  such  claim  may  be  proved  in  the  name  of  the 
party  contingently  liable ;  but  no  dividend  will  be  paid  upon 
such  claim,  except  upon  satisfactory  proof  that  it  will  diminish 
pro  tanto  the  original  debt.^*^     The  fact  that  the  claim  was 

43  Bk.  V,  Comstock,  11  N.  B.  R.  ^^  in  re  Fortune,  3  N.  B.  R.  83. 

235.  «G.  O.  XXI  (3). 

ii  In  re  Mills,  17  N.  B.   R.  472,  49  In  re  Miner,  117  F.  R.  953,  9 

F.  C.  9612.  A.  B.  R.  100;  s.  c.  114  F.  R.  998,  8 

45  In  re  Pease,  6  N.  B.  R.  73,  F.  A.  B.  R.  248. 

C.  10880.  50  G.  O.  XXI   (4);   In  re  Dillon, 

46  Ex  p.  Dreyfus,  13  N.  B.  R.  43.  100  F.  R.  627,  4  A.  B.  R.  63;  In  re 
2  Lowell,  305,  F.  C.  8043.  Christensen,  2  N.  B.  N.  R.  1094. 


Ch.  57  PROOF    OF    CLAIMS— CONTINGENT.  531 

not  paid  by  a  surety  until  after  the  date  of  the  adjudication, 
will  not  prevent  its  proof  and  allowance  as  a  claim  against 
the  bankrupt  ;^^  but  if  for  any  reason  the  creditor  could  not 
have  proved  the  claim,  as  because  he  had  received  a  prefer- 
ence, it  cannot  be  proved  by  the  person  contingently  liable. 
A  creditor  is  entitled  to  prove  his  full  claim  in  preference  to 
the  person  contingently  liable,  Avho  has  discharged  a  part  of 
his  indebtedness.''-  On  the  failure  of  the  holder  of  a  prom- 
issory note  transferred  to  him  by  endorsement  to  prove  his 
claim  therefor  on  the  bankruptcy  of  the  maker,  the  surety 
must  himself  move  in  the  matter  or  require  the  holder  to  act 
on  furnishing  him  with  suitable  mdemnity  against  risk  and 
expense.^^ 

§  847.  The  consideration.— The  proof  should  show  the  con- 
sideration for  the  claim,^*  and  where  the  consideration  for  a 
note  presented  for  proof  is  set  forth  in  the  creditor's  deposi- 
tion as  goods,  wares,  merchandise,  etc.,  there  should  be  stated 
the  kind  of  goods,  the  quantity,  the  price,  the  date  of  the 
transaction  and  time  of  delivery,  if  delivered  at  one  time,  or, 
if  delivered  contmuously  through  a  period  of  time,  that  period 
should  be  stated.-'^  In  the  case  of  the  holder  of  bankrupt's 
paper,  he  must  show  that  he  paid  value  when  he  took  it,  or 
incurred  some  responsibility,  or  relinquished  some  right,  or 
granted  some  indulgence,  or  discharged  a  precedent  debt,  upon 
the  faith  and  credit  of  the  paper.^^ 

^  848.  By  whom  proof  made.— While  generally  speaking 
only  the  holder  and  owner  of  a  claim  should  make  proof,<5' 
the  law  contemplates  that  it  may  be  made  by  an  agent,  attorney 
or  proxy ,•'5'^  upon  good  and  sufficient  reasons.  Under  the 
former  act  it  might  be  made  by  an  agent  in  case  the  owner 

51  In  re  Christensen.  supra.  Sawyer,  3  N.  B.  N.  R.  266,  6  A.  B. 

''-In    re    Dillon,    supra;      In    re  R.  154. 

Schmeckel  Cloak  &  Suit  Co.,  3  N.  5^  In  re  Stevens,  104  F.  R.  325,  5 

B.  N.  R.  110,  104  F.  R.  64;    In  re  A.  B.  R.  11. 

Heyman.  95  F.  R.  800,  2  A.   B.  R.  5:>  in  re  Elder,  3  N.  B.  R.  165,  1 

651,  citing  In  re  Ellerhorst,  5  N.  B.  Sawy.  73,  F.  C.  4326. 

R.  144,  F.  C.  4381;   In  re  Hollister,  36  Jn   re  Howard,   Cole   &  Co.,  6 

3  F.  R.  452;  Stewart  v.  Armstrong,  N.  B.  R.  372,  F.  C.  6751. 

56  F.  R.  171;  In  re  Souther,  2  Low.  "^t  in  re  Ford,  18  N.  B.  R.  426,  F. 

322,  F.  C.  13184;  Bk.  v.  Pierce,  137  C.  4932. 

N.  Y.  444;   see  Downing  v.  Bk..  11  -^^  Sec.  1    (9),  act  of  1898;   G.  0. 

N.  B.  R.  372.  F.  C.  4046.  XXI    (1). 

53  Natl.    Bk.    of    So.    Reading   v. 


532  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  57 

was  uot  within  the  United  States,"^'*  though  the  mere  absence 
from  the  State  was  insufficient/'^  Thus  a  mere  agent  holding 
negotiable  paper  was  not  permitted  to  make  proof  when  the 
ow^ner  was  in  a  situation  to  do  so  himself,  but  if  not,  then  the 
agent  might  prove  in  the  name  and  for  the  benefit  of  the 
real  owner.^i  The  agent  might  prove  where  he  was  cognizant 
of  all  the  facts,  the  creditor  having  no  personal  knowledge  •,^- 
though  it  has  been  held  that  the  agent's  oath  that  he  is  better 
acquainted  with  the  facts  than  his  principal  would  not  neces- 
sarily render  the  agent's  deposition  alone  admissible  as 
proof.63 

When  the  deposition  is  made  to  prove  a  debt  due  to  a 
partnership,  it  must  appear  on  oath  that  the  deponent  is  a 
member  of  the  firm;  when  made  by  an  agent  the  reason  the 
deposition  is  uot  made  by  the  claimant  in  person  must  be 
stated;  and  when  made  to  prove  a  debt  due  to  a  corporation, 
the  deposition  must  be  made  by  the  treasurer,  or,  if  the  cor- 
})oration  has  no  treasurer,  by  the  officer  whose  duties  most 
nearly  correspond  to  those  of  treasurer,**-*  and  if  verified  by 
the  manager  instead  of  the  treasurer,  it  is  objectionable, 
though  amendable."^^ 

§  849.  Before  whom  made— Verification.— The  proof  of  a 
claim  must  be  sworn  to,  and  the  oath  thereto  may  be  adminis- 
tered by  a  referee.  United  States  Commissioner,  Notary  Public, 
or  other  officer  authorized  to  administer  oaths  in  proceedings 
before  the  United  States  courts  or  under  the  laws  of  the  States, 
and  diplomatic  and  consular  officers  in  a  foreign  country .^^ 
If  made  abroad  it  must  be  in  accordance  with  the  requirements 
of  the  Federal  laws.**^  The  attorney  of  a  creditor  may  take 
the  oath  of  his  client  as  a  notary,'*^  though  the  contrary  was 
held  under  the  Act  of  1867.''^     A  notary  public,  before  whom 

59  In  re  Whyte,  9  N.  B.  R.  267,  65  in  re  Rude,  2  N.  B.  N.  R.  498. 
F.  C.  17606.  66  Sec.  20,  act  of  1898;  G.  O.  XXI 

60  In  re  Jackson,  14  N.  B.  R.  449,  (5) ;  In  re  Sugenheimer,  1  N.  B.  N. 
F.  C.  7123,  7  Diss.  280.  59,  1  A.  B.  R.  425,  91  F.  R.  744. 

61  In  re  Saunders,  13  N.  B.  R.  e?  Robert  v.  Lynch,  16  N.  B.  R. 
164,  F.  C.  12371,  2  Low.  444.  38,  F.  C.  8635. 

62  In  re  Watrous,  14  N.  B.  R.  258,  es  Jn  re  Kimball,  2  N.  B.  N.  R. 
F.  C.  17270.  46,  4  A.  B.  R.   144,  100  F.  R.  177; 

63  In  re  Whyte,  9  N.  B.  R.  267,  McDonald  v.  Willis,  143  Mass.  542. 
F.  C.  17606.  69  In    re   Nebe,   1   N.    B.    R.    289, 

64  G.  O.  XII   (1).  F.  C.  10073;  In  re  Keyser,  9  Ben. 


Ch.  57  PROOF   OF   CLAIMS.  533 

proof  is  made,  must  authenticate  the  same  by  his  official  seal 
as  well  as  his  signature."'^  In  the  case  of  any  defect  in  the 
verification,  it  may  be  amended,"^ 

§  850.  When  action  on  proof  postponed.— As  between  con- 
tending creditors,  the  court  or  referee  in  the  interest  of  fair 
dealing  and  good  conscience,  has  the  unquestioned  power  to 
postpone  the  claim  of  a  creditor,  and  should  do  so  whenever 
the  circumstances  are  such  as  to  arouse  suspicion  or  to  throw- 
doubt  upon  tli<^  validity  of  the  claim.  Thus  a  claim  may  be 
postponed,  although  a  just  one,  as  where  there  is  evidence  of 
a  fraudulent  combination  and  scheme  of  such  creditor  to  defeat 
the  claim  of  others  ;^2  or  where  the  officers  of  a  bankrupt 
corporation  present  large  claims  ;'^^  or  where  the  names  of 
certain  creditors,  by  whom  claims  against  the  estate  are  pre- 
sented, do  not  appear  upon  the  schedule  ;'^^  or  where  a  prima 
facie  case  is  made  out  that  certain  creditors  have  received 
preferences,  or  that  their  claims  have  been  purchased  with 
money  belonging  to  the  bankrupt  and  in  collusion  with  him  ;'^s 
or  where  the  claim  is  founded  on  a  large  open  account  be- 
tween the  parties,  and  which  is  in  dispute  between  them.'^^ 
Proof  of  a  claim  may  be  postponed  until  after  the  choice  of 
trustee,'^^  and,  if  so,  it  may  be  treated  in  all  respects  as  if  it 
had  not  been  tendered  and  postponed.'^^ 

§  851.  When  proof  may  be  amended.— A  judge  or  referee 
may  in  his  discretion  allow  a  proof  of  debt"^  or  the  verification 
of  a  claim  to  be  amended,  and,  in  case  of  inadvertence,  mis- 
take or  ignorance,  whether  of  fact  or  law,  will  generally 
exercise  that  power,  in  the  absence  of  fraud,  when  justice 
seems  to  require  that  the  amendment  be  made  and  when  all 

224,    F.    C.   7748;     see   also   In   re  R.  R.  &  Iron  Co.,  7  N.  B.  R.  376, 

Brumelkamp,  1  N.  B.  N.  360,  95  F.  F.  C.  7997. 

R.  814,  2  A.  B.  R.  318.  74  in  re  Milwain,  12  N.  B.  R.  358, 

"0  In  re  Nebe,  supra;  but  see  In  F.  C.  9623. 

re   Strauss,    2   N.   B.    R.   18,   F.   C.  ts  in  re  Herrman,  3  N.  B.  R.  153, 

13532;   In  re  Haley,  2  N.  B.  R.  13,  F.   C.  6426. 

F.  C.  5918.  "G  In  re  Jones,  2  N.  B.  R.  20,  F. 

-1  In  re  Stevens,  107  F.  R.  243,  5  C.  7447. 

A.  B.  R.  806.  "  In  re  Smith,  1  N.  B.  R.  25,  2 

T2  In  re  Headley,  2  N.  B.  N.  R.  Ben.  113.  F.  C.  12971. 

250,  3  A.  B.  R.  272,  97  F.  R.  765;  7^  in  re  Herrman.  3  N.  B.  R.  161. 

State  V.  Hope,  102  Mo.  431.  4  Ben.  126,  F.  C.  6425. 

73  In   re  Lake  Sup.   Ship  Canal.  79  in  re  Stevens,  107  F.  R.  243,  5 

A.  B.  R.  806. 


534  THE   NATIONAL  BANKRUPTCY    LAW.  Ch.  57 

parties  can  be  placed  in  the  same  situation  they  would  have 
occupied  if  the  error  had  not  occurred.**"  This  right  extends 
to  all  matters  forming  a  part  of  the  proof  and  will  generally 
be  permitted  so  long  as  proof  of  a  debt  may  be  made,**^  pro- 
vided the  claim  has  not  been  settled  or  dividend  received  on 
account,  in  which  event  the  holder  would  probably  be  estopped 
unless  good  and  sufficient  reasons  are  shown.  It  has  been  held, 
however,  that  the  amendment  may  be  permitted,  even  after  the 
expiration  of  the  time  for  proving  claims,  if  there  be  enough 
on  the  original  proof  by  which  to  amend.**^  ^he  sufficiency  of 
the  amended  proof  is  to  be  determined  on  its  face,  irrespective 
of  prior  proofs,  except  as  to  whether  it  is  substantially  the  same 
claim.^^  If  the  proof  is  insufficient  and  is  not  amended  upon 
leave,  it  will  be  expunged.^^ 

In  the  administration  of  the  law,  its  fundamental  principle 
of  equal  distribution  among  the  creditors,  would  seem  to 
forbid  the  exercise  of  this  discretion  in  the  interest  of  one 
creditor  to  the  prejudice  of  others,  as  where  a  claim  is  proved 
as  unsecured,  and  subsequently  an  endeavor  is  made  to  set 
up  the  claim  as  an  equitable  lien  when  there  is  no  perfected 
security  in  the  creditor's  favor,  but  only  a  contingent  and 
inchoate  lien  in  the  effort  to  secure  a  preference  by  litigation.*"' 

A  creditor,  after  examination  before  the  referee  touching 
his  claim,  has  been  allowed  to  file  supplemental  proof  corre- 
sponding with  the  facts  shown  by  his  testimony  ;*^  but  where 
proof  is  made  on  an  old  promissory  note,  an  amendment 
should  not  be  permitted  to  show  that  a  new  note  was  given, 
for  which  the  old  note  was  part  consideration,  but  such  new 
note  should  be  proved  independently.*'^ 

80  In  re  Myers,  99  F.  R.  691;  In  S2  Hutchinson  v.  Otis,  115  F.  R. 
re  Wilder,  2  N.  B.  N.  R.  629,  101     937,  8  A.  B.  R.  382. 

F.  R.   104,  3  A.  B.  R.   761;    In  re  83  in  re  Stevens  et  al.,  supra. 

Parkes,  10  N.  B.  R.  82,  F.  C.  10754;  84  in  re  Scott,  1  N.  B.  N.  402,  93 

In  re  Friedman,  1  N.  B.  N.  208,  1  F.  R.  418,  1  A.  B.  R.  553. 

A.   B.  R.  510;   In  re  Clark  &  Ben-  ss  in  re  Wilder,  2  N.  B.  N.  R.  629. 

inger,  5  N.  B.  R.  255.  F.  C.   2806;  101  F.  R.  104,  3  A.  B.  R.  761;   see 

In  re  Jaycox  &  Green,  8  N.  B.  R.  In  re  Lesser,  99  F.  R.  913,  3  A.  B. 

241.  F.   C.  7242;   In  re  McConnell.  R.  758. 

9  N.  B.  R.  387,  F.  C.  8712.  so  in  re  Montgomery,  3  N.  B.  R. 

81  In  re  Moebins,  116  F.  R.  47,  8  108,  F.  C.  9729. 

A.  B.  R.  590;  In  re  Stevens  et  al.,  87  in  re  Montgomery,  3  N.  B.  R. 
107  F.  R.  243,  5  A.  B.  R.  806.  109,  F,  C.  9731. 


Ch.  57  PROOF    OF    CLAIMS.  535 

§  852.  The  effect  of  proof— in  general.— When  a  creditor 
seeks  to  prove  a  claim  against  the  estate  of  a  bankrupt,  he 
stands  in  the  position  of  a  plaintiff  at  law,^*^  is  a  party  to  the 
suit  and  bound  by  the  decision,^'''  but  in  no  sense  a  witness 
nor  entitled  to  fees.'**^  In  the  case  of  a  foreign  creditor  his 
rights  remain  unaffected  by  the  domestic  proceedings,  except 
that  his  remedy,  when  sought  in  the  United  States  courts, 
must  be  in  accordance  with  the  bankruptcy  act  and  laws  of 
the  United  States.^i 

Proving  a  debt  does  not  of  itself  operate  as  an  absolute 
extinguishment  or  satisfaction  of  the  debt,  the  creditor  being 
remitted  to  his  former  rights  and  remedies  if  the  bankrupt 
is  refused  a  discharge  ;^2  the  weight  of  authority  holding  that 
the  right  of  action  is  merely  suspended,  pending  the  granting 
of  the  discharge/^3  Where  proof  has  been  duly  presented  a 
I)rima  facie  case  is  made,  subject  only  to  an  order  for  further 
proof  and  the  right  of  a  creditor,  or  person  interested,  to 
offer  counter  proof  j^^  and  when  such  proof  is  admitted  the 
rights  of  creditors  accrue,  and  they  may  then  ask  for  an 
amendment  of  the  petition  for  any  defect.^^ 

§  853. on   collateral  proceedings.— No   creditor,   who 

holds  a  claim  which  might  be  proven  in  bankruptcy,  whether 
the  debt  is  secured  by  lien  or  not,  can  enforce  such  debt  in  a 
state  court  against  a  debtor  after  his  adjudication  in  bank- 
ruptcy, except  by  permission  of  the  court  of  bankruptcy.**^ 
This  inhibition  would  probably  not  extend  to  collateral  reme- 
dies, and  hence  the  right  of  action  against  a  person  as  a 
stockholder  of  a  corporation  would  not  be  affected.^'^  A 
creditor    secured  by  a  mortgage  on  the    bankrupt's    estate, 

S8  In  re  Prescott,  9  N.  B.  R.  385,  145;   Dingee  v.  Becker,  9  N.  B.  R. 

5  Biss.  523,  F.  C.  11389.  508;  Davis  v.  Anderson,  6  N.  B.  R. 

«i'  Wiswall  V.  Campbell,  15  N.  B.  146,  F.  C.  3623. 

R.  421,  93  U.  S.  347.  »+  In   re   Sumner,   2  N.   B.  N.  R. 

!•"  In  re  Paddock,  6  N.  B.  R.  396,  681,  101  F.  R.  224,  4  A.  B.  R.  123; 

F.  C.  10658.  In  re  Saunders,  13  N.  B.  R.  164,  2 

in  In  re  Bugbee,  9  N.  B.  R.  258.  Lowell,  444,  F.  C.  12371. 

F.  C.  2115.  95  In  re  Jones,  2  N.  B.  R.  20.  F. 

92  Dingee  v.   Becker,   9  N.  B.  R.  C.  7447. 

508,  F.  C.  3919;  Miller  v.  O'Kain,  9o  in  re  Winn,  1  N.  B.  R.  131,  F. 
14  N.  B.  R.  145.  C.  17876. 

93  Miller  v.  O'Kain,  14  N.  B.  R.        st  Allen  v.  Ward.  10  N.  B.  R.  285. 


:,;l(i  THE  NATIONAL  BANKRUPTCY  LAW.  ("11.  o^ 

having  proved  his  claim,  may,  with  leave  of  the  court  of 
bankruptcy,  and  in  the  absence  of  objection  by  the  trustee, 
proceed  to  foreclose  the  mortgage  in  a  State  court;-  but  a 
creditor,  who  asserts  his  lien  in  the  court  of  bankruptcy,  is 
not  entitled  to  resort  to  a  State  tribunal  to  enforce  his  lien 
against  the  same  property  which  was  the  subject  of  adjudi- 
cation in  the  bankruptcy  court.^ 

§854. may  still  oppose  discharge.— Whether  he  has 

proved  his  debt  or  not,  any  creditor  may  oppose  bankrupt's 
discharge.^  Under  the  former  law  it  was  held  that  a  dis- 
charge would  not  be  set  aside  after  bankrupt's  death  in  order 
that  demands  might  be  proved  against  his  estate  in  the  hands 
of  his  administrator.^ 

§  855.  Effect  of  failure  of.— A  creditor  who  has  not  proved 
his  claim  does  not  acquire  any  rights  superior  to  those  who 
do,  but  if  the  claim  is  scheduled  it  will  be  released  by  the 
discharge,  and  as  a  penalty  he  loses  his  dividend.  Such 
creditor  has  no  rights  in  composition  proceedings;^  nor  can 
he  proceed  in  an  action  against  the  bankrupt  pending  the 
determination  as  to  his  discharge.^ 

§  856.  Right  to  prove  not  dependent  on  existence  of  assets. 
—Whether  a  debt  is  provable  depends  upon  the  nature  of  the 
liability,  and  not  upon  whether  there  are  assets,  or  there  is 
any  prospect  of  assets  applicable  to  it.'^  Thus  where  a  cred- 
itor holds  the  individual  notes  of  a  partner  he  may  prove  and 
have  them  allowed  in  the  firm  proceedings,  though  their 
payment  will  be  postponed  until  the  partnership  debts  have 
been  paid.^ 

§857.  'b.  Claim  founded  on  instrument  in  writing.— 
'Whenever  a  claim  is  founded  upon  an  instrument  of  writing, 
'such  instrument,  unless  lost  or  destroyed,  shall  be  filed  with 

1  McHenry  v.  La  Societe  Fran-  ^  Young  v.  Ridenbaugh,  11  N.  B. 
caise,  16  N.  B.  R.  385,  95  U.  S.  581.  R.  563,  3  Dill.  239,  F.  C.  18173. 

2  Spilman  v.  Johnson,  16  N.  B.  •"■  In  re  Mathers.  17  N.  B.  R.  225, 
R.  145.  F.  C.  9274. 

3  In  re  Sheppard,  1  N.  B.  R.  115.  «  In    re    Schwartz,    15    N.    B.    R. 
F.  C.  12753;  In  re  Boutelle.  2  N.  B.  330,  14  Blatch.  196,  F.  C.  12502. 
R.   51,  F.   C.    1705,   contra;     In   re  7  in  re  Bates,  100  F.  R.  263,  4  A. 
Burke,  3  N.  B.  R.  76,  Deady.  425,  B.  R.  56. 

F.  C.  2156;  In  re  Levy.  1  N.  B.  R.  «  In  re  Dobson,  2  N.  B.  N.  R.  514. 
66,  2  Ben.  169,  F.  C.  8297. 


Ch.  57     PROOF    OP    CLAIMS— WRITTEN    INSTRUMENTS.  537 

'the  proof  of  claim.  If  such  instrument  is  lost  or  destroyed, 
'a  statement  of  such  fact  and  of  the  circumstances  of  such 
'loss  or  destruction  shall  be  filed  under  oath  with  the  claim. 
'After  the  claim  is  allowed  or  disallowed,  such  instrument 
'may  be  withdrawTi  by  permission  of  the  court,  upon  leaving 
'a  copy  thereof  on  file  with  the  claim. '^ 

§  858.  Instrument  in  writing.— The  failure  to  file  with  the 
proof  of  notes  the  originals,  is  a  sufficient  bar  to  their  allow- 
ance, and  the  filing  of  a  list  giving  the  date,  amount,  date  of 
maturity  and  the  names  of  the  makers,  will  not  answer  in 
lieu  thereof.^ 0  The  holder  of  an  indorsed  note  who  does  not 
himself  prove  it  on  the  bankruptcy  of  the  maker  is  not  re- 
quired to  tender  it  to  the  indorser,  in  order  that  he  may  file 
it  as  required  by  this  section,  but  the  better  practice  is  to 
obtain  the  note  by  furnishing  indemnity  to  the  holder,  when 
it  may  be  filed  with  proof  of  the  claim,  or  have  the  holder 
prove  the  claim  and  file  the  note  upon  suitable  indemnity 
against  risk,  loss  or  expense.^ ^ 

A  creditor  may  withdraw  the  written  instrument  after  the 
claim  has  been  passed  upon,  if  a  copy  is  left  on  file,  but  the 
trustee  has  the  right  to  demand  the  production  of  the  original 
Avhen  the  dividends  are  paid,  that  they  may  be  properly 
indorsed. 1-  In  proceedings  against  the  estate  of  a  deceased 
bankrupt  a  creditor  is  competent  to  prove  the  contract  on 
which  his  claim  is  based,^^  and  a  written  memorandum  signed 
by  the  parties  referring  to  and  recognizing  a  previous  oral 
agreement  as  an  existing  contract  would  suffice,  if  there  was 
no  fraud  or  mistake  in  its  execution.^-* 

9  Analogous  provision  of   act  of  and   amount   of   any   dividend   de- 

1867.     "Sec.  24.     ...     A  bill  of  clared  thereon." 

exchange,     promissory     note,     or  lo  in  re  McCauley,  2  N.  B.  N.  R. 

other  instrument,  used  in  evidence  1085. 

upon  the  proof  of  a  claim,  and  left  n  Nat.    Bk.    of    So.    Reading    v. 

in  court  or  deposited  in  the  clerk's  Sawyer,  3  N.  B.  N.  R.  266.  6  A.  B. 

office,  may  be  delivered,  by  the  reg-  R.  154. 

ister  or  clerk  having  the  custody  12  in  re  Emison,  2  N.  B.  R.  179, 

thereof,  to  the  person  who  used  it,  F.  C.  4459. 

upon  his  filing  a  copy  thereof,  at-  1 )  In  re  Merrill,  16  N.  B.  R.  35. 

tested   by  the  clerk  of   the   court.  9  Ben.  165.  F.  C.  9466. 

who  shall  indorse  upon  it  the  name  i*  In  re  Howard,  100  F.  R.  630,  4 

of  Ihe  party  against  whose  estate  A.  B.  R.  69. 
it  has  been   proved,  and  the  date 


538  THE   NATIONAL  BANKRUPTCY   LAW.  Ch.  57 

A  general  allegation  of  the  consideration  for  claims  founded 
upon  instruments  in  writing  is  insufficient,  but  it  should  extend 
to  the  particulars,  though  it  need  not  be  beyond  what  relates 
to  the  claim  as  it  accrued  to  the  claimant.^'^ 

As  the  War  Revenue  law  of  1898  declared  a  rule  of  evidence 
Avith  reference  to  certain  written  instruments,  notes  and  other 
papers  drawn  while  such  law  was  in  force,  and  which  were 
not  stamped  pursuant  thereto,  and  which  weijp  filed  in  support 
of  a  proof  of  a  claim,  were  disallowed.^" 

§859.     'c.    Proved   claims   may  be  filed  for   allowance.— 

'Claims  after  being  proved  may,  for  the  purpose  of  allowance, 
'be  filed  by  the  claimants  in  the  court  where  the  proceedings 
'are  pending  or  before  the  referee  if  the  case  has  been 
'referred. '^^ 

§  860.  Where  proof  of  debt  filed.— The  proof  of  debt  should 
be  tiled  with  the  clerk  of  court  unless  the  petition  has  been 
referred,  in  which  event  it  should  be  filed  with  the  referee  in 
charge  of  the  case,  and  if  any  proofs  have  been  received  by 
the  trustee,  they  must  be  delivered  to  said  referee.^^  A  cred- 
itor who  retains  possession  of  the  proof  of  his  claim  and  does 
not  tile  it,  has  not  proven  his  claim.^^ 

§861.  'd.  Allowance  of  claims.— Claims  which  have  been 
'duly  proved  shall  be  allowed,  upon  receipt  by  or  upon  pres- 
'entation  to  the  court,  unless  objection  to  their  allowance 
'shall  be  made  by  parties  in  interest,  or  their  consideration 
'be  continued  for  cause  by  the  court  upon  its  own  motion. '2» 

§  862.     Allowance  or  rejection  of  claims.— From  a  judgment 

IS  In  re  Stevens,  107  F.  R.  243,  5  to   be  kept  by  him   for  that  pur- 

A.  B.  R.  806.  pose,  the  names  of  creditors  who 

10  In  re  Dobson,   2  N.   B.  N.  R.  have  proved   their  claims,   in   the 

514.  order  in   which   such  proof  is  re- 

17  Analogous  provision  of  act  of  ceived,  stating  the  time  of  receipt 

1867.       "Sec.     22.     .     .     .     If     the  of  such  proof,  and  the  amount  and 

proof  is  satisfactory  to  the  register  nature  of  the  debts,  which  books 

or   the   commissioner,   it  shall   be  shall  be  opened  to  the   inspection 

signed    by   the   deponent,   and   de-  of  all  the  creditors." 

livered  or  sent  by  mail  to  the  as-  is  G.  O.  XX;  In  re  Ankeny,  1  N. 

signee,    who    shall     examine    the  B.  N.  482. 

same    and    compare    it    with    the  i9  In  re  Sheppard,  1  N.  B.  R.  115. 

books   and    accounts   of  the  bank-  F.  C.   12753. 

rupt,  and  shall  register,  in  a  book  20  Analogous  provision  of  act  of 


Cir.  57  PROOF   OF   CLAIMS.  539 

allowing  or  rejecting  a  claim  or  debt  of  $500  or  over,  an  appeal 
may  be  taken  to  the  circuit  court  of  appeals  ;2^  and  it  may  be 
taken  from  tho  circuit  court  of  appeals  to  the  Supreme  Court, 
if  the  amount  in  controversy  exceeds  $2,000,  or  where  a  justice 
of  the  Supreme  Court  certifies  that  the  determination  of  the 
questions  involved  is  essential  to  a  uniform  construction  of 
the  act.  The  judgment  of  a  court  of  bankruptcy  allowing 
or  rejecting  a  claim  is  presumptively  rendered  on  the  date  of 
its  filing  with  the  clerk,  and  the  ten  days  for  taking  an  appeal 
begins  to  run  from  that  time.-- 

The  referee  is  vested^^  with  a  wide  discretion  in  the  allow- 
ance and  disallowance  of  claims ;  and  the  judge,  upon  review, 
will  not  interfere  with  his  decision  upon  questions  of  fact, 
unless  convinced  that  it  is  manifestly  against  the  weight  of 
evidence.  The  fact  of  relationship  between  the  debtor  and 
creditor  requires  closer  scrutiny  on  the  part  of  the  referee 
in  the  examination  of  a  claim  than  is  required  in  the  case  of 
ordinary  claims,  and  where  his  decision  is  the  result  of  such 
scrutiny,  it  will  not  be  reversed  except  in  a  very  clear  case.-'* 
The  proof  and  allowance  are  distinct,  the  former  being  a 
sworn  statement  by  which  the  creditor  presents  a  claim  and 
the  latter  a  judicial  action  by  which  such  claim  is  established 
in  the  proceedings  and  permitted  to  participate  in  the  man- 
agement and  distribution  of  the  estate.  Claims  may  also  be 
allowed  conditionally  or  temporarily  for  the  purpose  of  par- 
ticipating in  the  choice  of  trustee  or  where  some  question  may 
]-emain  to  be  determined  before  they  can  be  allowed  for 
purposes  of  distribution. ^^  A  creditor  who  has  filed  a  state- 
ment of  his  claim  under  oath,  cannot  sustam  it  by  evidence 
of  an  indebtedness  arising  in  a  difiPerent  manner  from  that 
stated.-'^  It  has  been  held  that  a  creditor  presentmg  a  claim 
for  proof  and  allowance,  which  is  contested  by  the  trustee,  is 
not  entitled  to  demand  a  trial  by  jury,  because  proceedings 

1867.     "Sec.  23.     .     .     .     The  court  23  G.  O.  XXI. 

shall  allow  all  debts  duly  proved,  24  in  re  Rider,  3  A.  B.  R.  193,  96 

and  shall  cause  a  list  thereof  to  be  F.  R.  811;    In    re    Mendelsohn,  12 

made  and  certified   by  one  of  the  N.  B.  R.  533,  F.  C.  9420. 

registers."  2r,  in  re  Wise,  2  N.  B.  N.  R.  151. 

21  Sec.  25a,  act  of  1898.  20  in  re  Lansaw,  118  F.   R.  365, 

22  Peterson  v.  Nash  Bros.,  112  F.  9  A.  B.  R.  167. 
R.  311,  7  A.  B.  R.  181. 


540  THE    NATIONAL   BANKRUPTCY    LAW.  ClI.  57 

in  bankruptcy  are  of  equitable  cognizance  and  the  seventh 
amenelment  to  the  Constitution  of  the  United  States  does  not 
apply  thereto,  and  no  act  of  Congress  at  present  in  force 
authorizes  it.-^  If  a  creditor  attempts  to  obtain  an  advan- 
tage over  others  by  fraudulently  including  in  his  account 
fictitious  items  or  incorrect  amounts,  he  forfeits  his  right  to 
have  his  claim  allowed  in  any  sum.-^ 

A  claim  that  has  been  duly  proved^"  and  filed  for  allowance 
with  the  referee^*^  must  be  allowed,  unless  objections  are  made 
by  parties  in  interest,  or  unless  continued  by  the  court  for 
cause  on  its  own  motion.^^  If  the  proof  fails  to  state  an 
essential  fact,  but  complies  substantially  with  the  forms,  orders 
and  the  statute,  it  is  the  referee 's  duty  to  allow  it  as  requested, 
since  he  is  not  required  to  examine  claims  further  than  to 
see  that  the  proof  contains  the  formal  requisites  prescribed 
by  the  law  and  General  Orders,  as  parties  in  interest  have  the 
right  to  file  objections  or  petition  for  a  re-examination.  If 
proof  is  made  in  the  manner  directed  by  the  statute,  the 
verified  statement  of  the  claim  makes  a  prima  facie  case  for 
its  allowance.^-  jf  ^ny  party  in  interest  objects  he  must 
assume  the  burden  of  producing  evidence  against  it  of  at  least 
equal  probative  force  to  that  furnished  by  claimant's  sworn 
statement,  and  he  is  entitled  to  examine  the  claimant  and 
other  witnesses,  if  their  attendance  can  be  secured  without 
embarrassing  delay,  but  the  proceeding  should  not  be  sus- 
pended for  purpose  of  obtaining  the  evidence  of  witnesses 
bej^ond  the  jurisdiction,  unless  the  court  is  satisfied  that  the 
objection  is  interposed  in  good  faith,  and  that  the  evidence 
desired  is  of  substantial  value  and  necessary  to  a  just  deter- 
mination of  the  case.  In  such  case,  the  claim  should  not  be 
accepted  until  the  objection  is  disposed  of  or  the  court  is 
satisfied  of  the  validity  of  the  claim.^^ 

Where  the  respondent,  in  a  petition  in  involuntary  bank- 

2T  In   re  Christensen,   101   F.   R.  511,  citing  In  re  Cochran,  11  F.  C. 

243,  4  A.  B.  R.  99.  citing  Barton  v.  606;  In  re  Felter,  7  F.  C.  904;  In  re 

Barbour,  104  U.  S.   126,  26  L.  Ed.  Merrick,  17  F.  C.  75;  In  re  Patter- 

672.  son,   18   F.    C.   1313;     In  re   Trow- 

2s  In  re   Flick,  105  F.  R.   503,  5  bridge,  24  F.  C.  218. 

A.  B.  R.  465.  32  In  re  Shaw,  109  F.  R.   780,  6 

29  Sec.  57a  and  b,  act  of  1898.  A.  B.  R.  499. 

30  Sec.  57c,  act  of  1898.  33  in  re  Sumner,  2  N.  B.  N.  R. 

31  In  re  Ankeny,  1  N.  B.  N.  482,  681,  101  F.  R.  224,  4  A.  B.  R.  123. 


Ch.  57  PROOF    OF    CLAIMS.  641 

ruptcy,  denies  his  alleged  indebtedness  to  the  petitioning 
creditor,  and  takes  issue  on  the  validity  and  consideration  on 
which  such  creditor  claims,  and  upon  evidence  offered  on  both 
sides,  the  court  sustains  the  petitioner  and  adjudges  respon- 
dent bankrupt,  such  adjudication  is  conclusive  of  petitioner's 
claim,  when  presented  for  allowance,  as  to  the  bankrupt,  and 
any  creditor  who  joined  in  the  proceedings  and  opposed  the 
adjudication.  The  adjudication  is  not  conclusive,  nor  does  it 
preclude  the  bankrupt  from  opposing  the  allowance  of  notes, 
made  by  the  bankrupt  to  third  parties  and  offered  in  evidence 
on  the  question  of  solvency,  such  notes  not  being  directly  in 
issue  but  only  collaterally  brought  in  question,  the  holders 
not  being  parties  to  the  proceedings.^'^  The  fact  that  claims 
are  purchased  for  the  purpose  of  controlling  the  majority  of 
the  claims,  does  not  necessarily  prevent  their  allowance, 
though  the  transaction  should  be  carefully  scrutinized.^^  A 
State  rule  of  law  that  a  husband  may  not  contract  with  his 
Avife,  is  not  construed  to  prevent  the  enforcement  against  his 
estate  of  all  rights  in  their  nature  contractual,  provided  they 
did  not  originate  in  a  contract  made  directly  between  the 
couple.3<5 

The  attorney  for  the  bankrupt  should  not  be  permitted  to 
appear  in  the  proceedings  as  attorney  for  a  creditor  also,  yet, 
in  the  absence  of  a  rule  of  court  on  the  subject,  a  claim  thus 
duly  proved  against  the  bankrupt's  estate  has  been  allowed,^" 
though  such  practice  cannot  be  too  severely  condemned. 

§  863.  Effect  of  receipt  and  filing  of  proof —power  of 
referee. — By  the  receipt  and  filing  of  the  proof  of  debt,  the 
court  obtains  jurisdiction  of  the  claim  and  of  the  creditor 
presenting  it,  and  then  only  does  its  revising  power  over  such 
proof  commence,  the  receiving  and  filing  concluding  nothing 
but  the  court  retaining  full  power  to  revise  and  correct,  or 
reject  altogether.^^  Where  objections  to  a  proof  of  debt  are 
filed  and  a  hearing  is  had  before  the  referee,  he  may  pass 
upon  the  same  ;^^  or  upon  request  may  certify  the  matter  to 

34  In  re  Sheridan,  98  F.  R.  406,  37  in  re  Kimball,  2  N.  B.  N.  R. 
3  A.  B.  R.  554.  46,   100  F.  R.   777,  4  A.  B.  R.  144. 

35  In  re  Headley,  2  N.  B.  N.  R.  3h  in  re  Merrick,  7  N.  B.  R.  459, 
250.   3  A.  B.  R.  272,  97  F.  R.  765.  F.  C.  9463. 

3<'.  In  re  Nickerson.  8  A.  B.  R.  30  in  re  Keller,  18  N.  B.  R.  331, 
707;  Butler  v.  Ives,  139  Mass.  202.     F.  C.  7654. 


542  THE    NATIONAL   BANKRUPTCY    LAW.  Cn.  57 

the  court.^*^  Debts  proved  and  filed  with  the  referee  may  be 
l)Ostponed  for  investigation  and  not  allowed  to  be  voted 
upon.^^  It  has  been  held  that  an  existing  adjudication  in 
bankruptcy  precludes  all  inquiry  touching  the  existence  or 
validity  of  the  debt  of  a  petitioning  creditor/^  though  this 
seems  questionable. 

§864.  'e.  Proportion  of  secured  claims  allowed.— Claims 
'of  secured  creditors  and  those  who  have  priority  may  be 
'allowed  to  enable  such  creditors  to  participate  in  the  pro- 
'ceedings  at  creditors'  meetings  held  prior  to  the  determination 
'of  the  value  of  their  securities  or  priorities,  but  shall  be 
'allowed  for  such  sums  only  as  to  the  courts  seem  to  be  owing 
'over  and  above  the  value  of  their  securities  or  priorities.' 

§865.  Secured  creditors— allowance,  voting,  etc.— A  "se- 
cured creditor"  includes  a  creditor  who  has  a  security  for  his 
debt  upon  the  property  of  the  bankrupt  of  a  nature  to  be 
assignable  under  this  act,  or  who  owns  such  a  debt  for  which 
some  indorser,  surety  or  other  person,  secondarily  liable  for 
the  bankrupt,  has  such  security  upon  bankrupt's  assets ;^^  and 
so  far  as  concerns  voting,  does  not  include  creditors  holding 
securities  on  the  property  of  third  persons.  Secured  claims 
are  not  to  be  counted  in  computing  either  the  number  or 
amount  of  claims,  unless  the  amount  of  such  claims  exceeds 
the  value  of  such  securities  or  priorities  and  then  only  for 
such  excess."*^  Firm  creditors  are  entitled  to  vote  the  full 
amount  of  their  claims  if  otherwise  proper,  except  as  for  such 
securities  as  are  held  upon  partnership  assets,  while  the  value 
of  any  securities  upon  property  of  individual  members  of  the 
firm  are  not  securities  which  need  be  deducted  in  order  to 
ascertain  the  value  of  claims  against  the  firm.^^ 

A  creditor  whose  claim  consists  of  notes  and  drafts  for 
Avhich  he  has  no  security,  and  a  debt  secured  by  mortgages, 
may  be  admitted  as  a  creditor  for  that  part  of  his  claim  only 
which  is  unsecured,  and  the  indebtedness  for  which  he  has 
security  must  rest  in  abeyance,  until  the  value  of  the  security 

40  In  re  Clark,  6  N.  B.  R.  202,  F.  «  Sec.  1  (23),  act  of  1898. 
C.  2808.  44  Sec.  56b,  act  of  1898. 

41  In  re  Frank.  5  N.  B.  R.  194,  5  45  in  re  Coe  et  al.,  1  N.  B.  N. 
Ben.  164,  F.  C.  5050.  294,  1  A.  B.  R.  275. 

42  In  re  Fallon,  2  N.  B.  R.  92,  F. 
C.  4628. 


Ch.  57  PROOF    OF    CLAIMS.  543 

is  ascertained.^*'  A  creditor,  who,  at  the  time  of  the  bank- 
i-uptcy,  has  in  hand  goods  or  chattels  of  the  bankrupt  with 
a  power  of  sale,  or  choses  in  action  with  power  of  collection, 
may  sell  the  goods  or  collect  the  claims  and  set  them  oft' 
against  the  debt  of  the  bankrupt,  although  the  power  to  sell  or 
collect  w^as  revocable  by  the  bankrupt  before  his  bankruptcy, 
or  he  may  retain  the  surplus  by  w^ay  of  set-off  on  another 
claim  which  he  holds  against  the  bankrupt.^^  The  referee 
should,  in  a  proper  case,  authorize  the  trustee  to  allow  in 
i-eduction  of  a  claim,  the  reasonable  value  of  land  belonging 
to  the  estate  on  w^iich  the  claimant  has  security,  and  in  that 
event,  should  order  the  land  conveyed  to  the  claimant.^^  Ad- 
vances made  on  the  faith  of  a  security  presently  to  be  given 
should  be  allowed  as  a  secured  claim,  notwithstanding 
changes  in  the  condition  of  the  borrower  pending  the  con- 
summation of  the  agreement,  by  the  actual  delivery  of  the 
security. ^^  AVhere  a  bankrupt's  mortgaged  property  is  sold 
free  of  the  incumbrance,  the  mortgagee  is  not  bound  to  prove 
his  claim  as  required  by  this  section,  but  has  only  to  plead 
and  prove  his  debt  and  security  as  in  an  ordinary  suit.^*^ 

J;  866.  What  are  not  secured  claims.— A  personal  claim  of 
indebtedness  against  a  bankrupt  does  not  constitute  a  secured 
claim  upon  property  of  the  estate  in  the  hands  of  one  making 
such  claim  ;^i  or  the  claim  on  a  bond  where  the  sureties  are 
indemnified  by  a  mortgage  ;^-  or  the  claim  of  a  consignor  whose 
property  is  sold  prior  to  the  bankruptcy  and  the  proceeds 
mingled  with  the  general  assets  ;^3  or  a  bailor  who  allows  the 
bailee  to  mix  the  property  with  his  own  so  that  it  cannot  be 
distinguished;^^  or  a  creditor  who  seizes  property  by  attach- 
ment  issued  from  a  state  court,  within  four  months  of  the 

46  In  re  Hanna.  7  N.  B.  R.  502,  Krogman,    5   N.    B.   R.    116,    F.    C. 

5  Ben.  5,  F.  C.  6027.  7936. 

i-  Ex  p.  Whiting,  14  N.  B.  R.  307,  vj  in  re  Lloyd,   15  N.  B.  R.  257, 

2  Lowell  472,  F.  C.  17573.  F.  C.  8429. 

■i»  In  re   Smith,  1   N.  B.  N.  404,  53  Jn   re   Coan    and    Ten    Broeke 

2  A.  B.  R.  648.  Car  Mfg.   Co.,   12  N.  B.  R.   203.  6 

49  Sparhawk  v.  Richards,  12  N.  Biss.  315,  F.  C.  2915;  Ex  p.  Flana- 
B.  R.  74,  F.  C.  13205.  gan,  12  N.  B.  R.  230,  2  Hughes  264, 

50  In  re  Goldsmith,  118  F.  R.  763.  F.  C.  4855. 

51  Sedgwick  v.  Casey,  4  N.  B.  R.  s*  Adams  v.  Myers,  8  N.  B.  R. 
161.  4  Ben.  562.  F.  C.  12610;  In  re  214,  1  Sawy.  306,  F.  C.  62. 


544  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  57 

bankruptcy  proceeding  ;•'••"'  oi-  where  persons  place  money  in 
the  hands  of  another  to  be  invested  in  trust  for  their  benefit 
which  he  fails  to  do,  the  property  not  remaining  in  specie  ;•"'''' 
or  a  depositor  whose  specie  deposit  has  been  appropriated  by 
the  depositee.-'"'^ 

§  867.  Marshaling  of  assets.— Where  there  are  two  classes 
of  creditors  having  a  common  debtor,  who  has  several  funds, 
and  one  class  can  resort  to  all  the  funds  and  the  other  to  but 
part,  the  former  take  payment  out  of  the  fund  to  which  they 
can  resort  exclusively;  if  the  former  resort  to  the  fund  coni- 
mon  to  both  classes,  to  the  loss  of  the  latter,  the  latter  are 
subrogated  to  the  extent  of  such  loss  to  the  place  of  the 
former.^^  As  joint  and  separate  estates  are  considered  dis- 
tinct, a  joint  creditor  having  security  on  the  separate  estate 
may  prove  against  the  joint  estate  without  relinquishing  his 
security,  or  prove  his  whole  claim  against  both  estates  and 
receive  a  dividend  from  each,  but  so  as  not  to  receive  more 
than  the  full  amount  of  his  debt  from  both  sources.^'' 

§868.  'f.  Early  hearing  of  objections.— Objections  to 
'claims  shall  be  heard  and  determined  as  soon  as  the  con- 
'venience  of  the  court  and  the  best  interests  of  the  estates 
'and  the  claimants  will  permit.' 

§  869.  Who  may  make  objections.— The  bankrupt  not  only 
has  the  right  but  it  is  his  duty  to  examine  and  file  objections 
to  the  proof  and  allowance  of  unjust  or  fictitious  claims 
against  his  estate;^*'  while  either  the  trustee*^^  or  a  creditor 
may  also  object.  A  disinterested  party  can  only  be  heard  by 
leave  of  the  court.*^^  If  the  trustee  refuses  or  neglects  to 
contest  a  fraudulently  proved  debt,  any  creditor  who  has 
proved  his  debt  may  do  so,  after  obtaining  authority  from  the 
court  or  referee.^^     But  a  trustee  cannot  object  to  a  judgment 

55  In  re  Broich,  15  N.  B.  R.  11,  7  59  In  re  Howard,  4  N.  B.  R.  185, 
Biss.  303.  F.  C.  1921.                  .  F.  C.  6750. 

56  In  re  Faneway,  4  N.  B.  R.  26;  eo  See.  7  (3),  act  of  1898;  In  re 
Ungewitter  v.  Von  Sachs,  3  N.  B.  Ankeny,  1  N.  B.  N.  511,  2  N.  B.  N. 
R.  178,  4  Ben.  167,  F.  C.  14343.  R.  349,  100  F.  R.  614. 

57  In 're  King,  9  N.  B.  R.  140;  ei  Atkins  v.  Wilcox,  105  F.  R. 
In  re  Hosie,  7  N.  B.  R.  601.  F.  C.  595.  5  A.  B.  R.  313. 

6711.  "2  Dressel   v.   North    State  Lum- 

58  In  re  Foot.  12  N.  B.  R.  337,  8     ber  Co..  119  F.  R.  531. 

Ben.  228.  F.  C.  4906:  In  re  Bugbee,         6"  Bank  v.  Cooper.  9  N.  B.  R.  529, 
9  N.  B.  R.  258,  F.  C.  2115.  20   Wall.    171:    In   re  Little   River 


Ch.  57  PROOF    OF    CLAIMS— OBJECTIONS.  545 

creditor's  claim  on  the  ground  that  the  judgment  was  for  a 
debt  procured  by  fraud  on  the  bankrupt,  and  was  secured  by 
default,  as  such  defense  should  have  been  set  up  in  the  court 
rendering  the  judgment."^  Objections  to  a  claim  should  be 
specific  and  set  forth  in  the  form  of  a  petition  for  review,^^ 
but  they  are  not  required  to  be  under  oath.^"'' 

§  870.  Effect  of  making  and  before  whom  made.— Objection 
interposed  to  a  claim  at  a  creditor's  meeting  should  be  heard 
and  determined  by  the  referee  as  early  as  possible,  and  if  he 
is  not  satisfied  with  the  prima  facie  case  made  by  the  claimant 
in  his  statement  accompanying  the  claim,  it  should  not  be 
accepted  as  proven  until  disposition  has  been  made  of  such 
objection  or  the  court  is  convinced  of  its  validity  ;•*'''  and  in 
such  case  the  hearing  may  be  postponed  and  the  question 
heard  at  some  subsequent  time.*^'^  If  objection  is  made  to  a 
claim,  although  no  proof  is  offered  in  opposition,  there  ap- 
pears to  be  no  reason  why  the  referee  upon  request  should 
not  certify  the  question  involved  for  the  ruling  of  the  eourt.*^*^ 

§  871.  Proof  in  case  of  objection.— A  creditor  is  not  bound, 
upon  a  mere  objection  to  his  claim,  to  produce  such  evidence 
thereof  as  would  be  necessary  at  an  ordinary  trial,'^^  nor  does 
such  objection  transfer  the  burden  of  proof  to  the  objector 
to  disprove  the  claim;  all  he  is  required  to  do  is  to  produce 
evidence  the  probative  force  of  which  is  equal  to  or  greater 
than  that  offered  in  the  first  instance  by  the  claimant  upon 
whom  the  burden  of  proof  remains, '^^  the  statute  merely  point- 
ing out  how  he  may  meet  it,  in  making  a  prima  facie  case,  or 
how  the  creditor,  or  other  person  entitled,  may,  by  inter- 
posing objection,  so  relate  himself  to  the  record  as  to  be  able 
to  give  evidence  in  opposition  to  the  claim.'^-  An  objecting 
creditor  shall  be  heard^^  and  given  an  opportunity  to  examine 

Lumber  Co.,  101  F.  R.  558,  3  A.  B.  N.  R.  462,  99  F.  R.  695,  3  A.  B.  R. 

R.   682.  733. 

>■■*  Stillwell  V.  Walker,   17    N.  B.  «»  In   re  Clark  &  Bininger,  6  N. 

R.    569,   F.   C.   13451.  B.  R.  202,  F.  C.  2808. 

65  In  re  Linton,  7  A.  B.  R.  676.  to  in   re   Saunders,   13    N.    B.   R. 

66  In  re  Woolen,  118  F.  R.   670,  164,  2  Lowell,  444,  F.  C.  371. 

9  A.  B.  R.  247.  7i  In   re  Woolen,  118   F.  R.  670, 

07  In  re  Sumner,   2  N.  B.  N.  R.     9  A.  B.  R.  247. 
681,    101    F.    R.    224,    4    A.    B.    R.         72  In  re  Sumner,   2  N.   B.  N.  R. 
123.  681,  101  F.  R.  224.  4  A.  B.  R.  123. 

68  In  re  Eagles  &  Crisp,  2  N.  B.         '^  In  re  Mendelsohn,  12  N.  B.  R. 

533.  3  Sawy.  342,  F.  C.  9420. 


546  THPJ    NATIONAL   BANKRUPTCY    LAW.  Ch.  57 

the  claimant  and  other  witnesses,  if  their  attendance  can  be 
procured  without  embarrassing  delay,  and,  in  a  proper  case, 
the  determination  of  the  matter  may  be  suspended  until 
evidence  can  be  taken  on  deposition,  but  this  is  only  where 
the  referee  is  convinced  that  there  is  substantial  reason  for 
believing  the  evidence  necessary  for  the  just  administration 
of  the  estateJ^ 

§  872.  Costs  in  case  of  objection.— A  creditor  who  contests 
the  validity  of  the  claim  of  another  is  liable,  upon  the  decision 
being  adverse  to  him,  for  the  taxable  costs  and  disbursements 
of  the  creditor  whose  claim  was  contested,  and  the  fees,  costs 
and  expenses  of  the  referee.'^^  Where  one  of  the  creditors 
successfully  objects  to  the  allowance  of  a  claim  filed  by  another 
creditor,  after  the  trustee  declines  to  interfere,  thereby  saving 
a  considerable  sum  for  distribution  among  the  creditors  gen- 
erally, his  attorney  contesting,  such  claim  may  be  allowed  a 
fee  to  be  paid  out  of  the  estate.'^^ 

§  873.  'g.  Preferences  must  be  surrendered.— The  claims 
'of  creditors  who  have  received  preferences,  voidable  under 
'section  60,  subdivision  b,  or  to  whom  conveyances,  transfers, 
'assignments,  or  incumbrances,  void  or  voidable  luader  section 
'67,  subdivision  e,  have  been  made  or  given,  shall  not  be  al- 
'  lowed  unless  such  creditors  shall  surrender  such  preferences, 
'conveyances,  transfers,  assignments,  or  incumbrances.''^'^ 

§  874.  'What  must  be  surrendered.— The  amendment  of 
February  5,  1903,  changes  this  provision  in  such  material 
respects  as  to  render  many  of  the  earlier  decisions  under  the 
law  as  it  now  exists  almost  valueless  as  authority.  The  amend- 
ment requires  that  as  a  condition  precedent  to  the  proof  of  a 

■74  In  re  Sumner,  supra.  son  who,  after  approval  of  this  act 

75  In  re  Troy  Woolen  Co.,  8  N.  B.  shall  have  accepted  any  prefer- 
R.  412,  F.  C.  14203.  ence,    having   reasonable   cause   to 

76  In  re  Little  River  Lumber  Co.,  believe  that  the  same  was  made  or 
101  F.   R.  558,  3  A.  B.  R.   682.  given   by  the   debtor,    contrary   to 

77  By  the  amendment  of  Febru-  any  provision  of  this  act,  shall  not 
ary  5,  1903,  the  matter  in  the  text  prove  the  debt  or  claim  on  account 
was  substituted  for  the  following:  of  which  the  preference  was  made 
'The  claims  of  creditors  who  have  or  given,  nor  shall  he  receive  any 
'received  preferences  shall  not  be  dividend  therefrom  until  he  shall 
'allowed  unless  such  creditors  shall  first  have  surrendered  to  the  as- 
'surrender   their    preferences.'  signee  all  property,  money,  benefit, 

Analogous  provision  of  act  of  or  advantage  received  by  him  un- 
1867.     "Sec.  23.     .     .     .     Any  per-     der  such  preference." 


Ch.  57  PROOF   OF   CLAIMS— SURRENDER  OF  547 

claim,  there  must  be  first  surrendered  (1)  a  preference  voidable 
under  section  60b.  As  a  preference  is  defined  by  section  60a 
as  occurring  where  an  insolvent  v^^ithin  four  months  of  bank- 
ruptcy procured  or  suffered  a  judgment  to  be  entered  against 
himself  in  favor  of  any  person  or  made  a  transfer  of  any  of 
his  property,  with  the  result  that  such  creditor  shall  receive 
a  greater  proportion  of  his  debt  than  other  creditors,  such 
transfer,  whether  of  property  or  money,  or  the  amount  re- 
covered by  such  judgment  must  be  surrendered  prior  to 
proving  the  claim,  if  the  person  receiving  the  same  or  to  be 
benefited  thereby  had  reasonable  cause  to  believe  that  a 
preference  was  thereby  intended. 

(2)  The  law  also  provides  that  there  shall  be  surrendered 
all  conveyances,  transfers,  assignments  or  incumbrances  on  the 
bankrupt's  property,  within  four  months  of  the  filing  of  the 
petition,  with  the  intent  and  purpose  on  the  bankrupt's  part 
to  hinder,  delay  or  defraud  creditors,  or  any  of  them,  or  if 
made  by  the  bankrupt  while  insolvent  within  the  same  period, 
and  which  conveyances,  transfers  or  incumbrances  are  null 
and  void  as  against  the  creditors  of  the  debtor  by  the  laws 
of  the  state. 

It  will  be  observed,  therefore,  that  a  surrender  is  only 
necessary  where  the  creditor  receiving  the  preference  had 
reasonable  cause  to  believe  that  a  preference  was  intended, 
or  where  the  transfer  by  the  debtor  was  with  the  intent  and 
purpose  to  hinder,  delay  or  defraud  creditors,  or  was  voidable 
as  against  creditors  under  the  laws  of  the  state.  The  dis- 
qualifications of  a  claim  because  of  a  preference  inheres  in 
and  follows  every  part  of  the  claim,  whether  retained  by  the 
creditor  or  transferred  to  another. 

§  875.  Surrender  prior  to  amendment— Carson,  Pirie,  Scott 
V,  Trust  Co. — There  is  perhaps  no  provision  of  the  law  that 
was  the  subject  of  greater  discussion  or  of  such  diversity  of 
opinion  as  section  "57g"  as  it  appeared  prior  to  the  amend- 
ment. As  originally  enacted  it  provided  "that  the  claims  of 
creditors  who  have  received  preferences  shall  not  be  allowed 
unless  such  creditors  shall  surrender  their  preferences."  This 
section  was  the  subject  of  consideration  by  the  Supreme  Court 
of  the  United  States  in  the  famous  case  of  Carson,  Pirie,  Scott 
&  Co.  V.  The  Chicago  Title  &  Trust  Co..77a  j^^d  by  a  decision  of 

77a  182  U.  S.  438,  5  A,  B.  R.  814. 


548  THE    NATIONAL.   BANKRUPTCY    LAW.  Ch.  57 

five  to  four  that  court  held  that  payments  made  by  an  insol- 
vent debtor  to  a  creditor  in  the  usual  course  of  business,  must 
be  first  surrendered  as  a  condition  of  proving  the  balance  of 
the  debt  or  other  claims  of  the  creditor,  notwithstanding  the 
fact  that  the  debtor  had  no  intention  of  giving  a  preference 
and  the  creditor  was  without  reasonable  cause  to  believe  that 
a  preference  was  thereby  intended.  In  answer  to  the  conten- 
tion that  the  term  "transfer  of  any  of  his  property,"  as  used 
in  section  60a,  to  which  reference  was  necessarily  made  for 
a  solution  of  what  constituted  a  preference,  the  court  held 
that  the  word  "transfer"  included  not  only  the  sale  of  prop- 
erty, but  also  every  other  mode  of  disposing  or  parting  with 
property.  The  word  was  used  in  its  most  comprehensive 
sense,  all  technicality  and  narrowness  of  meaning  being  pre- 
cluded, and  accordingly  included  the  transfer  of  money  as 
well  as  of  property. 

The  amendment  enables  a  creditor  to  retain  a  preferential 
payment  or  transfer  where  there  is  lacking  a  reasonable  cause 
to  believe  that  a  preference  was  intended  or  that  the  purpose 
was  to  hinder,  delay  or  defraud  creditors.  Accordingly,  this 
makes  valueless  those  decisions  which  were  rendered  prior  to 
the  amendment,  which  held  that  payments  received  in  the 
usual  course  of  business,  although  the  creditor  had  no  reason- 
able cause  to  believe  that  a  preference  was  intended,  must 
nevertheless  be  surrendered  prior  to  proving  a  claim  for  the 
balance :  the  surrender  being  necessary  whether  either  or  both 
the  debtor  and  the  creditor  intended  a  preference  and  were 
innocent  in  the  transaction.'^* 

78  In  re  Fixen  &  Co.,  2  N.  B.  N.  sen,  2  N.  B.  N.  R.  695;  In  re  Eagles 

R.   885,  102   F.   R.   295,  4  A.   B.   R.  &  Crisp,  2  N.  B.  N.  R.  462,  99  F.  R. 

10;     In  re  Joiirdan,  2  N.  B.  N.  R.  695,  3  A.  B.  R.  733;   In  re  Richard, 

581;   In  re  Hoffman,  2  N.  B.  N.  R.  1  N.  B.  N.  487,  94  F.  R.  633,  2  A. 

554;    In  re  Knost  &    Wilhelmy,    1  B.  R.  506;  In  re  Klingaman.  101  F. 

N.   B.   N.  403,  2  A.   B.   R.    471,   F.  R.  691,  4  A.  B.  R.  254;  In  re  Rogers 

R.  409;  In  re  Scott,  1  N.  B.  N.  226;  Milling  Co.,  102  F.  R.  687,  2  N.  B. 

In  re  Fort  Wayne  Elec.  Corp.,  2  N.  N.  R.   973,  4  A.  B.  R.  540;    In   re 

B.  N.   R.   434.  99  F.   R.   400;    ^.  c.  Schmechel  Cloak  &  Suit  Co.,  104  F. 

below  3  A.  B.  R.  186,  96  F.  R.  803;  R.   64,   3  N.   B.    N.   R.   110;    In    re 

In  re  Wise,  2  N.  B.  N.  R.  151;   In  Teslow,  2  N.  B.  N.  R.  1024,  104  F. 

re  Kohn,  2  N.  B.  N.  R.  367;   In  re  R.  229;  In  re  Arndt,  104  F.  R.  234, 

Conhaim,  2  N.  B.  N.  R.  148,  3  A.  B.  3  N.  B.  N.  R.  101;  In  re  Siegel  Hill- 

R.  249,  97  F.  R.  923;  In  re  Nathan,  man  Dry  Goods  Co.,  2  N.  B.  N.  R. 

2  N.  B.  N.  R.  613;  In  re  Christen-  933;    In  re  Thompson,  2  N.  B.  N. 


Ch.  57 


SURRENDER  OF   PREFERENCE. 


549 


The  amendmeut  also  renders  inapplicable  the  decisions 
which  held  that  a  creditor  could  not  avoid  the  operation  of 
this  provision  requiring  the  surrender  of  preferences  by  show- 
ing that  he  received  it  in  the  ordinary  course  of  business,  and 
that  he  had  no  knowledge  or  reasonable  cause  to  believe  that 
the  debtor  was  insolvent,  or  that  a  preference  was  intended/^ 
or  that  the  paj^ment  claimed  as  a  preference  was  made  upon 
a  different  debt  than  the  one  presented  for  allowance  ;^*^  as 
the  payment  of  one  of  several  notes  ;^^  or  that  the  payment 
was  in  full  discharge  of  specific  bills,  while  the  creditor  held 
an  open  account  against  the  bankrupt  ;^2  or  where  vendors 
secure  return  of  a  portion  of  the  goods  sold  by  them  under 
an  agreement  that  the  property  was  pledged  and  hypothecated 
to  the  vendors  as  collateral  security  for  the  payment  of  the 


R.  1016;  In  re  Beiber,  2  N.  B.  N. 
R.  943;  Reed  v.  Phinney,  2  N.  B. 
N.  R.  1007;  In  re  Castle,  2  N.  B.  N. 
R.  985;  In  re  Jones,  2  N.  B.  N.  R. 
961,  4  A.  B.  R.  563;  In  re  Beswick, 
2  N.  B.  N.  R.  808;  In  re  Durham, 
2  N.  B.  N.  R.  1101;  In  re  Sloan, 
102  F.  R.  116,  4  A.  B.  R.  356;  In 
re  Thompson,  2  N.  B.  N.  R.  1016; 
contra.  In  re  Piper,  2  N.  B.  N.  R. 
7;   Blakely  v.  Bk.,  1  N.  B.  N.  411. 

2  A.  B.  R.  460,  95  F.  R.  267;  In  re 
Ryan,  2  N.  B.  N.  R.  693;  In  re 
Locke.  1  N.  B.  R.  123,  1  Lowell, 
293;  In  re  Hall,  2  N.  B.  N.  R.  1126, 
4  A.  B.  R.  671;  In  re  Smoke,  2  N. 
B.  N.  R.  831,  aff'd  2  N.  B.  N.  R. 
996,  4  A.  B.  R.  434,  104  F.  R.  289; 
In  re  Alexander,  2  N.  B.  N.  R.  997, 
102  F.  R.  464,  4  A.  B.  R.  376;  In  re 
Keller,  109  F.  R.  306,  6  A.  B.  R. 
487;  In  re  Oliver,  109  F.  R.  784,  6 
A.  B.  R.  626;  In  re  Keller,  109  F. 
R.  118,  6  A.  B.  R.  334. 

79  In  re  Fixen,  2  N.  B.  N.  R.  885, 
102  F.  R.  295,  4  A.  B.  R.  10;  In  re 
Sloan,  102  F.  R.  116,  4  A.  B.  R. 
356;    In  re  Arndt.    104   F.   R.  234, 

3  N.  B.  N.  R.  101;  In  re  Keller, 
109  F.  R.  118,  6  A.  B.  R.  334;  In 
re  Seckler,  106  F.  R.  484,  5  A.  B. 
R.    579;    In    re    Waterbury   Furni- 


ture Co.,  114  F.  R.  255,  8  A.  B.  R. 
79;  Mills  v.  Lewis,  110  F.  R.  512, 
6  A.  B.  R.  612;  In  re  Lyon,  114  F. 
R.  326,  7  A.  B.  R.  412;  In  re  Kellar, 
110  F.  R.  348,  6  A.  B.  R.  661;  In 
re  Bashline,  109  F.  R.  965,  6  A.  B. 
R.  194;  In  re  Abraham  Steers  Lum- 
ber Co.,  112  F.  R.  406,  7  A.  B.  R. 
332;  In  re  Dickinson,  7  A.  B.  R. 
679;  Carson,  Pirie,  Scott  v.  Trust 
Co.,  21  Sup.  Ct.  906,  182  U.  S.  428, 
5  A.  B.  R.  814;  In  re  Dickson,  111 
F.  R.  726,  7  A.  B.  R.  186;  but  see 
In  re  Ratliff,  107  F.  R.  80,  5  A.  B. 
R.  713. 

so  In  re  Beswick,  2  N.  B.  N.  R. 
808;  In  re  Rogers  Milling  Co.,  102 
F.  R.  687,  2  N.  B.  N.  R.  973,  4  A. 
B.  R.  540;  contra.  In  re  Hoffman, 
2  N.  B.  N.  R.  554;  In  re  Wise,  2 
N.  B.  N.  R.  151. 

51  Reed  v.  Phinney,  2  N.  B.  N. 
R.  1007;  In  re  Conhaim,  2  N.  B.  N. 
R.  148,  97  F.  R.  923,  3  A.  B.  R. 
249;  see  In  re  Myers,  2  N.  B.  N. 
R.  765;  In  re  Castle,  2  N.  B.  N.  R. 
985. 

52  In  re  Siegel  Hillman  Dry 
Goods  Co.,  2  N.  B.  N.  R.  933;  In 
re  Teslow,  2  N.  B.  N.  R.  1024.  aff'd 
104  F.  R.   229. 


550  THE    NATIONAL  BANKRUPTCY   LAW.  Ch.  57 

price  with  aiitlior-ity  to  take  possession  and  dispose  of  the 
j"oods  at  their  discretion  ;^^  a  lien  given  within  four  months  as 
security  for  an  antecedent  debt  ;^^a  loan  rei)aid,^^  or  that 
payment  was  made  for  the  purpose  of  obtaining  more  goods 
on  credit;^*'  or  where  transactions  are  claimed  to  be  for  cash, 
but  collections  therefor  are  not  made  for  some  days  subsequent 
to  delivery  of  the  goods  f"  or  where  a  deed  of  trusf^*^  or  mort- 
gage is  given  to  secure  an  antecedent  debt;^^  or  goods  are 
replevined  on  the  ground  that  the  sale  was  rescinded  because 
of  bankrupt's  fraud ;"o  or  that  the  claim  was  one  entitled  to 
jjriority  of  payment.^^ 

Upon  the  surrender  of  his  preference,  the  taint  of  fraud 
implied  in  the  creditor's  acceptfince  of  it,  is  removed  and  he 
is  immediately  restored  to  all  his  rights.^^ 

Prior  to  the  amendment,  it  was  held  in  a  number  of  in- 
stances that  a  creditor  holding  distinct  debts  might  prove 
them  and  have  his  claim  allowed  upon  one  upon  which  no 
payment  had  been  received,  without  surrendering  what  he 
had  received  upon  the  other,^^  though  it  was  also  held  that 
if  a  creditor  had  several  claims  of  the  same  class  upon  one 
of  which  he  received  a  payment,  the  same  would  have  to  be 
surrendered  before  any  of  his  claims  could  be  allow^ed.^** 

§  876.  Involuntary  surrender  of  preference.— Under  the 
Act  of  1867,^^  a  creditor  might  surrender  a  preference  and 

83  In  re  Klingaman,  101  F.  R.  B.  N.  R.  367;  but  see  In  re  Mag- 
691,  4  A.  B.  R.  254.  nus,  3  N.  B.  N.  R.  68;  In  re  Flick, 

84  In  re  Belding,  116  F.  R.  1016,     3  N.  B.  N.  R.  71. 

8  A.  B.  R.  718.  02  In  re   Nathan,   2   N.   B.  N.   R. 

85  In  re  Flick,  105  F.   R.   503,  5     611. 

A.  B.  R.  465;   In  re  Cotton,  115  F.  93  in    re   Dickinson,    7   A.    B.   R. 

R.  158.  679;  In  re  Wise,  2  N.  B.  N.  R.  i51; 

86  In  re  Arndt,  104  F.  R.  234,  3  In  re  Bullock,  8  A.  B.  R.  646;  In 
N.  B.  N.  R.  101.  re  Abraham  Steers  Lumber  Co.,  6 

87  In  re  Durham,  2  N.  B.  N.  R.  A.  B.  R.  315,  aff'd  7  id.  332;  In  re 
1101.  Weissner,   8    A.   B.   R.    177;    In   re 

88  In  re  Wright  Lumber  Co.,  8  Seay,  7  A.  B.  R.  700;  In  re  Cham- 
A.  B.  R.   345.  pion,  7  A.  B.  R.  560;  contra.  In  re 

89  In  re  Leeman,  1  N.  B.  N.  331,  Meyer,  8  A.  B.  R.  598. 

2  A.  B.  R.  52.  9*  Swartz  v.   Fourth   Nat.   Bank. 

90  In  re  Heinsfurter,  1  N.  B.  N.     117  F.  R.  1. 

504,  3  A.  B.  R.  113,  97  F.  R.  198.  95  Under  sections   23    and    39   of 

91  In  re  Jones,  2  N.  B.  N.  R.  961,  the  act  of  1867,  it  was  held  that  a 
4  A.  B.  R.  563;    In  re  Kohn,  2  N.     creditor,    having  reasonable   cause 


Ch.  5T 


SURRENDER  OF  PREFERENCE. 


551 


prove  his  claim,  though  if  the  surrender  was  not  voluntarily 
made  he  was  prohibited  from  proving  his  claim.^^  While 
there  is  some  diversity  of  opinion  under  the  present  law  upon 
this  point,  the  weight  of  authority  upholds  the  proposition 
that  a  creditor  who  has  received  a  preference  with  knowledge 
of  the  debtor's  insolvency  and  that  he  was  being  preferred, 
will  not  be  permitted  to  prove  his  claim  after  the  preferential 
payment  has  been  recovered  through  resort  to  the  courts.  If 
a  creditor  surrenders  the  preference  before  trial  and  judgment, 
the  right  would  doubtless  exist  to  prove  his  claim.  The  pro- 
hibition  to  prove  his  claim  for  the  balance  of  the  account 


to  believe,  or  knowing  by  his  agent 
at  the  time,  that  the  debtor  was 
insolvent,  or  that  a  fraud  was 
intended,  who,  within  four  months 
of  the  bankruptcy  proceedings, 
obtained  a  preference,  could  not 
prove  his  claim,  and,  in  addition, 
was  liable  to  lose  his  preference. 
(In  re  Princeton,  1  N.  B.  R.  178, 
2  Biss.  116,  F.  C.  11433;  Bingham 
V.  Richmond  &  Gibbs,  6  N.  B.  R. 
127,  F.  C.  1415;  Phelps  v.  Sterns, 
Id.  V.  Dudley,  4  N.  B.  R.  7,  F.  C. 
11080;  In  re  Kingsbury,  3  N.  B.  R. 
84,  F.  C.  7816;  In  re  Davidson,  3 
N.  B.  R.  106,  4  Ben.  10,  F.  C.  3599; 
In  re  Walton,  4  N.  B.  R.  154,  F.  C. 
17130;  In  re  Stein,  16  N.  B.  R.  569, 
F.  C.  13352;   In  re  Coleman,  2  N. 

B.  R.  172,  7  Blatch.  192,  F.  C.  2979; 
In  re  Cramer,  13  N.  B.  R.  225.  F. 

C.  3345;  In  re  Kaufman.  19  N.  B. 
R.  283,  F.  C.  7627);  but  this  pro- 
hibition only  applied  where  the 
creditor  refused  upon  demand  to 
surrender  his  preference  and  com- 
pelled the  assignee  to  recover  the 
same  by  suit.  (In  re  Hunt,  5  N. 
B.  R.  433,  F.  C.  6882) ;  and  a  cred- 
itor who  resisted  suit  could  not 
prove  his  claim,  where  he  was  de- 
feated in  the  action,  though  he 
paid  the  judgment  recovered 
against  him  therein,  such  payment 
not  being  a  surrender  (In  re  Rich- 


ter's  est,  4  N.  B.  R.  67,  F.  C.  11803; 
In  re  Cramer,  13  N.  B.  R.  225,  F.  C. 
3345;  In  re  Tonkin,  4  N.  B.  R.  13, 
F.  C.  14094;  In  re  Lee,  14  N.  B.  R. 
89,  F.  C.  8179;  Contra,  In  re  New- 
comber,  18  N.  B.  R.  85,  F.  C. 
10148). 

96  Surrender  under  act  of  1861. — 
Where  a  preference  was  knowingly 
received  by  a  creditor  he  was  de- 
barred from  proving  the  debt  there- 
by sought  to  be  secured  unless, 
previous  to  suit  brought  by  the  as- 
signee to  set  aside  the  preference, 
he  surrendered  the  same  (In  re 
Leland,  9  N.  B.  R.  209,  7  Ben.  156. 
F.  C.  8230;  In  re  Scott,  4  N.  B.  R. 
139,  F.  C.  12518;  In  re  Montgom- 
ery, 3  N.  B.  R.  97,  F.  C.  9728;  In 
re  Hunt,  5  N.  B.  R.  433,  F.  C.  6882; 
Contra,  In  re  Currier,  13  N.  B.  R. 
68,  2  Lowell  436,  F.  C.  3492)  ;  and 
a  full  surrender  was  a  complete 
condonation  of  the  offense  (In  re 
Stephens,  6  N.  B.  R.  533,  F.  C. 
13365;  In  re  Leland,  supra;  In  re 
Saunders,  13  N.  B.  R.  164,  2  Low. 
444.  F.  C.  12371)  ;  but  a  repayment 
of  a  preference  to  the  debtor  did 
not  take  the  place  of  a  surrender 
to  the  assignee  (In  re  Currier, 
supra).  It  was  also  held  that  a 
preference  would  not  bar  the  proof 
of  a  claim  unless  it  was  given  an:l 
received  by  the  parties  to  the  debt 


552  THE   NATIONAL  BANKRUPTCY    LAW.  Ch.  57 

rests  upon  the  fact  that  the  creditor  was  a  party  to  an  at- 
tempted fraud  upon  the  law.^'^ 

§  877.  Surrender  of  preference  if  given  within  four  months. 
— While  prior  to  the  amendment  the  statute  sjjecified  no  time 
limit  within  which  preferences  given  to  a  creditor  must  be 
surrendered  before  proof  could  be  made  of  the  balance  of  the 
claim,  by  analogy  to  other  provisions,  the  courts  generally 
read  into  the  law  the  period  of  four  months  prior  to  the  filing 
of  the  petition,^  though  it  was  also  held  that  this  period  applied 
only  in  case  the  creditor  had  knowledge  or  reasonable  cans*' 
to  believe  that  an  interdicted  act  had  been  committed,  but  if 
he  had  no  knowledge  the  day  of  cleavage  was  the  day  the 
petition  was  filed;-  also  that  such  payment  must  be  surren- 
dered, although  received  more  than  four  months  prior  to 
bankruptcy .3  By  the  amendment  referred  to,  the  four  months 
period  prior  to  the  filing  of  the  petition  has  been  specified. 

§  878.  Surrender  in  case  of  new  credit.— The  set-off  author- 
ized by  section  60c  in  case  new  credit  is  given,  is  not  restricted 
to  the  case  in  which  the  trustee  brings  an  action  against  the 
creditor  under  subdivision  b  of  the  same  section,  to  avoid  the 
preference  and  recover  the  amount  thereof,  but  is  also  appli- 
cable to  the  surrender  required  of  a  creditor  who  attempts  to 
prove  his  claim  for  the  balance  of  his  account."* 

(In  re  Comstock  &  Co.,  12  N.  B.  Dry  Goods  Co.,  2  N.  B.  N.  R.  933; 

R.  110,  3  Sawy.  320,  F.  C.  3079).  In  re  Harry  Dickinson,  7  A.  B.  R. 

97  In  re  Beiber,  2  N.  B.  N.  R.  943;  679;  Contra,  In  re  Jones,  110  F.  R. 

In  re  Owings,  109  F.  R.  623,  6  A.  736,  4  A.  B.  R.  563;  In  re  Abraham 

B.  R.  454;   In  re  Keller,  6  A.  B.  R.  Steers  Lumber  Co.,  110  F.  R.  738, 

334;  Strobel  &  Wilkins  v.  Knost,  3  6  A.  B.  R.  315. 

A.    B.    R.    631;     In    re    Schmeckel  2  in  re  Hall,  2  N.  B.  N.  R.  1126, 

Cloak  &   Suit  Co.,  104  F.  R.  64,  4  4  A.  B.  R.  671. 

A.  B.  R.  719;  In  re  Greth,  112  F.  3  in  re  Jones,  2  N.  B.  N.  R.  961, 
R.  978,  7  A.  B.  R.  598;  Contra,  In  aff'd  962,  4  A.  B.  R.  563. 

re  Baker,  2  N.  B.  N.  R.  195;  In  re  ■*  See  also  post,  §  969.    Dickson  v. 

Richard,  2  A.  B.  R.  512.  Wyman,  7  A.  B.  R.  186.  Ill  F.  R. 

iln  re  Beswick,   2   N.  B.  N.  R.  726;  In  re  Topliff,  114  F.  R.  323,  8  A. 

814;  In  re  Fixen,  2  N.  B.  N.  R.  885,  B.    R.    141;    In    re   Jourdan,    7    A. 

102  F.  R.  295,  4  A.  B.  R.  10;  In  re  B.    R.    186.   Ill    F.    R.    726;    C.    S. 

Sloan,    102   F.   R.   116,  4  A.   B.  R.  Morey   Mercantile  Co.  v.   Scheffer. 

356;   In  re  Arndt,  104  F.  R.  234,  3  114  F.  R.  447,  7  A.  B.  R.  670;  Cans 

N.  B.  N.  R.  101;  In  re  Castle.  2  N.  v.  Ellison,  114  F.  R.  734,  8  A.  B.  R. 

B.  N.  R.  985;  In  re  Wise,  2.  N.  B.  153;  McKey  v.  Lee,  5  A.  B.  R.  267. 
N.  R.  151;  In  re  Jourdan,  2  N.  B.  45  C.  C.  A.  127.  105  F.  R.  923;  In 
N.    R.  581;    In   re   Siegel-Hillman  re  Seckler,  106  F.  R.  484,  5  A.  B. 


Ch.  57  SURRENDER  OP  PREFERENCE.  553 

§  879.  'h.  Securities,  determination  of  value  of.— The  value 
'of  securities  held  by  secured  creditors  shall  be  determined  by 
'converting  the  same  into  money  according  to  the  terms  of 
'the  agreement  pursuant  to  which  such  securities  were  deliv- 
'ered  to  such  creditors  or  by  such  creditors  and  the  trustee, 
'by  agreement,  arbitration,  compromise,  or  litigation,  as  the 
'court  may  direct,  and  the  amount  of  such  value  shall  be 
'credited  upon  such  claims,  and  a  dividend  shall  be  paid  only 
'on  the  unpaid  balance.' 

§  880.    Securities— Trustee's  duty  with  regard  to.— It  is  the 

duty  of  a  trustee  in  bankruptcy  to  investigate  securities  held 
by  the  creditors  of  the  bankrupt  to  determine  their  value,  how 
and  by  what  right  they  are  held  and  whether,  or  not,  anything 
can  be  obtained  therefrom  for  the  general  creditors.  The 
value  is  to  be  determined  by  conversion  into  money,  by  agree- 
ment, arbitration,  compromise  or  litigation,  and  when  deter- 
mined the  right  and  title  of  such  creditors  is  fixed  and  the 
trustee  should  be  ordered  to  execute  a  proper  transfer  and 
release  to  such  creditors  of  all  the  rights,  claims  and  equities 
of  the  bankrupt,  or  his  creditors,  in  said  securities.^  A  cred- 
itor holding  security  cannot  receive  dividends  from  the  estate 
except  for  the  unpaid  balance  of  his  claim  after  the  value  of 
the  security  has  been  deducted.^ 

§  881. value  of. — The  value  of  secured  property  is  to 

be  determined  by  conversion  into  money,  by  agreement,  arbi- 
tration, compromise  or  litigation,'^  but  unless  by  agreement, 
it  is  doubtful  whether  it  could  be  ascertained  by  the  creditor's 
sending  the  security  to  an  auctioneer  and  having  it  advertised 
and  sold  at  public  sale.^     If  after  such  value  is  agreed  upon 

R.  579;  Peterson  v.  Nash  Brothers,  R.  554;   In  re  Siegel-Hillman  Dry 

7  A.  B.  R.  181,  112  F.  R.  311.    Kahn  Goods  Co.,  2  N.  B.  N.  R.  933;    see 

V.  Cone  Export  &  Commission  Co.,  also  Pirie  v.  Trust  Co.,  182  U.  S. 

115  F.  R.  290;  Contra,  In  re  Abra-  438,  5  A.  B.  R.  814. 

ham  Steers  Lumber  Co.,  110  P.  R.  s  in  re  Coffin,  1  N.  B.  N.  507,  2 

738.  6  A.  B.  R.  315;  aff'd  7  Id.  332,  A.  B.  R.  344. 

112  F.  R.  406;  also  In  re  Christen-  e  in  re  Little,  110  F.  R.   621,  6 

sen,  2  N.  B.  N.  R.  695,  aff'd  101  F.  A.  B.  R.  681. 

R.   802;    In  re  Thompson.  2  N.  B.  7  in  re  Coffin,  supra;   Stewart  v. 

N.  R.  1016;  In  re  Jourdan,  2  N.  B.  Isador.  1  N.  B.  R.  129;   In  re  Stew- 

N.  R.  581;   In  re  Ryan,  2  N.  B.  N.  art,  1  N.  B.  R.  42,  P.  C.  13418. 

R.  693;   In  re  Beswick,  2  N.  B.  N.  sin   re  Hunt,   17   N.   B.   R.   205, 

R.  808;   In  re  Hoffman,  2  N.  B.  N.  F.  C.  6884. 


554  THE   NATIONAL   BANKRUPTCY   LAW.  Ch.  57 

between  the  trustee  and  a  creditor,  new  facts  are  developed 
showing  such  valuation  to  be  erroneous,  a  new  valuation  will 
be  ordered.  Any  surplus  over  and  above  the  amount  necessary 
to  liquidate  the  debt  will  be  turned  over  to  the  trustee.'*  If 
a  creditor  claims  a  lien  upon  exempt  property,  the  value  of 
such  property  must  be  ascertained  as  just  stated,  and  deducted 
from  the  amount  of  the  claim,  to  ascertain  the  amount 
provable  against  the  general  estate.*** 

§  882. on  whose  property.— The  securities  that  must 

be  liquidated  before  creditors  can  prove  their  claims  in  bank- 
ruptcy must  be  upon  property,  real  or  personal,  of  the  bank- 
rupt that  may  be  surrendered  to  the  trustee,  and  a  claim 
secured  by  the  guaranty  of  a  third  person  may  be  proved  as 
unsecured.** 

§883. sale  of. — Where  it  appears  that,  if  mortgaged 

property  is  taken  and  sold  by  the  trustee,  an  amount  over 
and  above  the  secured  debt  may  be  derived  for  the  benefit  of 
the  general  creditors,  the  court  of  bankruptcy  may  continue  the 
trustee  in  possession  of  such  property  and  administer  the 
same.*-  Until  a  creditor  has  shown  a  right  to  sell  securities 
conceded  to  be  the  property  of  the  bankrupt  and  which  he 
claims  to  hold  as  security  for  the  indebtedness  of  the  bankrupt 
to  him,  permission  to  sell  them  will  not  be  granted;*^  and,  if 
the  debtor,  though  insolvent,  acquiesce  in  a  sale  of  the  col- 
lateral by  a  secured  creditor,  his  trustee  is  bound  by  such 
acquiescence,  although  they  are  sacrificed ;  but  he  is  not  bound 
by  the  bankrupt's  ratification  of  a  sale  made  after  the 
commencement  of  the  proceedings  in  bankruptcy.*^ 

§  884.  Purchase  of  security  by  creditor.— Where  secured 
creditors,  on  the  sale  of  the  assets  of  the  estate,  buy  in  those 
parcels   on   which   they   hold   security,   subject   to   their   own 

9  In  re  Newland,  9  N.  B.  R.  62,  96  F.  R.  943,  2  A.  B.  R.  770;  The 
7  Ben.  63,  F.  C.  10171;  s.  c.  7  N.  B.  Skylark,  4  Biss.  383,  F.  C.  12929; 
R.  477,  6  Ben.  342,  F.  C.  10170.  Ex  P.  Christy,  3  How.  292;   In  re 

10  In  re  Little,  supra.  Fellerath,  1  N.  B.  N.  292,  2  A.  B.  R. 
It  In    re   Anderson.   12  N.   B.   R.     40,  95  F.  R.  121. 

502,  7  Biss.  233,  F.  C.  350;   Contra,  is  In  re  Bigelow,  1  N.  B.  R.  186, 

In  re  Bigelow,   1   N.   B.  R.   186,   2  2  Ben.  480,  F.  C.  1396. 

Ben.  480,  F.  C.  1396.  "  Sparhawk  v.  Drexel,  12  N.  B. 

12  In  re  Booth.  1  N.   B.  N.   476,  R.  450,  F.  C.  13204. 


Ch.  5?  PROOF    OF    CLAIMS— SECURITIES.  555 

liens,  thus  merging  the  latter,  they  have  received  their  due 
from  the  estate  and  their  claims  for  any  excess  should  be 
rejected.i^ 

§  885.  *i.  Proof  when  claim  is  secured  by  individual  under- 
'taking. — Whenever  a  creditor,  whose  claim  against  a  bank- 
*rupt  estate  is  secured  by  the  individual  undertaking  of  any 
'person,  fails  to  prove  such  claim,  such  person  may  do  so  in 
'the  creditor's  name,  and  if  he  discharge  such  undertaking 
'in  whole  or  in  part  he  shall  be  subrogated  to  that  extent  to 
'the  rights  of  the  creditor.' 

§886.  Subrogation  of  surety;  etc.,  to  creditor's  rights.— 
A  person  contingently  liable  for  the  bankrupt  should  prove 
his  claim  in  the  name  of  the  creditor,  when  known,  and  when 
unknown,  in  the  name  of  the  party  contingently  liable,  but 
no  dividend  will  be  paid  upon  such  claim  except  upon  satis- 
factory proof  that  it  will  diminish  pro  tanto  the  original  debt.^^ 
A  party  is  entitled  to  be  subrogated  to  the  rights  of  the 
creditor,  without  any  agreement  to  that  effect,  where  he  has 
been  compelled  to  pay  the  debt  of  a  bankrupt  to  protect  him- 
self ;^'''  hence  it  has  been  held  that  sureties  and  indorsers  are 
authorized  to  prove  the  debt  for  which  they  are  liable,  when 
not  proven  by  the  creditor,  or  without  first  paying  it,^^  and 
such  debts  being  provable  are  released  by  the  discharge.^^ 
The  indorser  of  a  note  is  not  released  by  the  failure  of  the 
holder  to  prove  his  claim  or  to  tender  the  note  to  the  indorser.^*^ 

This  right  of  subrogation  arises  from  the  equities  of  the 
subsequent  transactions  and  not  from  the  original  contract  of 
suretyship,-^  but  the  subrogation  of  the  surety  to  the  rights 
of  the  creditor  neither  enlarges  nor  reduces  tliem.-^  The 
right  of  subrogation  does  not  arise  from  contract.  One  surety 
is  entitled  to  subrogation  as  against  his  co-surety  even  when 
they  are  not  bound  by  the  same  instrument  and  are  ignorant 

15  In  re  Pauly,  1  N.  B.  N.  405,  2  20  Nat.  Bank  of  South  Reading  v. 
A.  B.  R.  333.  Sawyer,  6  A.  B.  R.  154. 

16  G.  O.  XXI  (4)  ;  In  re  Christen-  21  Courier  Journal  Job  Printing 
sen,  2  N.  B.  N.  R.  1094.  Co.  v.    Schaefer-Meyer  Co..  101   F. 

IT  Whithead  v.  Pillsbury,  13  N.  B.  R.  699,  4  A.  B.  R.  183. 
R.  241,  F.  C.  17572.  22  in  re  Bingham,  1  N.  B.  N.  351, 

1-^  Phillips    V.    Dreher    Shoe    Co..  94  F.  R.  796,  2  A.  B.  R.  233;   In  re 

112  F.  R.  404,  7  A.  B.  R.  326.  Schmechel  Cloak  &  Suit  Co.,  104  F. 

i!*  In  re  Perkins,  10  N.  B.  R.  529,  R.  64,  3  N.  B.  N.  R.  110. 
F.  C.  10983. 


556  THE   NATIONAL  BANKRUPTCY   LAW.  Ch.  57 

of  each  other's  existence.^-^  Where  a  creditor  cannot  prove 
his  claim  without  first  surrendering  a  preference  under  section 
57g,  a  guarantor  who  has  paid  the  remainder  of  the  debt  since 
the  adjudication  is  subject  to  the  same  condition,  and  can 
prove  the  claim  only  on  returning  to  the  estate  the  amount  of 
such  preference.^^  If  a  creditor  receives  partial  payment  of 
his  debt  from  an  accommodation  maker,  an  indorser  or  a 
surety,  he  may  prove  his  claim  and  have  it  allowed  against 
the  estate  of  the  bankrupt  for  the  full  amount  owing  by  the 
bankrupt  upon  the  obligation,  but  if  the  dividends  on  the 
claim  from  the  estate,  plus  the  amount  paid  by  the  surety, 
aggregate  more  than  the  entire  amount  of  the  obligation  and 
interest,  he  holds  the  surplus  in  trust  for  the  surety. ^^  The 
right  to  prove  the  claim  in  such  case  is  in  the  creditor,  in 
preference  to  the  surety.^^  It  seems  that  a  surety  who  pays 
the  debt  of  his  bankrupt  principal,  after  the  adjudication  in 
bankruptcy  may  prove  his  claim-^  or  set  off  the  amount  so 
paid  against  his  own  debt  to  the  bankrupt.^^ 

A  surety  who  has  paid  his  principal's  debt  after  the  latter 's 
bankruptcy  is  not  required  to  surrender  preferential  payments 
received  by  the  creditor  as  a  condition  to  the  proving  of  his 
claim  which  arises  from  the  payment  made  by  him  and  through 
subrogation.^^  If  a  bank  in  good  faith  discounts  for  a  cus- 
tomer the  note  of  a  third  party,  indorsed  by  the  customer,  the 
bank  may  prove  the  debt  against  the  estate  of  the  maker, 
although  the  indorser  had  received  preferences  which  he  would 
have  been  required  to  surrender  before  he  could  prove  the 
claim.2*^  Accommodation  makers,  indorsers  or  sureties  upon 
the  obligations  of  an  insolvent  debtor  are  not  discharged  from 
liability  to  pay  them  because  of  the  innocent  acceptance  by 

23  In  re  Nickerson,  8  A.  B.  R.  Goods  Co.,  Ill  F.  R.  980,  7  A.  B.  R. 
707,   116  F.   K.   1003.  351. 

24  In  re  Schmechel  Cloak  &  Suit  27  in  re  Christensen,  2  N.  B.  N. 
Co.,  104  F.  R.  64,  3  N.  B.  N.  R.  110.  R.  1094. 

25  Swartz  V.  Fourth  Nat.  Bank,  8  2s  in  re  Dillon,  100  F.  R.  627,  4 
A.  B.  R.  673;   In  re  Ellerhorst,  F.  A.  B.  R.  63. 

C.  4381;    In  re  Bingham,  94  F.  R.         29  in  re  New,  116  F.  R.  116,  8  A. 

796,   2    A.   B.   R.    223;    In  re   Hey-     B.  R.  566. 

mann,  95  F.  R.  800,  2  A.  B.  R.  651.         3o  In  re  Wyley  et  al.,  116  F.  R. 

26  Swarts  V.  Siegel,  8  A.  B.  R.  689,     38. 
reversing  In  re  Siegel-Hillman  Dry 


Ch.  57  PROOF   OF  CLAIMS  BY  GOVERNMENT.  557 

the  creditor  of  preferences  from  the  debtor,  which  he  sur- 
renders.^^ 

Where  a  partnership  is  dissolved  by  consent,  one  partner 
buying  the  assets  and  assuming  all  the  debts  and  liabilities 
of  the  firm,  from  which  he  agrees  to  save  the  other  harmless, 
the  relation  of  the  former  partners  becomes  that  of  principal 
and  surety ;  and,  if  the  retiring  partner  is  called  upon  to  pay 
a  debt  of  the  firm,  after  the  continuing  partner  is  adjudicated 
a  bankrupt,  he  may  prove  the  amount  so  paid  against  the 
bankrupt's  estate,  making  such  proof  in  the  name  of  the 
creditor,  or,  if  the  creditor  has  already  proved  the  debt,  be 
subrogated  to  such  creditor's  rights.^-  The  creditors  of  an 
individual  partner  will  be  subrogated  to  the  rights  of  a  cred- 
itor of  the  partnership  who  has  received  payment  of  his  debt 
from  property  belonging  to  the  individual  partner;  and  the 
trustee  of  one  partner  will  be  subrogated  to  the  rights  of  the 
creditors  of  another  partner  to  the  extent  that  their  claims 
against  the  latter  have  been  satisfied  by  the  sale  of  the 
former's  property .^^ 

§  887.     ' j.     Penalties,  or  forfeitures  accrued  to  governments. 

'—Debts  owing  to  the  United  States,  a  state,  a  county,  a 
'district,  or  a  municipality  as  a  penalty  or  forfeiture  shall  not 
'be  allowed,  except  for  the  amount  of  the  pecuniary  loss  sus- 
'tained  by  the  act,  transaction,  or  proceeding  out  of  which 
'the  penalty  or  forfeiture  arose,  with  reasonable  and  actual 
'costs  occasioned  thereby  and  such  interest  as  may  have 
'accrued  thereon  according  to  law.' 

See  ante  §  — ,  and  §  —  post,  for  a  discussion  of  claims  in 
which  the  United  States  is  interested. 

§  888.     'k.    Allowed     claims     reconsidered     for     causes.— 

'Claims  which  have  been  allowed  may  be  reconsidered  for 
'cause  and  reallowed  or  rejected  in  whole  or  in  part,  accord- 
'ing  to  the  equities  of  the  case,  before  but  not  after  the  estate 
'has  been  closed.' 

§  889.  Reconsideration  of  allowed  claims.— The  trustee  or 
any  creditor  desiring  the  re-examination  of  any  claim  filed 
against  a  bankrupt's  estate,  which  includes  only  those  that 

31  Swarts  V.  Fourth  Nat.  Bank  of  33  in  re  Mason  &  Son,  1  N.  B.  N. 
St.  Louis.  117  F.  R.  1.  331,  2  A.  B.  R.  60. 

32  In  re  Dillon,  supra. 


558  THE    NATIONAL.   BANKRUPTCY    LAW.  Ch.  57 

were  in  existence  at  the  commencement  of  tlie  proceedings 
and  not  claims  for  expenses  of  administration,-'*^  may  apply 
by  petition  to  the  referee  to  whom  the  case  is  referred  for  an 
order  for  such  re-examination,-^-'"'  and  he  must  thereupon  make 
an  order  fixing  a  time  for  hearing  the  petition,  of  which  due 
notice  must  be  given  by  mail  to  the  creditor.  General  Order 
XXI  excludes  action  on  the  application  of  any  one  but  the 
trustee  or  a  creditor.^*^  The  former  may  institute  a  joint 
proceeding  against  several  creditors.^'^  The  ruling  of  the 
referee  upon  a  claim  cannot  be  brought  into  the  district  court 
for  review  by  merely  filing  exceptions  thereto  in  that  court.^^ 
At  the  time  appointed  the  creditor  or  any  witnesses  that  may 
be  called  by  either  party  will  be  examined,  and  if  it  appears 
from  such  examination  that  the  claim  ought  to  be  expunged 
or  diminished,  the  referee  may  order  accordingly .^^ 

When  the  application  is  for  the  purpose  of  increasing  or 
decreasing  the  amount  at  which  a  claim  has  been  allowed,  the 
better  practice  is  to  vacate  the  former  allowance  and  allow 
the  claim  at  the  new  amount  as  if  then  moved  for  the  first 
time.^*^  If  the  petition  for  reconsideration  or  disallowance 
does  not  aver  the  essential  facts  with  sufficient  particularity, 
a  motion  should  be  made  for  a  more  specific  statement  and  not 
to  strike  out  parts  of  the  petition.  Such  motion  may  be  made 
by  the  bankrupt  where  no  trustee  has  been  appointed,^i  and 
the  moving  party  is  entitled  to  open  and  close  at  the  hearing.-*^ 
While  there  may  be  some  question  as  to  the  right  of  a  creditor 
whose  claim  has  been  disallowed  to  obtain  a  re-examination 
under  this  section  in  view  of  the  General  Orders,^^  the  law 
being  broader  than  the  Orders  would  doubtless  comprehend 
such  an  application,  though  if  refused,  a  petition  for  review 
should  be  filed.^'^  A  referee's  refusal  to  reopen  a  case  to 
allow  creditors  who  have  been  guilty  of  laches  in  presenting 

34  In    re    Reliance    Storage    and        39  G.  O.  XXI   (6). 
Warehouse  Co.,  100  F.  R.  619,  4  A.         io  in  re  Smith,  1  N.  B.  N.  404,  2 

B.  R.  49.  A.  B.  R.  648. 

35  In  re  Tifft,  17  N.  B.  R.  502,  F.         41  In  re  Ankeny,  2   N.  B.  N.  R. 

C.  14029;    In  re  Russell,  105  F.  R.  349,  100  F.  R.  614,  4  A.  B.  R.  72. 
501,  5  A.  B.  R.  566.  42  Canby  v.  McLear,  13  N.  B.  R. 

36  In  re  Levy,  7  A.  B.  R.  56.  22,  F.  C.  2378. 

37  In  re  Lyon,  7  A.  B.  R.  61.  43  g.  O.  XXI  (6). 

38  In  re  Hawley,  116  F.  R.  428,  8  n  See  In  re  Chambers,  Calder  & 
A.  B.  R.  632,  Co.,  6  A.  B.  R.  707. 


Ch.  57  PROOF    OF    CLAIMS.  559 

their  claims,  to  be  heard,  will  ordinarily  be  upheld  by  the 
judge  unless  manifestly  in  error.*"'  A  referee's  finding  upon 
a  claim  will  usually  be  acepted,  but  a  court  may  review  his 
decision  when  asked  to  do  so  because  of  testimony  claimed  to 
have  been  overlooked.*^ 

If  a  claim  offered  for  proof  is  thoroughly  investigated  by 
the  referee, 'and  allowed,  the  judge  will  not  expunge  it  on  the 
application  of  other  creditors,  who  contend  that  fraud  is  pre- 
sumable from  the  relationship  of  the  parties  and  attempt  to 
support  such  presumption  by  unimportant  variances  in  the 
evidence.'*'^  If  through  inadvertence  a  claim  is  proved  without 
surrender  of  a  voidable  preference,  it  may  be  allowed  to  stand, 
treating  it  as  a  surrender,  or,  if  that  result  be  opposed  by 
the  creditor  or  he  deny  the  preference  and  that  fact  be  found 
against  him  so  that  opposition  amounts  to  a  fraud  upon  the 
act,  or  the  proceedings  by  evincing  an  intention  to  obtain 
through  them  an  advantage  over  other  creditors,  the  entire 
claim  will  be  expunged.*^ 

The  allowance  of  a  claim  against  a  bankrupt's  estate  in 
favor  of  an  assignee  thereof  who  acquired  it  after  the  adjudi- 
cation, but  from  an  innocent  bona  fide  holder,  in  whose  hands 
it  was  valid  and  provable,  will  not  be  set  aside  upon  allegation 
that  the  claim  was  brought  for  the  purpose  of  acquiring  a 
majority  interest  in  the  estate,  and  of  hindering  and  defraud- 
ing the  other  creditors,  when  it  does  not  appear  that  such 
fraudulent  purpose  has  actually  been  carried  out.^^  In  a  pro- 
ceeding to  reconsider  a  claim  which  has  been  allowed,  the  bur- 
den of  proof  rests  upon  the  petitioner,^*^  so  when  a  creditor 
appears  and  offers  himself  for  examination,  the  burden  of 
proof  rests  upon  the  trustee  or  contesting  creditors.^i 

§  890.  Time  for  asking-  reconsideration.— Although  no  time 
is  fixed  by  the  statute  within  which  an  application  for  the  re- 
consideration of  a  claim  should  be  made,  such  application 
should  be  seasonable,  and  if  one  has  been  guilty  of  laches,  or 
has  permitted  a  claim  to  be  allowed  and  paid  without  objec- 
ts In  re  Wood.  1  N.  B.  N.  430,  2     250,  97  F.  R.  765,  3  A.  B.  R.  272. 

A.  B.  R.  695,  95  F.  R.  946.  s"  In  re  Howard,  100  F.  R.  630. 
«  In  re  Grand,  118  F.  R.  73.  4  A.  B.  R.  69;  In  re  Doty.  5  A.  B. 
i-  In  re  Rider,  96  F.  R.  811,  3  A.     R.  58;   See  also  In  re  Lount,  F.  C. 

B.  R.  192.  8543. 

*>*  In  re  Wise,  2  N.  B.  N.  R.  151.         si  In    re   Robinson,   14   N.   B.   R. 
49  In  re  Headley,  2  N.  B.  N.  R.     130,  8  Ben.  406,  F.  C.  11938. 


560  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  57 

tion,  only  on  u  proper  showing  should  such  application  be  con- 
sidered.'^^ 

§  891.  *1.  Recovery  of  dividend  paid.— Whenever  a  claim 
'shall  have  been  reconsidered  and  rejected,  in  whole  or  in  part, 
'upon  which  a  dividend  has  been  paid,  the  trustee  may  re- 
'  cover  from  the  creditor  the  amount  of  the  dividend  received 
'upon  the  claim  if  rejected  in  whole,  or  the  proportional  part 
'thereof  if  rejected  only  in  part.'^^ 

§  892.  'm.  Proof  of  claim  of  one  bankrupt  estate  against 
'another. — The  claim  of  any  estate  which  is  being  adminis- 
'tered  in  bankruptcy  against  any  like  estate  may  be  proved 
'by  the  trustee  and  allowed  by  the  court  in  the  same  manner 
'and  upon  like  terms  as  the  claims  of  other  creditors.' 

§  893.  Undischarged  bankrupt's  claim  against  another  bank- 
rupt.— Where  an  undischarged  bankrupt,  after  notice  of  pro- 
test, took  up  a  promissory  note  on  which  he  was  indorser  and 
which  fell  due  after  the  filing  of  the  petition  in  bankruptcy, 
he  can  prove  his  claim  against  the  estate  of  the  maker,  also  in 
bankruptcy,  on  the  ground  that  it  was  after  acquired  prop- 
erty, and  not  affected  by  the  claims  of  his  creditors.^^  In  the 
case  of  a  controversy  between  the  trustees  of  two  estates  as 
to  the  ownership  of  property,  the  court  of  bankruptcy  has 
jurisdiction  to  pass  upon  the  matter.^^ 

§  894.  *n.  Claims  to  be  proved  within  one  year.— Claims 
shall  not  be  proved  against  a  bankrupt  estate  subsequent  to 
one  year  after  the  adjudication;  or  if  they  are  liquidated  by 
litigation  and  the  final  judgment  therein  is  rendered  within 
thirty  days  before  or  after  the  expiration  of  such  time,  then 
within  sixty  days  after  the  rendition  of  such  judgment :  Pro- 
vided, That  the  right  of  infants  and  insane  persons  without 
guardians,  without  notice  of  the  proceedings,  may  continue 
six  months  longer.' 

§  895.  Limitation  for  proving  claims.— This  provision  is  an 
absolute   prohibition   against   proof   and  allowance   of  claims 

52  See  In  re  Chambers,  Calder  &  F.  R.  946,  2  A.  B.  R.  695. 

Co.,  6  A.  B.  R.  707;  In  re  Reliance  ^s  See   Sec.   65,   act  of  1898,   for 

Storage  Warehouse  Co.,  100  F.  R.  declaration    and    payment  of   divi- 

619,  4  A.  B.  R.  49;  In  re  Hamilton  dends. 

Furniture  Co.,  116  F.  R.  116,  8  A.  54  in  re  Smith,  1  N.  B.  N.  136.  1 

B.   R.   588;    In  re   Stein.   94   F.  R.  A.  B.  R.  37. 

124,  1  A,  B.  R.  662;  In  re  Wood,  95  55  in  re  Rosenberg,  116  F.  R.  402. 


Ch.  57  TIME    OF    PROVING    CLAIMS.  5G1 

when  presented  after  the  expiration  of  one  year,^**  and,  instead 
of  being  an  enlargement  of  a  creditor's  rights,  operates  as  a 
restriction,  and  does  not  authorize  the  withholding  of  divi- 
dends when  ready,  on  proved  and  allowed  claims ;  nor  the 
delay  of  the  final  settlement  and  closing  of  an  estate,  when 
read}^  to  be  closed,  nor  the  withholding  from  other  creditors 
of  money  due  them  to  give  a  negligent  creditor  further  oppor- 
tunity for  the  proof  and  allowance  of  his  claim.^'''  A  referee's 
refusal  to  reopen  a  case  to  allow  a  creditor  vrho  has  been  guilty 
of  laches  in  presenting  his  claim,  will  be  upheld  unless  there 
is  manifest  error.^^  The  fact  that  a  creditor  occupied  a  posi- 
tion where  he  could  not  prove  his  claim,  as  by  asserting  and 
litigating  a  hostile  claim  based  on  an  alleged  lawful  prefer- 
ence, cannot  be  considered  as  equivalent  of  a  proof  of  claim, 
and  failure  to  make  the  necessary  proof  within  the  year  fixed 
will  bar  the  claim.^^ 

Where  a  state  law  prescribes  a  limited  time  in  which  to  fil(^ 
a  lien  claim,  such  limitation  is  the  lex  fori  of  the  state  courts, 
but  is  not  binding  upon  the  courts  of  bankruptcy,  in  which 
the  limitation  for  filing  all  claims  is  one  year ;  and,  if  a  lien 
is  perfected  with  the  exception  of  filing  it  in  court,  it  will  hold, 
if  filed  within  such  time,  provided  other  rights  do  not  inter- 
vene through  lack  of  notice  of  the  lien.^^  Section  63  of  the 
law  permitting  provable  debts  reduced  to  judgments  after  the 
filing  of  the  petition  and  before  the  discharge,  to  be  proved, 
does  not  enlarge  the  time  for  proving  such  debts  beyond  the 
year  to  which  proof  is  limited  by  this  section.^^i 

56  Bray  v.  Cobb,  2  N.  B.  N.  R.  so  in  re  Rude,  2  N.  B.  N.  R.  498; 
586,  100  F.  R.  270,  3  A.  B.  R.  788;  In  re  Ft.  Wayne  Elec.  Corp.,  2  N. 
In  re  Shaffer,  3  N.  B.  N.  R.  54,  104  B.  N.  R.  891;  In  re  Falls  City  Shirt 
F.  R.  982;  In  re  Hilton,  3  N.  B.  N.  Mfg.  Co.,  1  N.  B.  N.  565,  98  F.  R. 
R.  105.  592,  3  A.  B.  R.  437;   Contra,  Gold- 

57  In  re  Stein,  1  N.  B.  N.  339,  1  man  v.  Smith,  1  N.  B.  N.  291,  2  A. 

A.  B.  R.  662,  94  F.  R.  124.  B.  R.  104;    In  re  Brunquest,  14   N. 

58  In  re  Wood,  95  F.  R.  946,  2  A.     B.  R.  529,  7  Biss.  208,  F.  C.  2055. 

B.  R.  695,  1  N.  B.  N.  430.  si  in  re  Leibowitz,  108  F.  R.  617, 

59  In  re  Rhoades,  3  N.  B.  N.  R.     6  A.  B.  R.  268. 
112,  105  F.  R.  231;  In  re  Leibowitz, 

108  F.  R.  617,  6  A.  B.  R.  268. 


.36 


CHAPTER  LVUI. 

NOTICES    TO    CREDITORS. 


§896.  (58a)   Steps  requiring  notice. 

897.  Notices  to  creditors. 

898.  Of  examination  of  banlcrupt. 

899.  Of  hearing  on  composition. 

900.  Of  application  for  discharge. 

901.  Of  creditors'  meetings. 

902.  Of  sales. 

903.  Of  dividends. 


904.  Of  accounts. 

905.  Of  schedules. 

906.  Of  dismissals. 

907.  No  notice  required  when. 

908.  b.  Publication  of  notices. 

909.  Failure  to  publish  notices. 

910.  c.  Referee  to  give  notices. 

911.  In    what  cases. 


§  896.  '  (Sec.  58a)  Steps  requiring  notice.— Creditors  shall 
'have  at  least  ten  days'  notice  by  mail,  to  their  respective  ad- 
'  dresses  as  they  appear  in  the  list  of  creditors  of  the  bank- 
*rupt,  or  as  afterwards  filed  with  the  papers  in  the  case  by  the 
'creditors,  unless  they  waive  notice  in  writing,  of 

'(1)     All  examinations  of  the  bankrupt; 

*  (2)  All  hearings  upon  applications  for  the  confirmation 
'of  compositions  or  the  discharge  of  bankrupts; 

'  (3)     All  meetings  of  creditors; 

'  (4)     All  proposed  sales  of  property ; 

'(5)     The  declaration  and  time  of  payment  of  dividends; 

'  (6)  The  filing  of  the  final  accounts  of  the  trustee,  and  the 
'time  when  and  the  place  where  they  will  be  examined  and 
'passed  upon; 

'  (7)     The  proposed  compromise  of  any  controversy,  and 

*  (8)     The  proposed  dismissal  of  the  proceedings, '^ 


1  Analogous  provision  of  act  of 
1867.  "Sec.  11.  .  .  .  The  judge 
.  .  .  .  or  register  .  .  .  shall 
issue  a  wEfrrant  to  be  signed  by 
such  judge  or  register,  directed  to 
the  marshal  of  said  district,  au- 
thorizing him  forthwith,  as  mes- 
senger, to  publish  notices  in  such 
newspapers  as  the  warrant  speci- 
fies; to  serve  written  or  printed 
notice,  by  mail  or  personally,  on  all 
creditors  upon  the  schedule  filed 
with  the  debtor's  petition,  or 
whose  names  may  be  given  to  him 


in  addition  by  the  debtor,  and  to 
give  such  personal  or  other  notice 
to  any  persons  concerned  as  the 
warrant  specifies,  which  notice 
shall  state: 

"First.  That  a  warrant  in  bank- 
ruptcy has  been  issued  against 
the  estate  of  the  debtor. 

"Second.  That  the  payment  of 
any  debts  and  the  delivery  of  any 
property  belonging  to  such  debtor 
to  him  or  for  his  use,  and  the 
transfer  of  any  property  by  him. 
are  forbidden  by  law. 


562 


Ch.58 


NOTICES  TO   CREDITORS. 


5G3 


§897.  Notices  to  creditors.— Notices  and  orders  which  are 
not  by  the  act  or  by  the  General  Orders  required  to  be  served 
on  the  party  personally  may  be  served  upon  his  attorney.  The 
creditor  may  request  that  all  notices  to  which  he  is  entitled 
be  sent  him  at  any  designated  place,  and  all  notices  shall  be 
so  addressed  until  otherwise  directed  ;2  but  before  incurring 
any  expense  in  publishing  or  mailing  notices,  indemnity  may 
be  demanded  therefor  of  the  person  for  whom  the  service  is 
rendered,^  This  section  is  mandatory  and  requires  that  cred- 
itors shall  have  at  least  ten  days'  notice  by  mail  of  certain 
steps  in  the  bankruptcy  proceedings  unless  waived  in  writing,^ 
and,  if  such  notice  has  not  been  given,  the  fact  that  they  were 
represented  on  the  occasion,  or  even  personally  present,  would 
doubtless,  as  was  held  under  the  act  of  1867,^  do  away  with 
the  necessity  for  notice.  Where  a  creditor  has  received  notice 
of  the  filing  of  the  petition  and  that  he  is  named  in  the  sched- 
ule, he  is  charged  with  notice  of  whatever  transpires  in  the 
further  administration  of  the  estate,^  provided  it  is  not  one  of 
the  steps  of  which  the  law  requires  specific  notice  to  be  given. 
As  official  forms"  are  provided  and  the  referee^  required  to 

shall  submit  his  account  to  the 
court  and  file  the  same,  and  give 
notice  to  the  creditors  of  such  fil- 
ing, and  shall  also  give  notice  that 
he  will  apply  for  a  settlement  of 
his  account  and  for  a  discharge 
from  all  liability  as  assignee.    .   .   . 

"Sec.  29.  .  .  .  The  bankrupt 
may  apply  to  the  court  for  a  dis- 
charge from  his  debts,  and  the 
court  shall  thereupon  order  notice 
to  be  given  by  mail  to  all  creditors 
who  have  proved  their  debts,  and 
by  publication  at  least  once  a  week 
in  such  newspapers  as  the  court 
shall  designate.     .     .     ." 

2G.  O.  IV;  XXI. 

3  G.  O.  X. 

i  In  re  Gilbert,  2  N.  B.  N.  R.  378. 

■•  In  re  Campbell,  17  N.  B.  R.  4, 
3  Hughes,  276,  P.  C.  2348. 

•i  In  re  Reese,  8  A.  B.  R.  411,  115 
F.  R.  993. 

7  Forms  No.  18  and  41. 

s  Infra  subd.  c. 


"Third.  That  a  meeting  of  the 
creditors  of  the  debtor,  giving  the 
names,  residences,  and  amounts, 
so  far  as  known,  to  prove  their 
debts  and  choose  one  or  more  as- 
signees of  his  estate,  will  be  held 
at  a  court  of  bankruptcy,  to  be 
holden  at  a  time  and  place  desig- 
nated in  the  warrant,  not  less  than 
ten  nor  more  than  ninety  days 
after  the  issuing  of  the  same. 

"Sec.  17.  .  .  .  The  assignee 
.  .  .  shall  give  written  notice  to 
all  known  creditors,  by  mail  or 
otherwise,  of  all  dividends,  and 
such  notice  of  meetings,  after  the 
first,  as  may  be  ordered  by  the 
court. 

"Sec.  27.  .  .  .  In  case  a  divi- 
dend is  ordered,  the  register  shall, 
within  ten  days  after  such  meet- 
ing, .  .  .  forward  by  mail  to 
every  creditor  a  statement  of  the 
dividend  to  which  he  is  entitled. 

"Sec.  28.  .  .  .  Preparatory  to 
the    final    dividend,    the    assignee 


564  THE    NATIONAL   BANKRUPTCY   LAW.  Ch.  58 

give  the  notices,  the  ({iiestioiis  as  to  tlie  sul'liciency  of  the  no- 
tices'^ or  of  their  service^"  which  arose  under  the  act  of  1867 
are  not  likely  to  arise  now,  and  the  referee's  official  records 
will  furnish  evidence  of  service,  of  which  the  court  takes  judi- 
cial notice,  and  renders  unnecessary  the  affidavit  of  service 
held  sufficient  ordinarily  in  case  of  service  by  mail  under  the 
act  of  1867.^^  Of  course,  evidence  of  publication  where  pub- 
lication is  made  is  still  required.  Notice  by  publication  alone 
is  insufficient  where  the  bankrupt  states  the  addresses  of  the 
creditors  are  unknown,  unless  it  be  shown  by  satisfactory  proof 
that  the  same  cannot  be  ascertained  after  due  search.^^ 

If  a  bankrupt,  against  whom  an  involuntary  petition  is 
pending,  files  his  voluntary  petition,  notice  should  be  given  to 
the  creditors  liling  the  involuntary  petition,  before  the  adjudi- 
cation is  made  upon  the  voluntary  petition.^"' 

§  898. of  examination    of    bankrupt.— The    provision 

that  creditors  shall  have  at  least  ten  days'  notice  of  all  exam- 
inations of  the  bankrupt,  unless  they  waive  notice  in  writing, 
is  mandatory  ;^^  but  the  examinations  intended  are  those  occur- 
ring in  the  regular  courts  of  the  proceeding.  The  bankrupt 
may  be  examined  solely  for  the  purpose  of  preparing  the 
schedules,^ ^  or  to  furnish  information  to  aid  the  court  and 
its  officer  or  the  receiver,  in  the  preservation  of  the  estate  for 
the  benefit  of  the  creditors,^  "^  without  notice  to  the  creditors. 

§  899. of  hearing  on  composition.— Upon  the  filing  of 

an  application  for  the  confirmation  of  a  composition  a  time  and 
place  should  be  fixed  for  the  hearing  thereon  and  of  any  ob- 
jections thereto  and  ten  days'  notice  thereof  given.^'''  It 
should  not  be  confirmed  where  there  was  no  general  notice  to 
creditors  of  its  terms  and  it  had  been  offered  by  bankrupt  at 
the  first  meeting  to  certain  creditors  whose  claims  had  been 

9  In  re  Jones,  2  N.  B.  R.  20,  F.  i*  In  re  Gilbert,  2  N.  B.  N.  R. 
C.  7447.  378. 

10  In  re  Schepeler,  3  N.  B.  R.  43,  is  In  re  Franklin  Syndicate,  2  N. 
3  Ben.  346,  F.  C.  12452.  B.  N.   R.   552,  101  F.  R.   402,   4  A. 

11  In  re  Spencer,  18  N.  B.  R.  199,  B.  R.  511;  Sec.  7(9),  act  of  1898. 
F.  C.  13229.  16  In  re  Abrahamson  &  Bretstein, 

12  In  re  Dvorak,  107  F.  R.  76,  6  1  N.  B.  N.  23,  1  A.  B.  R.  44. 

A.  B.  R.  66.  IT  Sec.  12  c.  act  of  1898:    see  in 

13  In  re  Dwyer,  112  R.  777,  7  A.     re  Spades.  13  N.  B.  R.  72.  6  Biss. 

B.  R.  532.  448,  F.  C.  13196;    Smith  v.  Engle, 

14  N.  B.  R.  481. 


Ch.  58  NOTICES  TO   CREDITORS.  565 

allowed  at  that  meeting  and  who  accepted  it,  being  at  that 
time  but  not  at  the  time  of  the  hearing  a  majority  in  number 
and  value  of  those  whose  claims  had  been  allowed.^ ^  Notice 
should  also  be  given  of  an  application  to  set  aside  a  composi- 
tion.i'^  A  creditor's  failure  to  get  notice  by  reason  of  his 
address  being  by  mistake  given  incorrectly  in  the  bankrupt's 
schedules  is  no  ground  for  setting  aside  a  composition,  no 
fraud  being  alleged.-^ 

§  900. of  application  for  discharge.— Creditors  are  en- 
titled to  at  least  ten  days'  notice  of  the  hearing  upon  the  ap- 
plication for  discharge.  As  they  may  examine  the  bankrupt  to 
discover  whether  he  has  complied  with  the  statute  in  order 
to  entitle  him  to  a  discharge,  to  avoid  extra  expense  and  delay, 
the  notice  of  application  for  discharge  should  contain  a  notice 
also  of  his  examination,  but  only  one  such  examination  should 
be  had.21  While  the  official  form^^  requires  copies  of  the  peti- 
tion and  order  to  accompany  the  notice  of  application  for 
discharge,  it  is  not  to  be  treated  as  a  "certified  copy  of  the  rec- 
ord" for  the  purpose  of  fees.-^  Where  notice  has  been  given 
to  creditors  they  are  regarded  as  consenting  if  they  make  no 
opposition.24  It  has  been  held  that  a  court  of  bankruptcy 
has  jurisdiction  to  grant  a  discharge,  even  though  there  may 
be  creditors  not  regularly  brought  before  it  by  the  service 
of  notice  ;-^  nor  is  it  necessary  to  give  jurisdiction  to  such 
court  that  creditors  have  actual  notice,  or  personal  service, 
and  the  lack  of  it  w^ill  not  vitiate  a  discharge,  if  the  require- 
ments of  the  act  were  honestly  complied  with.-^  When  the 
bankrupt  furnishes  a  list  of  creditors  but  states  that  their  ad- 
dresses are  unknown,  before  the  discharge  is  granted,  satis- 
factory proof  should  be  adduced  to  show  that  the  same  cannot 
be  produced  after  due  search  has  been  made.-''  A  discharge  is 
conclusive  in  the  absence  of  fraud,  and  cannot  be  impeached 

!«  In  re  Rider,  96  F.  R.  808,  3  A.  24  in   re  Antisdel,  18    N.    B.    R. 

B.  R.  178,  192.  289,  F.  C.  480. 

19  Ex  p.  Hamlin,  16  N.  B.  R.  20,  25  Thurmond  v.  Andrews,   13  N. 
2  Lowell   571,  F.  C.  5993.  B.   R.    157. 

20  In  re  Rudnick,  1  N.  B.  N.  276,  26  Hanover  Nat.  Bank  v.  Moyses, 
531,  2  A.  B.  R.  114,  93  F.  R.  787.  186  U.   S.  181,  8  A.  B.  R.  1;   Rayl 

21  In  re  Price,  1  N.  B.  N.  131.  1  v.  Lapham,  15  N.  B.  R.  508. 

A.  3.  R.  419,  91  F.  R.  635.  27  in  re  Dvorak,  107  F.  R.  76,  6 

22  Form  No.  57.  A.  B.  R.  66. 

23  Anon.,  1  N.  B.  N.  239. 


566  THE   NATIONAL   BANKRUPTCY   LAW.  Ch.  58 

collaterally  by  a  creditor  who  had  no  notice.^^  Where  a  dis- 
charge has  been  revoked  for  fraud,  the  decree  revoking  such 
discharge  will  not  be  vacated  without  notice  to  all  parties  in- 
terested.29 

Debts  which  have  not  been  duly  scheduled  in  time  for  proof 
and  allowance,  with  the  names  of  the  creditors,  if  known  to 
the  bankrupt,  are  not  affected  by  a  discharge,  unless  such 
creditors  had  notice  or  actual  knowledge  of  the  proceedings 
in  bankruptcy.^^ 

§  901. of  meetings  of  creditors.— The  form  of  notice 

for  meetings  of  creditors  is  prescribed  and  they  must  be  held  in 
strict  accordance  with  the  notice  given,^^  and  it  must  be  given 
of  all  meetings.^-  Where  notice  of  the  first  meeting  of  cred- 
itors does  not  reach  creditors,  and  the  court  is  satisfied  that 
their  votes  would  have  changed  the  result,  and  that  they  did 
not  attend  through  failure  to  receive  notice,  on  their  applica- 
tion the  meeting  should  be  reopened  and  each  vote  received, 
but,  if  one  waits  until  a  later  meeting,  he  cannot  have  the  first 
reassembled  without  good  cause  for  the  delay.^^  The  objec- 
tion of  bankrupt  to  the  first  meeting  of  creditors  because  the 
notice  was  mailed  from  a  list  prepared  by  the  referee,  the 
bankrupt  failing  to  file  a  list  within  the  time  required  and 
with  the  necessary  data,  as  a  result  of  which  many  creditors 
appearing  on  bankrupt's  list  failed  to  receive  notice,  will  be 
overruled.^^  Notices  of  special  meetings  called  upon  the  peti- 
tion of  creditors  for  the  purpose  of  re-examining  certain  claims, 
should  be  sent  out  by  the  referee  unless  otherwise  ordered  by 
the  judge.3^ 

§902. of  sales. — At  least  ten  days'  notice  of  sales  is 

required  to  be  given  creditors,  unless  they  waive  such  notice 
in  writing  ;^<^  but,  if  the  court  is  satisfied  that  property  is  per- 

2«  Williams  v.  Butcher,  12  N.  B.  33  in  re  Spencer,  18  N.  B.  R.  199, 

R.  143;   Rayl  v.  Lapham,  15  N.  B.  F.  C.  13229. 

R.  508.  ••'*  In  re  Schiller,  2  A.  B.  R.  704, 

29  In  re  Augenstein,  16  N.  B.  R.  96  F.  R.  400. 

252.  35  G.  O.  XXI  (6);  In  re  Stoever, 

30  Sec.  17  (3),  act  of  1898.  3  N.  B.  N.  R.  314.  105  F.  R.  355. 

31  Form  18;  In  re  Eagles  &  so  in  re  Groves,  2  N.  B.  N.  R.  30; 
Crisp,  2  N.  B.  N.  R.  462,  3  A.  B.  R.  In  re  Hunter,  18  N.  B.  R.  504,  F.  C. 
733,  99  F.  R.  696.  6903. 

32  In  re  Stein,  1  N.  B.  N.  339,  1 
A.  B.  R.  662,  94  F.  R.  124. 


Ch.  58  NOTICES  TO    CREDITORS.  567 

ishable  and  an  immediate  sale  required  in  the  interest  of  the 
estate,  such  sale  may  be  ordered  without  notice  to  creditors.^'^ 
It  has  been  held  that  perishability  in  bankruptcy  involves 
physical  deterioration  of  the  property  itself,  not  mere  depre- 
ciation in  value,  and  hence  a  stock  of  hardware  cannot  be  sold 
as  perishable  without  notice,  though  becoming  unseason- 
able.^^ On  the  other  hand  it  has  been  held  that  a  horse  comes 
within  this  provision  since  he  consumes  food  and  thus  reduces 
his  value  ;^"  and  salt  which  could  be  sold  for  immediate  deliv- 
ery, but  otherwise  would  be  unsalable;'**^  and,  in  fact,  Christ- 
mas toys  and  the  like,  would  be  considered,  immediately  be- 
fore the  holidays,  or  fireworks  before  the  Fourth  of  July.  In 
other  words  if  a  thing  became  unseasonable  after  the  lapse 
of  a  few  days,  there  would  be  no  physical  deterioration  but  a 
serious  depreciation  in  value  which  would  warrant  a  sale  with- 
out the  required  notice. 

§  903. of  dividends.— At  least  ten  days'  notice  must  be 

given  of  the  declaration  and  time  of  the  payment  of  dividends. 
The  form  of  such  notice  is  prescribed  by  the  Supreme  Court.*^ 

§  904. of  accounts. — The  regular  notice    of    ten  days 

must  be  given  of  the  filing  and  settlement  of  accounts,^^  ^nd 
the  time,  when  and  place  where  they  will  be  examined  and 
passed  upon. 

§905. of    schedules.— When    bankrupt    amends  his 

schedules  after  a  trustee  has  been  chosen,  so  as  to  include  an 
additional  creditor,  notice  to  creditors  already  named  in  his 
schedules  or  a  call  for  a  new  meeting  has  been  held  unneces- 
sary.'*^  The  correctness  of  the  schedule  of  creditors,  or  whether 
a  creditor  received  notice  of  the  proceedings,  does  not  deter- 
mine the  jurisdiction  of  the  proceedings  or  of  a  discharge;** 
nor  w'ill  a  clerical  mistake  in  the  name  of  a  creditor  which 
prevented  his  receiving  a  notice  invalidate  the  proceeding.*'' 

§906. of  dismissal. — A  voluntary  or  involuntary  peti- 

37  G.  0.  XVIII    (3).  Bushey,  3  N.  B.  R.  167,  F.  C.  2227. 

3s  In  re  Beutel's  Sons,  2  N.  B.  N.  43  in  re  Carson,  5  N.  B.  R.  290, 

R.  1011.  5  Ben.  277,  F.  C.  2460. 

39  In  re  Smith,  1  N.  B.  N.  180.  **  In   re  Archenbrown,  11  N.  B. 

40  Anon.,  1  N.  B.  N.  204.  R.  149,  F.  C.  505. 

41  Form  No*  41.  45  Thornton  v.  Hogan,  17  N.  B. 

42  In  re  Stein.  1  N.  B.  N.  339,  1  R.  277. 
A.  B.  R.  662,  94  F.  R.  124;   In  re 


5fi8  THE    NATIONAL.   BANKRUPTCY   LAW.  Ch.  58 

tion  must  not  be  dismissed  by  the  petitioner  or  for  want  of 
pi'oseeution,  or  by  consent  of  parties,  until  after  notice  to  cred- 
itors.^^ The  notice  required  of  the  proposed  dismissal  of  the; 
proceedings  refers  to  a  dismissal  without  submission  to  the 
court  upon  the  merits.  There  does  not  appear,  however,  any 
requirement  of  notice  to  creditors,  who  have  not  appeared,  of 
trials  or  hearings  in  involuntary  cases,  but,  if  the  law  does 
require  notice  to  all  creditors  of  hearings  upon  the  merits,  the 
rendering  of  a  final  judgment  without  such  notice  would  b.; 
an  irregularity,  making  such  judgment  voidable  or  reversibhi 
as  to  the  parties  to  the  record,  and  void  as  to  otliers.^'^  It  has 
also  been  held  that  in  the  case  of  a  dismissal  on  the  request  of 
all  of  the  known  creditors,  the  proceedings  will  be  held  valid 
although  there  are  other  creditors  who  were  not  known  at  the 
time  and  who  did  not  receive  notice.^^  Where  a  composition 
agreement  provides  that  the  proceedings  may  be  discontinued 
without  notice  to  creditors,  the  court  is  not  bound  to  grant 
the  application.^^ 

§  907.  No  notice  required  when.— No  notice  to  creditors  of 
the  appointment  of  a  receiver  to  take  charge  of  bankrupt's 
property  pending  adjudication  is  required  ;^o  nor  of  the 
appointment  of  a  special  or  general  referee  ;^i  nor  when  costs 
of  administration  are  to  be  settled  and  allowed.^^ 

§908.  'b.  Publication  of  notices.— Notice  to  creditors  of 
*the  first  meeting  shall  be  published  at  least  once  and  may  be 
'published  such  number  of  additional  times  as  the  court  may 
*  direct ;  the  last  publication  shall  be  at  least  one  week  prior 
'to  the  date  fixed  for  the  meeting.  Other  notices  may  be  pub- 
'lished  as  the  court  shall  direct. '^^ 

§  909.     Failure  to  publish  notice.— Courts  of  bankruptcy  are 

46  Sec.  59  g.  act  of  1898.  52  in   re  Stotts,  1  N.  B.   N.  326,' 

47  Neustadter      v.    Chicago    Dry  1  A.  B.  R.  641,  93  F.  R.  438. 
Goods  Co.,  1  N.  B.  N.  552,  3  A.  B.  53  Analogous  provision  of  act  of 
R.  96,  96  F.  R.  830.  1867.    "Sec  12.    .    .     .    That  at  the 

4s  In  re  Jenison  Mercantile  Co.,  meeting  held  in  pursuance  of  the 

112  F.  R.  966,  7  A.  B.  R.  588.  notice,  one  of  the  registers  of  the 

40  In  re  McNat,  etc.,  Mfg.  Co.,  18  court  shall   preside,  and   the  mes- 

N.  B.  R.  388.  senger   shall   make   return    of   the 

50  In  re  Abrahamson  &  Bret-  warrant  and  of  his  doings  there- 
stein,  1  N.  B.  N.  23,  1  A.  B.  R.  44.  on;   and  if  it  appears  that  the  no- 

51  Bray  v.  Cobb,  1  N.  B.  N.  209,  tice  to  the  creditors  has  not  been 
1  A.  B.  R.  153,  91  F.  R.  102.  given  as  required  in  the  warrant. 


Ch.  58  NOTICE   TO   CREDITORS.  569 

required  to  designate  a  newspaper  published  within  their  re- 
spective districts,  and  in  the  county  in  which  the  bankrupt 
resides  or  the  major  part  of  his  property  is  situated,  in  which 
notices  and  orders  required  to  be  published  shall  be  inserted 
and  for  the  convenience  of  parties  in  interest,  additional  news- 
papers may  be  designated.'^^  Creditors  are  bound  by  the  pro- 
ceedings in  distribution  on  notice  by  publication  and  mail,  and 
when  jurisdiction  has  attached  and  been  exercised  to  that  ex- 
tent, the  court  has  jurisdiction  to  make  its  decrees  of  dis- 
charge or  otherwise,  if  sufficient  opportunity  to  show  cause 
to  the  contrary  is  afforded,  or  notice  given  in  the  same  way."*"' 

A  failure  to  publish  in  one  of  such  newspapers  notice  of  the 
first  meeting  of  creditors  to  prove  their  debts  and  choose  a 
trustee,  has  been  held  to  render  all  subsequent  proceedings 
void.^6 

§910.  'c.  Referee  to  give  notice.— All  notices  shall  be 
'given  by  the  referee,  unless  otherwise  ordered  by  the 
'judge. '^'^ 

§  911. in  what  cases.— The  notices  which  the  referee  is 

required  to  give  are  not  restricted  to  the  particular  cases  enum- 
erated in  clause  "  a "  of  this  section,  but  he  is  required  to  give 
all  notices,  unless  the  court  should  otherwise  order.^^ 

the  meeting  shall  forthwith  be  ad-  nated  by  the  court,  due  regard  be- 

journed,  and  a  new  notice  given  as  ing  had  to  their  circulation  in  the 

required.     If  the  debtor  dies  after  district  or  in  that  portion  of  the 

the   issuing    of    the    warrant,  the  district  in  which  the  bankrupt  and 

proceedings  may  be  continued  and  his  creditors  shall  reside.     .     .     ." 

concluded  in  like  manner  as  if  he  54  See.  28,  act  of  1898. 

had  lived.  ss  Hanover  Nat.  Bank  v.  Moyses, 

"Sec    14.     .     .     .     The  assignee  186  U.  S.  181,  8  A.  B.  R.  1. 

shall    immediately   give   notice    of  se  in  re  Hall,  2  N.  B.  R.  68,  F.  C. 

his  appointment,  by  publication  at  5922. 

least  once  a  week  for  three  succes-  ■''-7  Sec.  39  a  (4),  act  of  1898. 

sive  weeks  in  such  newspapers  as  ss  In  re  Stoev^r,  105  F.  R.  355, 

shall  for    that  purpose    be  desig-  5  A.  B.  R.  250. 


CHAPTER  LIX. 
WHO   MAY  FILE   AND   DISMISS   PETITIONS. 


5912.  (59a)  Who  may  file  a  volun- 
tary petition. 

913.  Petition  to  be  based  on  prov- 

able     debts  —  voluntary  — 
involuntary. 

914.  Filing  must  be  voluntary. 

915.  b.  Who  may  file  an  involun- 

tary petition. 

916.  Cognate  provisions. 

917.  Nature  of  proceeding. 

918.  Creditors    of  what    date   in- 

cluded. 

919.  Creditors    of    what    kind  in- 

cluded. 

920.  Claims  counted. 

921.  Secured    and    priority 

creditors. 

—  Preferred    creditors. 

—  Creditors      participat- 


922. 
923. 


ing  in  acts  of  bankruptcy, 
not. 

924.  Adjudication  conclusive. 

925.  Consent  of  bankrupt. 

926.  Good  faith. 

927.  c.  Petitions  to   be    in    dupli- 

cate. 


928.  Preparation. 

929.  Time  of  filing. 
Pendency  of  previous  volun- 
tary   or    involuntary    peti- 
tion. 

d.  Number   of    creditors    in- 
cluded. 

932.  Notices. 

933.  e.  Relatives     and     employes 

not  counted  as  creditors. 
Definition. 

f.  Creditors    may    intervene. 
Practice. 

Attaching  creditor. 
Creditors  generally. 
Partners. 

Time  of  intervention. 
On    default     or     failure    to 

prosecute. 
Manner  of  intervention. 

943.  g.  Dismissal    of    petition   by 

petitioner. 

944.  Notice  of    dismissal  of  peti- 

tion. 

945.  Withdrawal  of  a  creditor. 


930. 


931. 


934. 
935. 
936. 
937. 
938. 
939. 
940. 
941. 

942. 


§  912.  '  (Sec.  59a)  Who  may  file  a  voluntary  petition.— 
'Any  qualified  person  may  file  a  petition  to  be  adjudged  a  vol- 
'untary  bankrupt.'^ 

§  913.  Petition  to  be  based  on  provable  debt— Voluntary  or 
involuntary. — Any  person  who  owes  debts  except  a  corpora- 
tion may  become  a  voluntary  bankrupt.  Where  the  petition 
schedules  no  debts  or  only  such  as  are  excepted  from  a  dis- 


1  Analogous  provision  in  act  of 
1867.  "Sec.  11.  .  .  .  That  if  any 
person  residing  within  the  juris- 
diction of  the  United  States,  owing 
debts  provable  under  this  act  ex- 
ceeding the  amount  of  three  hun- 

570 


dred  dollars,  shall  apply  by  peti- 
tion. .  .  .  the  filing  of  such  peti- 
tion shall  be  an  act  of  bankruptcy, 
and  such  petitioner  shall  be  ad- 
judged a  bankrupt.     .     .     ." 


(11.51)  PETITIONS.  571 

charge,  the  adjudication  should  not  be  made,  or,  if  made,  be 
set  aside  upon  motion  and  the  proceedings  dismissed  for  want 
of  jurisdiction,  since  a  debt  not  affected  by  a  discharge  will 
not  give  jurisdiction.-  Upon  the  tiling  of  a  i^etition,  the  judge 
must  make  the  adjudication  or  dismiss  the  petition ;  if  absent, 
the  clerk  must  refer  the  case  to  the  referee,^  who  should  make 
the  adjudication  or  dismiss  the  petition.^ 

See  Section  4a,  ante,  §  96,  for  persons  qualified  to  become 
bankrupt. 

^  914.  Filing  must  be  voluntary.— No  one  can  be  called  on 
to  show  cause  why  he  himself  shall  not  go  or  put  any  one  else 
into  voluntary  bankruptcy,-''  although,  if  a  debtor  has  com- 
mitted no  act  of  bankruptcy,  and  will  not  voluntarily  petition, 
a  creditor  may  sue  him,  so  as  to  force  him  to  commit  an  act 
of  bankruptcy,  and  may  then  institute  involuntary  proceed- 
ings against  him.*"'  The  default  of  a  defendant  to  a  petition  in 
involuntary  bankruptcy,  through  failure  to  appear,  does  not 
convert  the  proceedings  into  one  of  voluntary  bankruptcy;"^ 
nor  is  the  court  of  bankruptcy  vested  with  power  to  compel  a 
creditor  to  become  a  petitioner  in  involuntary  bankrui^tcy.^ 

§  915.  'b.  Who  may  file  an  involuntary  petition.— Three  or 
'more  creditors  who  have  provable  claims  against  any  person 
'which  amount  in  the  aggregate,  in  excess  of  the  value  of  se- 
'curities  held  by  them,  if  any,  to  five  hundred  dollars  or  over; 
'or  if  all  of  the  creditors  of  such  person  are  less  than  twelve 
'  in  number,  then  one  of  such  creditors  whose  claim  equals  such 
'amount  may  file  a  i^'tition  to  have  him  adjudged  a  bankrupt.' 

2  Sec.  4a,  act  of  1898;   In  re  Ma-  10  Blatch.  493,  F.  C.   17202;    Coxe 
pies  105  F.  R.  919,  5  A.  B.  R.  426;  v.  Hale,  8  N.  B.  R.  562,  F.  C.  3310. 
In  re  Yates  114  F.  R.  365,  8  A.  B.  7  in    re   Taylor.    2    N.    B.    N.    R. 
R.    69;    In   re   Morales,   105    F.   R.  926,  102  F.  R.  728,  4  A.  B.  R.  515. 
761;  In  re  Bellah,  116  F.  R.  69,  8  »  In  re  Gillette,  104  F.  R.  769. 
A.  B.  R.  310;  Elmira  Steel  Co.,  109  »  Analogous   provision   in  act  of 
F.  R.  456,  5  A.  B.  R.  484;   Contra,  1867.     "Sec.  39.     .     .     .     Any  per- 
In  re  Tinker,  99  F.  R.  79,  2  N.  B.  son     .     .      .     shall  'be   deemed   to 
N.  R.  39,  3  A.  B.  R.  580.     But  see  have   committed    an    act  of   bank- 
Columbia  Real  Estate  Co.,  4  A.  B.  ruptcy,  and,  subject  to  the  condi- 
R.  411.  tions  hereinafter  prescribed,  shall 
s  Sec.  18g,  act  of  1898.  be   adjudged   a   bankrupt,   on    the 
4  Sec.  38a,  act  of  1898.  petition  of  one  or  more  of  his  cred- 
^-  In    re   Harbaugh,    15   N.    B.   R.  itors,  the  aggregate  of  whose  debts 
246.  F.  C.  6045.  provable  under  the  act  amount  to 
0  Wanen  v.  Bk.,  7  N.  B.  R.  481,  at  least  two  hundred  and  fifty  del- 


572  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  59 

§  916.  Cognate  provisions.— Section  4b  of  the  law,  ante,  >; 
108,  makes  provision  for  the  j)ersons  who  may  become  involun- 
tary bankrupts.  A  petition  may  be  filed  against  a  person  who  is 
insolvent ;  and  who  has  committed  an  act  of  bankruptcy  within 
four  months  after  the  commission  of  such  act.''^  If  in  such  a 
petition,  a  party  holding  an  adverse  claim  is  made  a  defendant, 
and  it  sets  up  no  cause  of  action  and  prays  no  special  relief 
against  him,  the  purpose  merely  being  to  put  an  end  to  further 
action  by  him,  he  does  not  by  such  procedure  continue  to  be 
subject  to  the  orders  of  the  bankruptcy  court  without  further 
process.^  ^  Upon  the  filing  of  a  petition,  service  thereof,  with  a 
writ  of  subpoena,  must  be  made  upon  the  person  therein  named 
as  defendant,  in  the  same  manner  that  service  of  process  is 
now  had  in  suits  in  equity  in  United  States  courts,  except  that 
it  is  returnable  within  fifteen  days,  unless  the  time  is  extended. 
Where  personal  service  cannot  be  had,  notice  must  be  given  by 
publication.^  2  "Whenever  a  person  against  whom  a  petition 
has  been  filed,  as  hereinbefore  provided,  takes  issue  with  and 
denies  the  allegation  of  his  insolvency,  he  must  appear  in  court 
and  submit  to  an  examination,!^  when  he  is  entitled  to  a  trial 
by  jury  in  respect  to  the  question  of  his  insolvency  or  alleged 
acts  of  bankruptcy .!•*  If,  on  the  last  day  within  which  plead- 
ings may  be  filed,  none  are  filed  by  the  bankrupt  or  any  of  his 
creditors,  the  judge  shall,  on  the  next  day,  if  present,  or  as 
soon  thereafter  as  practicable,  make  the  adjudication  or  dis- 
miss the  petition.15  But  if  the  judge  is  absent  the  case  must 
be  referred  to  the  referee  forthwith,i^  who  must  make  the  ad- 
judication or  dismiss  the  petition.!"^ 

§  917.  Nature  of  proceeding.— A  proceeding  in  involun- 
tary bankruptcy  is  not  a  mere  suit  inter  parties,  but  partakes 
of  the  nature  of  a  proceeding  in  rem,  in  which  every  creditor 
has  a  direct  interest,is  and  cannot  be  converted  into  voluntary 

lars,    provided    such     petition     is  12  Sec.  18a,  act  of  1898. 

brought  within   six   months   after  13  Sec.  3d,  act   »f  1898. 

the  act  of  bankruptcy  shall  have  i*  Sec.  19a,  act  of  1898. 

been  committed."  15  Sec.  18e,  act  of  1898. 

10  Sec.  3b,  act  of  1898.  is  Sec.  18f,  act  of  1898. 

11  Louisville  Trust    Co.    v  Com-  17  Sec.  38a,  act  of  1898. 

inger,  184  U.  S.  18,  7  A.  B.  R.  421,  is  In  re  Murphy,  2  N.  B.  N.  R. 
affirming  107  F.  R.  898,  5  A.  B.  R.  393,  3  A.  B.  R.  499;  In  re  Boston. 
537.  etc.   R.  R.   Co.,  6  N.   B.   R.   209,   9 


(Jr.  59  PETITIONS.  573 

bankruptcy  by  the  default  of  defendant  to  appear.^^  If  a 
creditor  proves  his  claim  in  proceedings  under  a  voluntary 
petition  subsequent  to  the  institution  of  involuntary  proceed- 
ings by  him,  he  will  be  deemed  to  have  waived  his  right  to 
continue  the  involuntary  proceedings.^^  See  also  "Filing  must 
be  voluntary,"  ante,  §  91-1. 

§  918.  Creditors  of  what  date  included.— They  must  have 
been  such  at  the  time  of  filing  the  petition  and  this  must  ap- 
pear in  the  petition^i  as  also  the  fact  that  they  are  the  requisite 
number  under  the  law--  and  their  claims  are  of  the  required 
amount;  although  there  might  be  no  objection  to  a  person 
purchasing  claims  against  the  debtor,  in  good  faith,  in  order 
to  join  in  the  petition  to  make  the  necessary  number. ^3 

§  919.  Creditors  of  what  kind  included.— There  seems  to  be 
no  reason  why  creditors  of  a  corporation,  who  happen  also  to 
be  stockholders  might  not  join  in  a  petition,  but  this  would 
not  be  so  if  such  creditors  are  its  directors  or  officers,  in  which 
case  they  should  be  excluded  on  the  ground  of  being  em- 
ployes.-^ The  same  number  of  creditors  are  required  for  pro- 
ceedings against  a  corporation  as  in  the  case  of  an  individ- 
nal.25  A  married  woman  may  commence  or  join  in  proceed- 
ings against  her  husband,  where  she  is  an  actual  creditor, 
and  the  law  of  the  state  permits  the  creation  of  enforceable 
debts  as  between  husband  and  wif e  r*^  or  creditors,  otherwise 
competent  to  appear  and  join  in  a  petition  subsequent  to  its 
filing.-^  The  creditors  of  a  partnership  are  also  the  creditors 
of  each  individual  member  and  may  therefore  petition  against 
any  one  member  as  well  as  against  the  firm.-^    In  the  case  ol 

Blatch,    101,    F.     C.    1678;     In    re  24  Barrett  Pub.  Co.,  2  N.  B.  N.  R. 

Piatt,  6  N.  B.  R.  465,  F.  C.  11213;  80;    Contra,   In  re  Rollins  Gold  & 

In   Hanover  Nat.   Bank  v.   Moyes,  Silver  Min.  Co..  2  N.  B.  N.  R.  988, 

186  U.  S.  181,  8  A.  B.  R.  1.  102  F.  R.  982,  4  A.  B.  R.  327. 

11'  In    re   Taylor,    2  N.    B.   N.    R.  25  in    re    Leavenworth     Savings 

926,  102  F.  R.  728,  4  A.  B.  R.  515.  Bank,  14  N.  B.  R.   92,  4  Dill.   363, 

20  In  re  Nounan  &  Co.,   6  N.   B.  F.  C.  8165. 

R.   579.  2(i  In  re  Novak.  101  F.  R.  800,  4 

21  In  re  Western  Sav.  &  Tr.  Co.,     A.   B.  R.  311. 

17  N.  B.  R.  413,  4  Sawy.  190,  F.  C.  27  in  re  Beddingfield,  1  N.  B.  N. 

17442.  385,   2  A.  B.  R.  355,  96  F.  R.  190; 

22  In   re  Scammon,  11  N.   B.   R.  In  re  Romanow,   1   N.   B.   N.    213. 
280,  6  Biss.  195,  F.  C.  12429.  1  A.  B.  R.  461,  92  F.  R.  510. 

2:<  In   re   Woodford,  13   N.  B.  R.         28  in  re  Mercur.  1  N.  B.  N.  527, 
575,  F.  C.  17972.  2  A.  B.  R.  626,  95  F.  R.  634;  In  re 


574  THE   NATIONAL.   BANKRUPTCY   LAW.  Ch.  59 

a  bond  payable  to  the  people  of  a  state,  the  state  is  the  cred- 
itor, although  the  money  goes  to  the  city  treasurer,^^  and  in 
the  case  of  a  surety  on  a  defaulting  contractor's  bond  the 
surety  company  becomes  a  creditor  for  the  amount  of  the  loss 
sustained  and  may  file  the  petition.^o 

If  a  merchant  fails  to  exhibit  a  statement  of  his  accounts 
when  demanded,  he  cannot  complain  of  proceedings  in  bank- 
ruptcy commenced  against  him  without  the  requisite  number 
of  creditors  joining  in  the  petition,  provided  a  sufficient  num- 
ber join  before  the  trial.  The  petition  should  contain  the 
averment  that  the  petitioners  believe  that  they  do  constitute 
the  requisite  number  and  amount  of  provable  debts  which 
are  unsecured.  But  that  they  should  know  such  to  be  the 
fact  cannot  in  the  very  nature  of  the  case  be  required  ;^^  and 
when  it  alleges  upon  belief,  without  charging  either  informa- 
tion or  knowledge,  that  the  petitioners  constitute  the  requisite 
proportion  of  creditors,  it  will  be  sufficient.^^ 

§  920.  Claims  counted.— All  claims  must  be  counted  irre- 
spective of  amounts;^'*  provided  they  are  provable,  although 
they  may  not  be  due^"'  or  for  accrued  interest,^^  an  indorser's 
liability  on  a  note,  if  fixed,^*^  a  claim  for  damages  for  a  breach 
of  contract,^^  a  claim  released  without  consideration  upon  the 
fraudulent  representations  of  another  creditor  ;^^  a  claim  based 
upon  an  alleged  gaming  contract  where  respondent's  testi- 
mony is  the  only  evidence  against  the  express  terms  of  the 
contract  and  rules  of  the  exchange  on  which  it  was  to  be  exe- 
cuted,^^  or  the  like. 

Lloyd,  15  N.  B.  R.  257,  F.  C.  8429;  3*  Linn  v.  Smith,  4  N.  B.  R.  12, 

In  re  Malot,  16  N.  B.  R.  485,  F.  C.  F.  C.  8375;  In  re  Alexander,  How. 

9282.  470,  F.  C.  161. 

29  In  re  Chamberlin.  17  N.  B.  R.  ss  Sloan  v.  Lewis.  12  N.  B.  R. 
50,  9  Ben.  149,  F.  C.  2580.  173,  22  Wall.  150. 

30  Boyce  v.  U.  S.  Fidelity  &  36  in  re  Nickodemus,  3  N.  B.  R. 
Guaranty  Co.,  Ill  F.  R.  138,  7  A.  55,  F.  C.  10254. 

B.  R.  6.  3"  In   re  Stern,   116  F.  R.  604,  8 

31  Perin  &  Gaff  Mfg.  Co.  v  Peale,  A.  B.  R.  569;  but  see  In  re  Big 
17  N.  B.  R.  377,  F.  C.  10981.  Meadow  Gas  Co.,  113  F.  R.  974,  7 

32  In  re  Mann,  14  N.  B.  R.  572,  A.  B.  R.  697. 

13  Blatchf.  401,  F.  C.  9033.  3s  Michaels  v.  Post,  12  N.  B.  R. 

33  In  re  Brown,  111  F.  R.  979,  7     152,  21  Wall.  398. 

A.  B.  R.  102;  In  re  Woodford,  13  39  Hill  v.  Levy,  2  N.  B.  N.  R.  ISO. 
N.  B.  R.  575,  F.  C.  17972.  98  F.  R.  94,  3  A.  B.  R.  374. 


Ch.  59    PETITIONS— CREDITORS  AND  CLAIMS  COUNTED.         olo 

A  surety  upon  a  note  who  has  not  paid  the  note  could  not 
file  a  petition  against  the  maker,  although  the  latter  has  com- 
mitted an  act  of  bankruptcy  ;^<^  nor  one  holding  an  unliquidated 
claim  for  damages  for  a  tort  ;^^  or  claims  for  rent  to  accrue  un- 
der a  lease  for  breach  of  warranty,  until  liquidated  ;^2  or  claims 
against  an  infant  which  may  be  repudiated  on  reaching  ma- 
jority;"*^ or  a  creditor  who  has  disposed  of  his  claim ;-*^  or  one 
whose  claim  is  barred  by  the  statute  of  limitations  of  the  state 
where  the  proceedings  are  pending;-*^  or  an  indorsee  whose 
claim  is  paid  by  the  indorser  during  the  pendency  of  the  pro- 
ceedings."*^ 

It  is  not  necessary  that  the  larger  creditors  should  be  re- 
quested to  sign  the  petition  for  adjudication  and  refuse.^'^ 

Creditors  who  have  assented  to  a  general  assignment  made 
by  their  debtor  and  who  therefore  cannot  join  in  a  petition, 
are  not  to  be  counted  ;^'^  or  claims  based  on  a  note  given  in 
place  of  a  lost  note,  if  both  are  without  consideration,  though 
not  necessarily  a  voluntary  gift;"*-'  or  where  the  respondent 
has  a  counter-claim  provable  in  bankruptcy  against  the  peti- 
tioning creditor  which  would  reduce  the  claims  below  the 
requisite  amount.^^  A  corporation  will  not  be  permitted  to 
have  one  of  its  creditors  assign  a  portion  of  its  claim,  in  order 
to  make  the  number  requisite  for  filing  the  petition.^i 

§  921.  Secured,  priority  and  lien  creditors  counted.— Se- 
cured creditors  may  i)rove  their  claims  f"'^  but  the  court  has 
authority  to  inquire  into  and  determine  the  value  of  such  se- 
curities, or  priority  claims,  in  order  to  ascertain  whether  the 

40  Phillips   V.    Dreher   Shoe    Co.,  6    Biss.    443,    F.    C.    10238;    In    re 

112  V.  R.  404,  7  A.  B.  R.  326;    In  Cromwell,    6   N.  B.    R.   305,   F.    C. 

re  Kiker.   18    N.   B.  R.    383,   F.   C.  3250. 

11833.  40  In  re  Broich,  15  N.  B.  R.   11, 

•11  In  re  Brinckmann,   103  F.  R.  7  Biss.  303,  F.  C.  1921. 

65,  4  A.  B.  R.  551;    Beers  v.  Han-  4?  in  re  Currier,  13  N.  B.  R.  68, 

lin,  99  F.  R.  695,  3  A.  B.  R.  745;  2  Lowell  436,  F.  C.  3492. 

In  re  Heinsfurter,  97  F.  R.  198,  3  4.s  in   re    Miner,    2   N.   B.    N.    R. 

A.  B.  R.  113.  1073,  104  F.  R.  520. 

42  In  re  Mahler.  105  F.  R.  428,  5  49  in  re  Cornwall,  4  N.  B.  R.  134, 

A.  B.  R.  453.  F.  C.  3251. 

4-'  In    re    Eidemiller,    105    F.    R.  so  In  re   Osage  Valley,   etc.,  Co., 

595,  5  A.  B.  R.  570.  9  N.   B.  R.  281,  F.  C.  10592. 

44  In  re  Burlington  Malting  Co.,  51  in  re  Independent  Thread  Co., 

109  F.  R.  777,  6  A.  B.  R.  369.  113  F.  R.  998,  7  A.  B.  R.  704. 

4nin  re  Noesen,  12  N.  B.  R.  422,  r,-  Sec.  57a,  act  of  1S98,  ante,  p. 

502. 


576  THE    NATIONAL    BANKRUPTCY    LAW.  ClL  59 

claims  of  the  petitioning  creditors  are  of  the  amount  required 
by  law;^^  and  only  the  excess  over  such  securities  or  priorities 
are  counted.-'^'*  A  creditor  who  holds  a  lien  as  by  attachment 
or  otherwise  on  the  debtor's  property  and  until  vacated  or  it 
becomes  null  and  void  by  the  adjudication,  such  creditor  can- 
not file  a  petition/''^ 

§  922.  Preferred  creditors  counted.— Creditors  holding 
claims  unconditionally  provable  without  any  release  or  other 
preliminary  action,^"^  will  be  counted.  The  object  of  the  bank- 
rupt law  is  the  equal  distribution  of  an  insolvent's  property 
among  his  creditors ;  and  to  this  end  intentional  preferences  are 
forbidden  and  made  acts  of  bankruptcy.  Hence  a  conveyance 
of  property,^'^  or  a  transfer  constituting  a  preference,  void  un- 
der the  bankrupt  law  for  any  reason  f'^  or  which  it  is  charged 
is  a  fraudulent  preference,^^  cannot  be  considered  as  paying 
or  satisfying  the  debts  for  which  they  are  given.  Otherwise 
an  insolvent  debtor  and  his  preferred  creditors  could  violate 
the  law  and,  upon  their  very  violation,  base  their  claim  to  pro- 
tection against  its  enforcement ;  which  could  not  be  allowed, 
since  no  one  can  base  a  right  on  an  unlawful  act.  Such  trans- 
actions are  unlawful;  they  are  prohibited  by  law;  and  are 
acts  of  bankruptcy.  The  debts  attempted  to  be  satisfied  are 
still  the  debts  of  the  debtor  within  the  meaning  of  the  law. 

53  In  re  Cal.  Pac.  R.  R.  Co.,  11  N.  183,  F.  C.  13293;  In  re  Bloss,  4  N. 
B.  R.  193,  3  Sawy.  240,  F.  C.  2315.     B.   R.   37,   F.   C.    1562;    See   In    re 

54  Sec.  56b,  act  of  1898.  Crossette,   17   N.   B.   R.   208,  F.   C. 
Under    the   act   of    1867,   it  was     3455);  and  in  such  a  case  the  peti- 

held  that  secured  or  lien  creditors  tion    had    the    same    effect    as     a 

could  not  be  reckoned  among  cred-  waiver   (In  re  Bloss,  supra;   In  re 

itors  whose  claims  were  uncondi-  Broich,  15  N.  B.  R.  11,  7  Biss.  303, 

tionally  provable  and   hence  enti-  F.  C.  1921). 

tied    to  sign  the   petition     (In   re  ss  in  re  Schenkein  et  al.,  113  F. 

Frost,  11  N.  B.  R.  69,  6  Biss.  213.  R.  421,  reversing  7  A.  B.  R.  162; 

F.  C.  5134),  which  was  especially  In  re  Burlington  Malting  Co.,  109 

true  if  they  obtained  their  secur-  F.  R.  777,  6  A.  B.  R.  369. 

ity  or  lien  in  fraud  of  the  act  or  se  in  re  Frost,  11  N.  B.  R.  69,  6 

if    it    would    be   avoided    if    bank-  Biss.  213,  F.  C.  5134;   In  re  Hunt, 

ruptcy  followed     (In  re  Scrafford,  5  N.  B.  R.  433,  F.  C.  6882. 

15  N.  B.  R.  104,  4  Dill.  376,  F.  C.  =■  In  re  Norcross,  1  N.  B.  N.  257, 

12556).     A  fully   secured   creditor  1  A.  B.  R.  644. 

might  file  his  petition  without  ex-  ss  in  re  Tirre,  1  N.  B.  N.  402,  95 

pressly    waiving     his     preference  F.  R.  425,  2  A.  B.  R.  493. 

though  the  better  practice  was  to  -»  In  re  Cain,  1  N.  B.  N.  389,  2 

do  so    (In  re  Stansell,  6  N.  B.  R.  A.  B.  R.  378. 


Ch.  59  PETITIONS— CREDITORS     COUNTED.  577 

The  same  act  cannot  be  at  the  same  time  an  act  of  bankruptcy 
and  a  discharge  therefrom.  It  cannot  have  the  effect  of  mak- 
ing the  debtor  a  bankrupt  and  protecting  him  from  being  ad- 
judged a  bankrupt. 

The  act  of  1867  as  amended  by  the  Act  of  June  22,  1874,60 
provided  that  fraudulently  preferred  debts  should  not  be 
proved  until  the  preferences  were  surrendered ;  and,  under 
that  provision  it  was  held  that,  where  a  creditor  had  two  dis- 
connected claims  and  received  a  fraudulent  preference  on  one, 
he  could  prove  on  the  other  ;^i  but,  if  he  had  but  one  and  had 
received  a  preference,  having  at  the  time  reasonable  cause 
to  believe  his  debtor  insolvent,  he  could  not  prove  it  or  be 
counted  to  make  the  requisite  number.^^ 

Under  the  present  act  the  proof  and  allowance  of  claims 
are  distinct'^^  and  there  is  no  requirement  that  a  preferred 
creditor  shall  surrender  payments  on  account  before  proving  his 
claim ;  or  forbidding  him  to  prove  it,^^  but  merely  that  it  can- 
not be  allowed  unless  the  preference  is  surrendered.*'"'  There 
being  no  prohibition  against  his  proving  his  claim  and  his 
claim  not  being  satisfied  by  the  preference,  a  preferred  cred- 
itor^ has  a  provable  claim^^  and  should  be  counted  to  make  the 
requisite  number  of  creditors  and  may  file  a  petition  in  invol- 
untary bankruptcy.*''^  This  must  be  so  since  there  is  no  pro- 
vision of  law  enabling  him  to  surrender  his  preference  and 
fully  qualify  himself  for  an  allowance  until  the  trustee  is 
appointed,  since  the  referee  cannot  receive  it  and  a  receiver  is 

60  18  U.  S.  Statt.  178.  Sec.  12.  579;  In  re  Folb,  1  N.  B.  N.  134,  91 

«iln  re  McVay,  13  F.  R.  443;   In  F.  R.  107,  1  A.  B.  R.  22. 
re  Holland,  8  N.  B.  R.   190,  F.  C.         65  in  re  Knost  &  Wilhelmy,  1  N. 

6604;    In    re    Aspinwall,    11    F.   R.  B.   N.    403,    2   A.    B.   R.   471;    aff'd 

146;    In   re  Richter's  Est,  4  N.  B.  99,    F.    R.   409;    In    re   Ft.    Wayne 

R.  67,  1  Dill.  544,  F.  C.  11803.  Elec.  Corp.,  2  N.  B.  N.  R.  434,  99 

6-iIn  re  Israel,  12  N.  B.  R.   204,  F.  R.   400,  3  A.  B.  R.   634;    In  re 

3  Dill.  511,  F.  C.  7111;   Clinton  v.  Conhaim,    2    N.    B.    N.   R.   148,    97 

Mayo,  12  N.  B.  R.  39,  F.  C.   2899;  F.  R.  923,  3  A.  B.  R.  249. 
In  re  Currier,  13  N.    B.    R.  68,  2         66  in  re  Norcross,  supra. 
Lowell,  436,  F.  C.  3492;  In  re  Rado,         67  in  re  Cain,  1  N.  B.  N.  389,  2 

6  Ben.  230,  F.  C.  11522;  In  re  Hunt,  A.    B.   R.    378;    In   re  Hertzhkopf, 

5  N.  B.  R.  433,  F.  C.  6882;    In  re  118  F.  R.  101.  9  A.  B.  R.  90;   In  re 

Marcer,  6  N.  B.  R.  361,  F.  C.  9060;  Norcross,  supra;    See  In   re  Bloss, 

Ecker  v.  McAllister,  17  N.  B.  R.  42.  F.  C.  1562;   In  re  Calif.  Pac.  R.  R. 

63  In  re  Wise.  2  N.  B.  N.  R.  151.  Co.,  F.  C.  2315;   In  re  Stansell,  F. 

64  Sec.  63a,  act  of  1898,  post,  p.  C.  13293;    In  re  Miller,  5  A.  B.  R. 


140. 


27 


578  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  59 

not  to  be  appointed  for  that  purpose,****  and  furthermore  it 
does  not  remain  for  the  bankrupt  to  say  that  the  creditor 
has  been  preferred.'*'*  This  is  contrary  to  several  decisions,"" 
though  even  in  this  line  of  decisions  his  right  is  recognized  if 
his  preference  is  innocent  and  he  offers  to  surrender  it,^i  but 
they  appear  to  rest  on  a  failure  to  distinguish  between  the 
proof  and  allowance  of  claims,  which  is  drawn  in  the  present 
act,  and  follow  the  cases  under  the  former  act,  the  difference 
in  which  has  been  pointed  out.  So  a  creditor  is  entitled  to 
prove  for  the  balance  of  a  claim  on  which  a  payment  was  made 
long  prior  to  the  filing  of  the  petition.'^^ 

§923.  Creditors  participating  in  act  of  bankruptcy  not 
counted. — The  general  rule  is  that  where  a  creditor  connives 
in  the  alleged  act  of  bankruptcy,  whether  it  be  either  actually 
or  constructively  fraudulent,  he  is  precluded  from  proceeding 
against  such  debtor  in  involuntary  bankruptcy,  and  should 
not  therefore  be  counted  -^^  as  where  a  creditor  on  being  made 
a  party  to  a  general  assignment  files  his  claim  and  participates 
in  the  administration  of  the  estate  under  the  assignment;'^'* 
though  if  the  creditor  has  done  nothing  more  than  file  his 
claim  with  the  assignee'^^  or  merely  sells  him  small  bills  of 
goods  to  replace  his  stock  ;'^^  he  would  not  be  estopped.  The 
mere  fact  that  the  creditor  is  a  trustee  under  a  voluntary 
assignment  would  not  exclude  him  from  petitioning  or  being 
counted,  unless  there  is  some  fraud  connected  with  it;''^  nor 

68  In  re  Thompson,  2  N.  B.  N.  now,  1  N.  B.  N.  213,  1  A.  B.  R.  461, 
R.  1016.  92  F.  R.   510;    In   re  Gillette,  104 

69  In  re  Morton,  118  F.  R.  908.     F.  R.  769,  5  A.  B.  R.  119;   Mass. 
TO  In  re  Gillette,  104  F.  R.  769,     Brick  Co.,   5   N.   B.  R.  408,   F.  C. 

5  A.  B.  R.  119;   In  re  Miner,  2  N.  9259;  Perry  v.  Langley,  1  N.  B.  R. 

B.  N.  R.  1073,  104  F.  R.  520;   In  559,    F.   C.   11006;     Contra,    In    re 

re  Rogers  Milling  Co.,  2  N.  B.  N.  Curtis,  1  N.  B.  N.  357,  2  A.  B.  R. 

R.  973,   102   F.  R.   687,  4  A.  B.   R.  226,  94  F.  R.  630,  aff'g  1  N.  B.  N. 

540.  163,  1  A.  B.  R.  440,  91  F.  R.  737. 

71  In  re  Miller,  104  F.  R.  764,  5  74  in  re  Miner,  2  N.  B.  N.  R. 
A.  B.  R.  140.                                '  1073,  104  F.  R.  520. 

72  In  re  Folb,  1  N.  B.  N.  134,  91  75  in  re  Curtis,  91  F.  R.  737,  1 
F.  R.  107,  1  A.  B.  R.  22;  In  re  Mar-  N.  B.  N.  163,  1  A.  B.  R.  440;  In  re 
cer,  6  N.  B.  R.  351,  F.  C.  9060.  Romanow,     supra;     Simonson     v. 

73  Simonson  v.  Sinsheimer,  95  F.  Sinsheimer,   supra. 

R.   948;    Leidigh   Carriage   Co.    v.        7g  simonson   v.    Sinsheimer,    100 
Stengel,  1  N.  B.  N.  387,  95  F.  R.     F.  R.  426,  3  A.  B.  R.  824. 
637,  2  A.  B.  R.  383;  In  re  Roma-        77  in  re  Lloyd,  15  N.  B.  R.  257, 

F.  0.  8429. 


Ch.  59         PETITIONS— ADJUDICATION    BY    CONSENT.  bVJ 

if  the  creditor  has  only  ottered  to  assent  to  a  general  assign- 
ment for  the  benefit  of  creditors,  upon  condition  that  the 
assignee  be  changed;''^  nor  advising  the  sale  of  a  debtor's 
property  for  a  certain  sum  and  the  distribution  of  the  proceeds 
among  his  creditors  pro  rata,  when  such  transfer  is  the  alleged 
act  of  bankruptcy,  if,  after  such  transfer,  the  proceeds  were 
diverted  by  the  debtor  to  other  purposes."*^ 

§  924.  Adjudication  conclusive.— A  judgment  on  an  invol- 
untary petition  is  final  and  conclusive  unless  reversed  for  error 
or  fraud,  as  against  all  persons  who  were  before  the  court  at 
the  time  f^  and  an  application  to  hold  such  adjudication  void 
on  the  ground  that  the  requisite  number  and  amount  had  not 
joined*^!  should  not  be  entertained. 

§  925.  Consent  of  bankrupt.— Although  the  bankrupt  has 
signed  a  written  admission  that  the  requisite  quorum  has 
united  in  the  petition  it  has  been  held  that  the  court  must 
still  "be  satisfied  that  the  admission  is  made  in  good  faith, "^2 
which  probably  means  that  the  court  is  to  ascertain  that  the 
admission  is  true,  since  there  are  others  than  the  bankrupt 
interested  and  entitled  to  be  heard.  The  adjudication  being 
conclusive  on  the  question  of  whether  the  requisite  number 
join  in  the  petition,  the  fact  that  less  than  the  requisite 
number  and  value  join  is  an  irregularity  which  in  one  case 
has  been  held  will  be  cured  by  a  decree  rendered  with  re- 
spondent's consent,^^  though  this  position  seems  hardly  tenable 
since  all  creditors  are  entitled  to  an  opportunity  to  contest 
the  adjudication. 

^  926.  Good  faith. — The  utmost  good  faith  is  required  on 
the  part  of  creditors  filing  a  petition  in  involuntary  bank- 
ruptcy and  they  should  not  be  permitted  to  recklessly  institute 
proceedings  for  the  purpose  of  making  the  alleged  bankrupt 
disclose  a  list  of  his  creditors,  his  assets  or  liabilities.*^ 

§927.     'c.    Petitions  to  be  in  duplicate.— Petitions  shall  be 

78  Spicer  v.    Ward,  3    N.    B.    R.  si  In  re  Duncan,  14  N.  B.  R.  18, 

127,  F.  C.  13241.  8  Ben.  365,  F.  C.  4131. 

T9  In  re  Gillette,  104   F.  R.  769,  «2  in    re  Flanagan,   18   N.   B.   R. 

5  A.  B.  R.  119.  439,  F.  C.  4850. 

80  Neustadter  v.  Dry  Goods  Co.,  §3  in  re   Williams,   11   N.   B.   R. 

1  N.  B.  N.  552,  96  F.  R.  830,  3  A.  B.  146,  6  Biss.  233.  F.  C.  17700. 

R.  96.  84  In   re   Scammon.   11    N.    B.   R. 

280,  6  Biss.  195,  F.  C.  12429. 


580  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  59 

'liltid  in  duplicate,  one  copy  for  the  clerk  and  one  for  service 
'on  the  bankrupt.' 

v^  928.  Preparation.— All  petitions  and  the  schedules  filed 
therewith  must  be  printed  or  written  out  plainly,  without 
abbreviation  or  interlineation,  except  where  such  may  be 
necessary  for  the  purpose  of  reference,^^  and  it  has  been  held 
they  will  not  be  considered  unless  made  on  the  prescribed 
printed  forms.^*'     See  Amendments,  ante,  §  462. 

§  929.  Time  of  filing.— This  section  provides  that  the  peti- 
tion shall  be  in  duplicate  but  does  not  say  when  the  duplicate 
must  be  filed;  but  elsewhere^'^  it  is  provided  that  "upon  the 
filing  of  a  petition  for  involuntary  bankruptcy,  service  thereof, 
with  a  w^rit  of  subpoena,  shall  be  made,  etc.,"^^  that  the  prayer 
shall  be  for  'service  of  this  petition  Avith  a  subpoena, "^^  that 
"a  copy  of  said  petition,  together  with  a  writ  of  subpoena, 
be  served,"  and'^'^  that  the  clerk's  docket  shall  contain  a 
memorandum  of  the  filing  of  the  petition,  but  says  nothing 
about  the  copy,  while  if  the  petition  is  to  be  filed  in  duplicate 
the  docket  should  show  it,^^  since  the  day  and  hour  of  filing 
must  be  endorsed  on  each  paper  filed  with  the  clerk.  Th.^ 
duplicate  therefore  should  be  filed  with  the  original,  or  to 
speak  more  correctly  duplicate  originals  should  be  filed  within 
the  four  months,  and  failure  to  so  file  a  duplicate  petition  is 
a  fatal  error  which  cannot  be  cured  by  amendment,  or  by  a 
filing  nunc  pro  tunc,  and  the  filing  of  the  duplicate  must  be 
entered  by  the  clerk  on  his  docket.^-  A  mere  clerical  error 
in  the  jurat  of  one  of  the  duplicate  originals  may  be  cured  by 
amendment. '''^ 

§  930.  Pendency  of  previous  voluntary  or  involuntary  peti- 
tion.— See  "Filing  of  petition,"  ante,  §  461. 

§931.  'd.  Number  of  creditors  included.— If  it  be  averred 
'in  the  petition  that  the  creditors  of  the  bankrupt  are  less  than 
'twelve  in  number,  and  less  than  three  creditors  have  joined 

85  G.   O.  V.  91  G.  O.  II. 

86  Mahoney  v.  Ward,  100  F.  R.  92  in  re  Stevenson,  1  N.  B.  N. 
278,  2  N.  B.  N.  R.  538,  3  A.  B.  R.  313,  2  A.  B.  R.  66,  94  F.  R.  110;  In 
770.  re  Dupree,  1  N.  B.  N.  513,  97  F.  R. 

87  Sec.   18.   act  of   1898.  28. 

88  Form  No.  3.  93  in  re  Bellah,   116  F.  R.  69,  8 

89  Form  No.  4.  A.  B.  R.  310. 

90  G.  O.  I. 


Ch.  59  PETITIONS— CREDITORS    COUNTED.  581 

'as  petitioners  therein,  and  the  answer  avers  the  existence  of 
'a  larger  number  of  creditors,  there  shall  be  filed  with  the 
'answer  a  list  under  oath  of  all  the  creditors,  with  their  ad- 
'  dresses,  and  thereupon  the  court  shall  cause  all  such  creditors 
'to  be  notified  of  the  pendency  of  such  petition  and  shall  delay 
'the  hearing'  upon  such  petition  for  a  reasonable  time,  to  the 
'end  that  parties  in  interest  shall  have  an  opportunity  to  be 
'heard;  if  upon  such  hearing  it  shall  appear  that  a  sufficient 
'number  have  joined  in  such  petition,  or  if  prior  to  or  during 
'such  hearing  a  sufficient  number  shall  join  therein,  the  case 
'may  be  proceeded  with,  but  otherwise  it  shall  be  dismissed.' 

§  932.  Notices. — The  duty  of  sending  out  the  notices  to 
creditors  prescribed  in  this  subdivision  is  in  the  first  instance 
on  the  respondent ;  but,  on  his  default,  the  duty  devolves  on 
the  petitioner.  It  is  in  the  court's  discretion  to  decide  what 
effect  failure  to  send  out  such  notices  in  a  reasonable  time 
shall  have.»^ 

§  933.  'e.  Relatives  and  employes  not  counted  as  creditors. 
'—In  computing  the  number  of  creditors  of  a  bankrupt  for 
'the  purpose  of  determining  how  many  creditors  must  join  in 
'the  petition,  such  creditors  as  were  employed  by  him  at  the 
'time  of  the  filing  of  the  petition  or  are  related  to  him  by 
'consanguinity  or  affinity  within  the  third  degree,  as  deter- 
'  mined  by  the  common  law,  and  have  not  joined  in  the  petition, 
'shall  not  be  counted.' 

§  934.  Definition.— Consanguinity  is  the  relation  existing 
between  persons  descending  from  a  common  ancestor;  affinity 
is  the  connection  existing,  in  consequence  of  marriage,  be- 
tween the  husband  or  wife  and  the  kindred  of  the  other.  For 
method  of  making  computation,  see  ante,  §  669.  Creditors  of 
a  bankrupt  corporation  who  are  its  officers  or  directors  should 
not  be  counted  because  of  their  connection  with  respondent 
corporation,  on  the  ground  of  its  being  in  the  case  of  a  cor- 
poration the  same  as  consanguinity  and  affinity  in  a  natural 
person,  or  because  they  are  employes.^^ 

§935.  'f.  Creditors  may  intervene.— Creditors  other  than 
'original  petitioners  may  at  any  time  enter  their  appearance 

94  In  re  Barrett  Pub.  Co.,  2  N.  B.  B.  N.  R.  80;  Contra,  In  re  Rol- 
N.  R.  80.  lins  Gold   and   Silver  Min.   Co.,   2 

'■>■'  In   re  Barrett  Pub.   Co.,   2   N.     id.  988,  4  A.  B.  R.  327. 


583  THE   NATIONAL  BANKRUPTCY   LAW.  C'n.  59 

'and  join  in  the  petition,  or  file  an  answer  and  be  heard  in 
'opposition  to  the  prayer  of  the  petition.' 

i^  936.  Time  of  intervening.— Any  creditor  may  appear  and 
plead  to  the  petition  within  five  days  after  the  return  day  or 
within  such  further  time  as  the  court  may  allow  ;"^  but  one 
creditor  after  another  will  not  be  permitted  to  come  in  and 
contest  the  adjudication,  especially  after  the  five  days  have 
elapsed.'-^"  Where  service  of  the  petition  was  not  had  within 
the  time  limited,  other  creditors  may  subsequent  thereto  be 
permitted  to  join  in  the  petition  and  contest  the  propriety  of 
the  adjudication.*^**  There  is  nothing  in  the  act  which  spe- 
cifically gives  a  creditor  appearing  in  opposition  to  the  praye»' 
of  the  petition  the  right  to  a  jury  trial  as  to  matters  of  fact 
alleged  in  the  petition,  but  it  would  seem  that  such  right 
would  not  be  denied.^'* 

^  937.  Attaching  creditor.— An  attaching  creditor  may 
intervene  to  contest  an  adjudication  on  the  merits  as  well  as 
to  claim  lack  of  jurisdiction  ;i  or  that  the  requisite  number 
and  amount  of  creditors  have  not  joined,  as  well  as  any  other 
material  fact  in  the  case.^  Such  creditor  may  take  advantage 
of  any  defense  available  to  respondent  ;^  but  this  would  not 
be  true  where  the  attachment  was  obtained  after  the  filing  of 
the  petition.^ 

§  938.  Creditors  generally.— A  creditor  other  than  the  orig- 
inal petitioner,  although  holding  a  claim  for  a  mere  nominal 
sum,^  may  enter  his  appearance  by  petition  alleging  that  he 
is  a  creditor,  stating  the  purpose  of  his  petition  and  nothing 
more,  and  thereby  acquire  all  the  rights  of  the  original 
petitioner,  even  though  it  be  proven  that  the  latter  has  no 
claim,*''  or  the  four  months  have  expired  since  the  commission 

!•«  Sec.  18b,  act  of  1898.  9420;    In   re   Burton,   17  N.   B.   R. 

fl7  In       re      Mutual      Mercantile  212,  9  Ben.  324.  F.  C.  2214. 

Agency,  111  F.  R.  152,  6  A.  B.  R.  2  in  re  Broich,  15    N.   B.  R.  11. 

607;   Neustadter  v.  Dry  Goods  Co..  7  Biss.  303,  F.  C.  1921;  Contra,  In 

1  N.  B.  N.  552,  3  A.  B.  R.  96,  96  F.  re  Scrafford,  15  N.  B.  R.  104.  F.  R. 

R.  830.  12556,   reversing   14   N.  B.  R.  184, 

9**  In  re  Stein,   105  F.  R.  749,   5  F.  C.  12557. 

A.  B.  R.  288.  3  In  re  Williams,  supra. 

09  Sec.  19c,  act  of  1898.  *  in  re   Vogel,   18  N.  B.  R.   165, 

1  In    re    Williams,    14    N.    B.    R.  F.  C.  1698. 

132,  F.  C.  17706;  In  re  Mendelsohn,  5  In  re  Brown,  111  F.  R.  979.  7 

12  N.  B.  R.  533,  3  Sawy.  342,  F.  C.  A.  B.  R.  102. 

6  In  re  Taylor,  1  N.  B.  N.  412; 


Ch.  59  PETITIONS— INTERVENTION.  583 

of  the  act  of  bankruptcy;'^  and  where  the  requisite  number 
does  not  join,  and  afterwards  a  supplemental  petition  is  filed 
in  which  other  creditors  join,  the  total  number  being  sufficient, 
the  supplemental  petition  will  not  be  dismissed  because  it  did 
not  alone  contain  the  requisite  number.^  A  person  not  a  party 
to  the  petition  but  sustaining  merely  the  relation  of  one  who 
claims  to  be  a  creditor,  cannot  be  permitted  to  intervene  and 
defend  against  a  petition  filed  by  other  creditors.^  Where 
one  who  files  a  petition  in  bankruptcy  against  another  is  him- 
self adjudged  a  bankrupt,  his  trustee  is  properly  substituted 
as  petitioner  in  his  place.^^ 

§  939.  Partners. — Where  the  act  of  bankruptcy  charged  in 
an  involuntary  petition  against  a  partnership  is  the  transfer 
of  its  property  to  an  assignee  for  the  benefit  of  creditors,  such 
assignee  is  entitled  to  intervene  and  contest  the  petition,  and, 
having  been  permitted  to  intervene  and  been  heard,  he  has 
the  right  to  appeal  from  a  decree  adjudging  respondent  bank- 
rupt.^ ^  Where  one  member  of  a  firm  died  and  his  administra- 
tors allowed  the  surviving  partner  (respondent)  to  continue 
the  business  without  a  new  agreement,  the  administrators 
could  only  come  in  as  any  other  creditors,  in  the  absence  of  a 
new  agreement,  the  surviving  partner  having  converted  his 
former  partner's  property  to  his  own  use  with  the  knowledge 
and  consent  of  the  administrators.^ ^    g^er  Partners,  ante,  §  130. 

§  940.  Time  of  intervention.— Creditors  who  have  become 
voluntary  parties  to  a  general  assignment  are  estopped  from 
filing  a  petition  in  involuntary  bankruptcy  against  the  as- 
signor, but  he  may  be  adjudged  bankrupt  on  a  petition  filed 
by  them,  creditors  otherwise  competent  to  appear  and  join 
in  such  petition  subsequent  to  its  filing  being  reckoned  in 
computing  the  requisite  number  of  creditors  and  amount  of 

In  re  Austin,  16  N.  B.  R.  518,  F.  C.  5  N.  B.  R.  232,  F.  C.  1679;    In  re 

662;   In  re  Mendenhall,  9  N.  B.  R.  Columbia  Real  Estate  Co.,  112  F. 

380.   F.   C.   9424;    In  re  Mammoth  R.  643,  7  A.  B.  R.  441. 

Lumber  Co.,    109   F.   R.   308,   6   A.  lo  in  re  Jones,  7  N.  B.  R.  506,  F. 

B.  R.  84.  C.  7450. 

'  In  re  Mackey,  110  F.  R.  355,  6  n  In  re  Meyer,  98  F.  R.   976,   3 

A.  B.  R.  577;  In  re  Stein,  supra.  A.  B.  R.  550. 

8  In  re  Frisbie,  15  N.  B.  R.  522,  12  In  re  Mills,  11  N.  B.  R.  74,  F. 

14  Blatch.  185,  F.  C.  5129.  C.  9611. 

»  In  re  Boston,  etc.,  R.  R.  Co., 


584  THE    NATIONAL   BANKRUPTCY    LAW.  L'n.  59 

claims,  though  they  did  not  join  until  more  than  four  months 
after  the  alleged  act  of  bankruptcy.^^  Such  intervention 
must  be  made  during  the  pendency  of  the  proceedings,  an-.l 
as  a  rule  will  not  be  made  after  adjudication,  since  the  suc- 
cessive retrial  of  decided  issues  will  not  be  permitted,^*  though 
it  is  within  the  court's  power  to  permit  creditors  other  than 
original  petitioners  to  intervene  at  any  time.^-''  Under  the 
former  act  nearly  two  years  after  a  firm  filed  a  voluntary 
petition  in  bankruptcy  on  which  it  was  adjudged  bankrupt 
and  its  property  conveyed  to  an  assignee,  a  creditor  filed  a 
bill  alleging  that  two  persons  not  named  in  the  petition  were 
copartners  in  the  firm  and  asked  that  they  be  joined  in  the 
bankruptcy  proceedings,  and  it  was  held  that  the  creditor 
could  not  supply  the  omission,  but  could  have  the  same  reme- 
dies against  such  parties  as  before  the  petition  was  filed.^^ 

§941.  On  respondent's  default  or  petitioner's  failure  to 
prosecute. — A  creditor  has  the  right  to  intervene  after  thf 
default  of  the  respondent  and  contest  the  adjudication,^"  or 
when  a  petitioning  creditor  abandons  the  proceeding,  and 
such  right  cannot  be  defeated  by  any  arrangement  between 
the  respondent  and  a  creditor,  and  any  action  of  the  court 
defeating  such  right  is  in  contravention  of  the  statute.^  ^  On 
default  of  the  bankrupt  to  defend,  the  court  may  hear  n 
suggestion  from  any  creditor,  though  it  is  one  charged  with 
having  received  a  preference,  that  the  number  of  creditors 
joining  in  the  petition  is  insufficient.^*'  If  the  petitioning 
creditor  does  not  appear  and  proceed  to  adjudication  on  an 
adjourned  day,  another  creditor  may  appear  and  prosecute.-*' 
The  pendency  of  a  petition  to  discontinue  the  proceedings 
instead  of  depriving  creditors   of  the  right  to   intervene,   is 

13  In  re  Romanow,  1  N.  B.  N.  213,  is  Citizens'  Nat.  Bk.  v.  Cass,  18 
1  A.  B.  R.  461,  92  F.  R.  510.  N.  B.  R.  279,  F.  C.  2732. 

14  Neustadter  v.  Dry  Goods  Co.,  it  In  re  Jones,  16  N.  B.  R.  452, 
1  N.   B.   N.  552,  3  A.   B.  R.   96,  96  F.  C.  7442. 

F.  R.  830;    In  re  Bush,  6  N.  B.  R.         is  In  re  Lacy,  10  N.  B.  R.  477,  F. 

179,  F.  C.  222;   In  re  Mutual  Mer-  C.  7965;  In  re  Shaffer,  17  N.  B.  R. 

cantile  Agency,   111    F.   R.   152,   6  369,  4  Sawy.  363,  F.  C.  12742. 
A.  B.  R.  607.  19  Clinton  v.  Mayo,   12  N.  B.  R. 

15  In  re  Stein,  105  F.  R.  749;  In  39,  F.  C.  2899. 

re  Houghton,  10  N.  B.  R.  337,  P.  C.         20  in  re  Lacy,  supra. 
6730;    In  re  Olmstead,  4   N.  B.  R. 
71  F.  C.  10505. 


Cil.  59  PETITIONS— INTERVENTION.  585 

notice  to  them  that  the  original  creditor  does  not  intend  to 
prosecute  further  and  confers  on  them  the  very  right  to 
intervene.-^ 

§  942.  Manner  of  intervention.— A  creditor  other  than  the 
original  petitioner  may  intervene  by  petition,  simply  alleging 
that  he  is  a  creditor  and  desires  to  intervene  and  thereby 
becomes  entitled  to  all  the  rights  of  such  original  petitioner.^- 
The  service  of  an  injunction  on  a  person  does  not  make  him 
a  party  in  interest  in  the  bankruptcy  proceedings,  except  to 
the  extent  that  he  may  move  to  dissolve  a  wrongful  injunc- 
tion.23 

§  943.  'g.  Dismissal  of  petition  by  petitioner.— A  volun- 
'tary  or  involuntary  petition  shall  not  be  dismissed  by  the 
'petitioner  or  petitioners  or  for  want  of  prosecution  or  by 
'consent  of  parties  until  after  notice  to  the  creditors.' 

§944.  Notice.— The  notices  here  referred  to  relate  to  the 
withdrawal  of  cases  without  submission  to  the  court.-^  Cred- 
itors must  have  at  least  ten  days'  notice  by  mail  of  the  pro- 
posed dismissal  of  bankruptcy  proeeedings,^^  and  the  duty 
of  sending  out  such  notices  in  an  involuntary  proceeding 
devolves  upon  the  referee.-^  Under  the  Act  of  1867  it  was 
held  that  a  petitioning  creditor  might  at  any  time  before 
adjudication,  discontinue  the  proceedings  and  have  his  peti- 
tion dismissed  without  notice  to  the  creditors,  who,  if  they 
desired  to  continue  the  proceedings,  should  apply  on  the  day 
to  which  the  proceedings  were  adjourned,  for  leave  to  be 
substituted  or  file  a  new  petition.^^ 

§  945.  Withdrawal  of  a  creditor.— Where  a  creditor  joins 
in  a  proceeding  in  involuntarj^  bankruptcy  and  allows  the 
petition   to   be   filed,   and   afterwards  assigns   his  claim,^^  or 

21  In  re  Buchanan,  10  N.  B.  R.         23  Sec.  58a,  act  of  1898. 

97,  F.  C.  2073.  26  See.  58b,  act  of  1898;   but  see 

22  In  re  Taylor,  1  N.  B.  N.  412;  In  re  Barrett  Pub  Co.,  2  N.  B.  N. 
In  re  Austin,  16  N.  B.  R.  518,  F.  C.     R.    80. 

662;   In  re  Mendenhall,  9  N.  B.  R.  2-  in  re  Rolling  Mill  Co.,  2  N.  B. 

380,  F.  C.  9424.  R.  146,   F.   C.  2338. 

23  Karr  v.  Whittaker,  5  N.  B.  R.  28  But  see  In  re  Western  Savings 
123,  F.  C.  7612.  &  Tr.  Co..  17  N.  B.  R.  413,  F.  C. 

2^  Neustadter  v.  Dry  Goods  Co.,     17442. 
1  N.  B.  N.  552,  3  A.  B.  R.  96,  96  F. 
R.  830. 


586  THE  NATIONAL  BANKRUPTCY  LAW.  Ch.  59 

obtains  a  settlement  from  the  bankpupt,^^  or  in  some  other 
way,  it  is  too  late  to  withdraw  from  the  proeeedmgs;^'^  and 
permission  to  withdraw  will  be  denied  whenever  necessary  to 
further  the  purposes  of  the  act.-'*'  When,  however,  a  creditor's 
name  has  been  signed  to  the  petition  without  his  knowledge 
he  may  repudiate  the  proceedings  and  the  petition  will  be 
dismissed  as  to  him  ■,^-  or  if  he  join  therein  through  misrep- 
resentation, h'^  may  be  allowed  to  withdraw  at  any  time  before 
adjudication;^^  though  not  if  the  misrepresentation  is  not 
substantial  and  intentionally  false.^*  A  party  having  once 
appeared  cannot  withdraw  his  appearance  on  the  grouftd  that 
the  court  did  not  have  jurisdiction,  but  must  raise  that  ques- 
tion by  demurrer.35 

If  all  the  creditors  express  a  desire  to  dismiss  the  proceed- 
ing, they  should,  as  a  rule,  be  allowed  to  do  so,^^  but  a  motion 
for  leave  to  dismiss  the  proceedings  and  to  settle  with  the 
debtor  comes  too  late  if  filed  after  the  debtor  has  been  ad- 
judged a  bankrupt.^"  A  voluntary  bankrupt  may  withdraw 
his  petition  where  there  is  no  estate  and  no  claims  are  proved 
and  no  trustee  appointed.^^ 

•-'9  In   re  Ryan.  114  F.  R.  373.  7         34  in  re  Vogel,  18  N.  B.  R.  165, 

A.  B.  R.  562.  F.  C.  16981. 

30  In  re  Beddingfield,  1  N.  B.  N.  35  in  re  Ulrich,  3  N.  B.  R.  34,  3 
385,  2  A.  B.  R.  355,  96  F.  R.  190;      Ben.  355,  F.  C.  14327. 

In  re  Romanow,  92  F.  R.  510,  1  N.  36  in  re  Jemison  Mercantile  Co., 

B.  N.  213,  1  A.  B.  R.  461;  In  re  112  F.  R.  966,  7  A.  B.  R.  588;  In  re 
Sargent,  13  N.  B.  R.  144,  F.  C.  Salaberry,  107  F.  R.  95,  5  A.  B.  R. 
12361;  In  re  Rosenfields,  11  N.  B.  847;  In  re  Heffron,  6  Biss.  156,  F. 
R.  86,  F.  C.  12061.  C.  632. 

31  In  re  Sheffer,  17  N.  B.  R.  369,  3-  in  re  Sherburne.  1  N.  B.  R. 
4  Sawy.  363,  F.  C.  12742.  155,  F.  C.  12758. 

32  In  re  Rosenfields,  supra.  38  in  re  Hebbart,  5  A.  B.  R.  8. 

33  In   re   Sargent,   supra;    In   re 
Heffron,  supra. 


CHAPTER  LX. 


PREFERRED    CREDITORS. 


§946.  (60a)  Preference. 

947.  Definition  of. 

948.  Insolvency. 

949. Procuring    or     suffering 

judgment. 

950.  Transfer  of  property. 

951. Exchange  of  property. 

952.  Judgment. 

953.  Payment  of  money. 

954.  Stoppage  in  transitu. 

955.  Creditors  of  same  class. 

956. Intent  to  prefer  not  ne- 
cessary. 

957.  Immaterial  whether  vol- 
untary or  involuntary. 

958.  Effect  of. 

959.  Only    creditors    can    be    pre- 

ferred. 


060.  Within  four  months. 

961.  b.  Voidable  preference. 

962.  Constituents  of  voidable  pref- 
erences. 

963.  Reasonable  cause  to  believe. 

964.  Know^ledge  of  agent  or  attor- 
ney. 

965.  Transactions  out  of  the  usual 
course. 

966.  Fraudulent  preferences  void- 
able, not  void. 

967.  Actions  affecting  preferences. 

968.  c.  New    credit    after    prefer- 
ence. 

969.  Set-off. 

970.  d.  Court   determines   reason- 
ableness of  attorney's  fee. 

971.  Attorney's  fee. 

§  946.  '  (Sec.  60a)  Preference.— A  person  shall  be  deemed 
'to  have  given  a  preference  if,  being  insolvent,  he  has,  within 
'four  months  before  the  filing  of  the  petition,  or  after  the 
'  filing  of  the  petition  and  before  the  adjudication,  procured 
'or  suffered  a  judgment  to  be  entered  against  himself  in  favor 
'of  any  person,  or  made  a  transfer  of  any  of  his  property,  and 
'the  effect  of  the  enforcement  of  such  judgment  or  transfer 
'will  be  to  enable  any  one  of  his  creditors  to  obtain  a  greater 
'percentage  of  his  debt  than  any  other  of  such  creditors  of 
'the  same  class.  Where  the  preference  consists  in  a  transfer, 
'such  period  of  four  months  shall  not  expire  until  four  months 
'after  the  date  of  the  recording  or  registering  of  the  transfer, 
'if  by  law  such  recording  or  registering  is  required.'^ 

§  947.  Definition  of  preference.— This  subdivision  expressly 
defines  a  preference  and  provides  that  the  existence  of  three 


1  Subdivision  "a"  was  amended 
by  the  act  of  February  5,  1903,  by 
the  substitution  of  the  matter  in 
the  text  for  the  following: 

"A  person  shall  be  deemed  to 
have  given  a  preference  If,  being 
insolvent,  he  has  procured  or  suf- 
fered a  judgment  to  be  entered 
against  himself  in  favor  of  any 
person,  or  made  a  transfer  of  any 


of  his  property,  and  the  effect  of 
the  enforcement  of  such  judgment 
or  transfer  will  be  to  enable  any 
one  of  his  creditors  to  obtain  a 
greater  percentage  of  his  debt  than 
any  other  of  such  creditors  of  the 
same  class." 

See  subdivision  b  of  this  sec- 
tion for  analogous  provision  in  the 
act  of  1867. 


587 


588  THE   NATIONAL  BANKRUPTCY   LAW.  Ch.  GO 

elements  in  any  transaction  shall  make  it  a  preference.  These 
are  "insolvency,"  "procuring  or  suffering  a  judgment  or 
making  a  transfer,"  provided  the  preference  occurred  within 
four  months  before  the  filing  of  the  petition,  or  after  the  filing 
of  the  petition  and  before  the  adjudication,  and  "that  it  result 
in  one  creditor  receiving  more  than  others  oi  the  same  class." 
It  constitutes  a  rule  of  evidence  in  bankruptcy  proceedings 
and  makes  it  a  conclusive  presumption  that  the  debtor  in- 
tended to  give  a  preference  if  he  does  any  one  of  the  three 
and  the  result  is  as  stated  vv^ithout  reference  to  the  intent.- 
It  is  the  benefit  or  advantage  which  one  creditor  obtains  over 
another  and  not  the  purpose  or  intent  of  the  parties  which 
determines  the  effect  and  constitutes  the  transaction  a  prefer- 
ence and  means  the  same  whether  given  or  received.^ 

§948.  Definition  of  insolvency.— Insolvency  exists  "when- 
ever the  aggregate  of  one's  property,  exclusive  of  any  property 
conveyed,  transferred,  concealed  or  removed,  or  permitted  to 
be  concealed  or  removed,  with  intent  to  defraud,  hinder  or 
delay  creditors,  is  not  at  a  fair  valuation  sufficient  to  pay  his 
debts."*  This  statutory  definition  of  "insolvency"  differs  so 
wndely  from  the  judicial  definition  heretofore  given  to  it,  viz. : 
inability  to  pay  one's  debts  in  the  ordinary  course  of  business, 
that  it  will  be  readily  seen  that  one  may  be  insolvent  under 
the  judicial  definition  who  would  not  be  so  under  the  statutory 
definition  and  vice  versa.  The  allegation  that  the  bankrupt 
was  in  failing  circumstances  and  unable  to  meet  his  debts  in 
full,  is  insufficient.^  In  the  event  that  insolvency  is  denied 
b}^  the  creditor,  the  trustee  must  prove  it.^ 

§  949.  Preference  from  procuring  or  suffering  a  judgment. 
— Intent  and  active  agency  on  the  part  of  the  debtor  are  not 
necessary,  but  only  a  state  of  insolvency  coupled  with  an  act 
on  the  part  of  one  creditor  the  effect  of  which  will  be  a 
preference,  even  though  the  proceedings  are  regular  judicial 
proceedings  upon  a  debt  which  is  due  and  to  which  there  is 
no  just  defense."     The  failure  of  the  debtor  to   prevent  the 

2  In  re  Piper,  2  N.  B.  N.  R.  7.  s  Martin  v.  Bigelow,  7  A.  B.  R. 

3  In  re  Conhaim.  2  N.   B.  N.  R.     218. 

148,  3  A.  B.  R.  249,  97  F.  R.  923;  6  in  re  Chappel,  113  F.  R.  545,  7 

Swarts  V.  Fourth  Nat.  Bank  of  St.  A.  B.  R.  608. 

Louis.  117  F.  R.  1,  8  A.  B.  R.  673.  7  In  re  Meyer,  1  N.  B.  N.  207.  1 

4  Sec.  1   (15),  act  of  1898.  A.  B.  R.  1;  Mather  v.  Coe,  1  N.  B. 


Cii.  60 


PREFERENCES. 


589 


securing-  of  such  a  preference  as  by  filing  a  petition  in  vol- 
untary bankruptcy  is  sufficient.'^  The  several  courts  which 
have  made  an  apparently  contrary  decision'-*  merely  hold  that 
failure  to  prevent  the  entry  of  judgment  on  a  warrant  of 
attorney  is  not  sufficient,  but  they  do  not  go  so  far  as  to  say 
that  permitting  such  judgment  to  be  enforced  is  not,  which 
latter  is  held  sufficient  to  create  a  preference.^ *^ 

§950. transfer  of  property.— Transfer  includes^i  "the 

sale^-  and  every  other  and  different  mode  of  disposing  of  or 
l^arting  with  })roi)erty,'3  or  the  possession  of  property,  abso- 
lutely or  conditionally,   as  payment,  pledge,  mortgage,^ ^  gift 


N.  554,  1  A.  B.  R.  504,  92  F.  R. 
333. 

s  In  re  Reichman,  1  N.  B.  N.  556, 
1  A.  B.  R.  17,  91  F.  R.  624;  In  re 
Collins,  1  N.  B.  N.  290,  2  A.  B.  R. 
1;  In  re  Spacht,  2  N.  B.  N.  R.  238; 
In  re  Richards,  2  A.  B.  R.  518,  95 
F.  R.  258;  In  re  Huffman,  1  A. 
B.  R.  587;  In  re  Whalen,  1  N.  B. 
N.  228;  In  re  Rome  Planing  Mills, 
3  A.  B.  R.  123,  96  F.  R.  812;  In  re 
Moyer,  1  N.  B.  N.  260,  1  A.  B.  R. 
577,  93  F.  R.  188;  In  re  Cliffe,  1 
N.  B.  N.  510,  2  A.  B.  R.  317,  94 
F.  R.  354;  In  re  Burrus,  97  F.  R. 
926,  3  A.  B.  R.  296;  In  re  Arnold, 
1  N.  B.  N.  334,  2  A.  B.  R.  180,  94 
F.  R.  1001;    but  see  In  re  Ogles,  1 

A.  B.  R.  671,  93  F.  R.  426;  see 
also  In  re  Forsyth,  7  N.  B.  R.  174, 
F.  C.  4948;  In  re  Gallinger,  4  B.  R. 
729,  1  Sawy.  224,  F.  C.  5192;  In  re 
Craft,  1  N.  B.  R.  89,  2  Ben.  214, 
F.  C.  3316;  In  re  Black,  1  N.  B.  R. 
81,  2  Ben.  196,  F.  C.  1457;  In  re 
Dibblee,  2  B.  R.  617.  3  Ben.  283, 
F.  C.  3885;    Buchanan  v.  Smith,  4 

B.  R.  397,  8  Blatch.  153;  In  re 
Sutherland,  1  B.  R.  531,  1  Deady 
344,  F.  C.  13638;  In  re  Houghton, 
1  B.  R.  460;  In  re  Schick,  1  B.  R. 
177,  F.  C.  12455;  Warren  v.  D.  L. 
&  W.  Ry.  Co.,  7  N.  B.  R.  451,  F.  C. 
17194;  In  re  Lord,  5  N.  B.  R.  518, 
F.  C.  8503;  Vogle  v.  Lathrop,  4  N. 


B.  R.  146,  F.  C.  16985;  Hyde 
V.  Corrigan,  9  N.  B.  R.  466,  F.  C. 
6968;  Seattle  v.  Gardner,  4  N.  B. 
R.  106,  F.  C.  1195;  Christman  v. 
Haynes,  8  N.  B.  R.  528,  F.  C.  2703; 
Haskell  v.  Ingalls,  5  N.  B.  R.  200, 
1  Hask.  341,  F.  C.  6193;  In  re 
Baker,  14  N.  B.  R.  433;  In  re 
Schick.  2  Ben.  5;  In  re  Dibblee,  3 
Ben.  283;  Fitch  v.  McGill,  2  Biss. 
163;  In  re  Dunkle,  7  N.  B.  R.  72, 
F.  C.  4160;  In  re  Heller,  3  Biss. 
153;  In  re  Wells,  3  N.  B.  R.  95,  F. 

C.  17388;  Wilson  v.  Brinkman,  2 
N.  B.  R.  149,  F.  C.  17794;  Smith  v. 
Buchanan.  8  Blatch.  153;  Vander- 
hoof  V.  Bk.,  1  Dill.  476;  Anderson 
V.  Strassberger,  6  Ben.  672;  War- 
ren V.  Bk.,  7  N.  B.  R.  481,  10 
Blatch.  493,  F.  C.  17202. 

«  In  re  Nelson,  1  N.  B.  N.  567,  98 
F.  R.  76,  1  A.  B.  R.  63. 

10  In  re  Spacht,  2  N.  B.  N.  R. 
238;  In  re  Richards,  2  A.  B.  R. 
518,  95  F.  R.  258;  In  re  Huffman,  1 
A.  B.  R.  587;  See  Wilson  v.  Bank, 
17  Wall.  473;  National  Bank  v. 
Warren,  95  U.  S.  539. 

11  Sec.  1  (25),  act  of  1898. 

12  Stern  v.  Louisville  Trust  Co., 
112  F.  R.   501,  7  A.   B.  R.  305. 

1^  Stern  v.  Louisville  Trust  Co., 
supra;  Frank  v.  Musliner,  9  A.  B. 
R.  229. 

14  In  re  Ed.  W.  Wright  Lumber 


590  THE   NATIONAL   BANKRUPTCY   LAW.  Ch.  60 

or  security."  The  word  "transfer"  is  used  in  its  most  com- 
prehensive sense  and  includes  the  transfer  of  money  as  well 
as  property.^  ^  Any  transfer  of  property  by  an  insolvent, 
direct  or  indirect,  by  which  one  creditor  obtains  an  advantage 
over  others  is  a  preference  and  it  does  not  matter  that  the 
motive  is  commendable,  as  to  save  the  property  from  attach- 
ment, or  the  like ;  as  also  any  transfer  by  which  the  insolvent 's 
estate  is  diminished,  which  includes  those  the  consideration 
for  which  is  a  pre-existing  debt.^**  Such  transfer  does  not, 
however,  include  a  mortgage  given  in  part  to  secure  an  ante- 
j  cedent  debt,  collateral  previously  given  being  replaced  by  the 
mortgage;^'  nor  the  transfer  of  notes  and  accounts— choses 
in  action— as  collateral  to  secure  the  repayment  of  a  present 
loan;^"^  nor  the  transfer  of  fire  insurance  policies  as  collateral 
for  an  antecedent  debt,  the  insured  being  solvent;^-'  nor  the 
performance  of  labor  by  an  insolvent  debtor  for  his  creditor.-^ 
If  insurance  policies  be  assigned  as  collateral  security,  the  liea 
dates  from  the  assignment,  and  not  from  the  actual  delivery.^' 
It  has  been  held  that  the  delivery  to  a  bank  of  coin,  legal 
tender  notes,  bank-bills,  indorsed  checks  and  drafts  to  be 
passed  to  the  credit  of  the  depositor,  is  a  transfer  of  property.^^ 

Co.,  114  F.  R.  1011,  8  A.  B.  R.  345;  In  re  Batchelder,  3  N.  B.  R.  37,  1 

Sebring  v.  Wellington,  6  A.  B.  R.  Lowell,    373,    F.    C.    1098;     In-  re 

671;  In  re  Beerman,  112  F.  R.  663,  Lewis,   2  N.    B.  R.   145;    Catlin  v. 

7  A.  B.   R.  431;    In  re  Jones,  118  Hoffman,  9  N.  B.  R.  342.  2  Sawy. 

F.  R.  673,  9  A.  B.  R.  262.  486,  F.  C.  2521;    Smith  v.  Little,  9 

15  In  re   Rouk,  111  F.  R.  154,   7  N.  B.  R.  11.  5  Ben.  490,  F.  C.  13072; 

A.  B.  R.  31;  Carson,  Pirie,  Scott  &  Pirie  v.  Chicago  Title  &  Trust  Co., 

Co.  V.   Trust  Co.,  182   U.  S.   43S,   5  182  U.  S.  444;   5  A.  B.  R.  814;  Wil- 

A.  B.   R.    814;    Sherman   v.   Luck-  son  Bros.  v.  Nelson,  183  U.  S.  191, 
hardt,  9  A.  B.  R.  307;  Laundry  v.  7  A.  B.  R.  142. 

Andrews,  6  A.  B.  R.  281.  i'  In  re  Davidson,  109  F.  R.  882, 

IB  See  Sec.  67,  act  of  1898;  In  re  5  A.  B.  R.  528. 

Taylor,  1  N.  B.  N.  412;  In  re  Wood-  is  Young  v.  Upson,  115  F.  R.  192, 

ward,    2   A.    B.   R.     233;     Toof    v.  8  A.  B.  R.  377. 

Martin,  6  N.   B.   R.   49,     13    Wall.  lo  In    re    Wittenberg    Veneer    & 

40;    s.  c.    4    N.  B.  R.    158,     F.    C.  Panel  Co.,  108  F.  R.  593,  6  A.  B.  R. 

9164;  Foster  v.  Hackley,  2  N.  B.  R.  71. 

131,  F.  C.  497;   In  re  Rogers,  2  N.  20  in  re  Abraham  Steers  Lumber 

B.  R.  129,  F.  C.  12002;  In  re  Pier-  Co.,  110  F.  R.  738.  6  A.  B.  R.  315. 
son,  10  N.  B.  R.  107,  F.  C.  11153;  21  McDonald   v.   Daskam,   116   F. 
Barker  v.  Smith,  12  N.  B.  R.  474.  R.  276,  8  A.  B.  R.  543. 

2  Woods,  87,  F.   C.  986;    Brock  v.         22  In  re  Stege,  8  A.  B.  R.  515.  \ 
Terrell.  2  N.  B.  R.  190,  F.  C.  1914; 


C'H.  60  PREFERENCES.  591 

§951. exchange  of  property.— The    bankruptcy  law 

does  not  intend  to  interfere  with  or  disturb  the  orderly  busi- 
ness of  the  country .23  Hence  the  substitution  of  one  piece  of 
property  for  another,  the  exchange  of  properties  of  equal 
value,  the  sale  for  a  present  consideration,  the  giving  of 
security  for  a  present  advance  or  loan,  the  transfer  of  prop- 
erty in  carrying  out  a  prior  valid  contract,  and  generally 
transfers  which  do  not  give  one  creditor  an  advantage  over 
others  or  diminish  the  estate,  are  not  preferences.^^  Giving 
a  deed  of  trust  to  secure  a  debt  previously  secured  by  me- 
chanic 's  lien  is  merely  a  change  of  security  and  not  a  prefer- 
ence;-^ and  so  is  the  exchanging  within  four  months  of 
bankruptcy  of  new  secured  notes  for  old  secured  notes;-"  or 
the  giving  of  a  new  mortgage,  the  old  mortgage  having  been 
given  more  than  four  months  before  the  bankruptcy,  if  no 
greater  value  is  inserted  ;-'^  or  the  transfer  to  a  lessor,  who 
held  as  security  for  the  rent,  chattel  mortgages  good  between 
the  parties  bat  void  as  to  creditors,  of  real  estate  in  payment 
of  the  rent,  such  chattel  mortgages  being  thereupon  released  ;-'^ 
or  the  substitution  of  a  note  and  mortgage  for  bonds  held  as 
a  special  deposit  for  a  customer  ;29  but,  if  new  securities  of 
greater  value  are  given,  the  rule  that  an  exchange  of  securities 
is  not  a  preference  does  not  apply .^^^ 

§952. from  judgments.— Attention  is  called  to  what 

has  already  been  said  in  the  discussion  of  this  provision  of 
the  present  act  as  to  procuring  or  suffering  a  judgment.^^  A 
preference  is  not  created,  however,  by  a  levy  or  sale  under  a 
judgment  unless  the  judgment  debtor  at  the  time  of  the  levy 
was  insolvent,  regardless  of  the  fact  that  the  sale  rendered 
him  so.'^-     A  preference  is  created  where  notes  are  given  with 

2a  Crook  V.  Bk.,  1  N.  B.  N.  530,     29,  F.  R.  12410;   Contra,  In  re  Jor- 

3  A.  B.  R.  238.  dan,  9  N.  B.  R.  16,  F.  C.  7529. 

24  Darby  v.  Boatmans'  Sav.  Inst.,^       2s  Stewart  v.  Piatt,  19  N.   B.  R. 

4  N.  B.  R.  195,  F.  C.  3571.  »  347,  101  U.  S.  731. 

25  In  re  Weaver,  9  N.  B.  R.  132,         29  Cook  v.  Tullis,  9  N.  B.  R.  433. 
F.  C.  17307.  18  Wall.  322. 

20  Bernhisel  v.  Firman,  11  N.  B.  so  Waring  v.  Buchanan,  19  N.  B. 

R.  505,  22  Wall.  170.  R.  502,  F.  C.  17176. 

2T  In    re   Shepherd,   6   A.    B.   R.  31  Ante,  §  949. 

725;   Brett  v.  Carter,  14  N.  B.  R.  32  Chicago  Title  &  Trust  Co.   v. 

301,  2  Lowell  458,  F.  C.  1844;  Sawy.  John  A.  Roebling's  Sons  Co..   107 

V.  Turpin,  5  N.  B.  R.  339,  2  Lowell,  F.  R.  71,  5  A.  B.  R.  368. 


592  THE   NATIONAL  BANKRUPTCY   LAW.  Cn.  60 

a  cognovit  to  confess  judgment  thereon  by  an  insolvent  debtor 
to  a  creditor  who  a  few  days  later  entered  up  judgment  and 
issued  execution  ;3''*  and  it  is  immaterial  whether  such  action 
was  expected  or  not  by  the  debtor  ;=^^  or  a  judgment  entered, 
upon  a  warrant  of  attorney  attached  to  a  note  which  the 
creditor  had  been  renewing,  and  execution  issued  thereon  just 
prior  to  the  bankruptcy;^*"'''  or  the  confession  of  judgment,  the 
issuing  of  an  execution  and  the  seizure  and  sale  of  property 
under  it,-"**'  or  entering  judgments  on  warrants  held  by  near 
relatives  of  the  bankrupt  and  issuing  execution  thereon  im- 
mediately on  learning  that  the  creditors  were  pressing  ;37  or 
giving  a  note  by  an  insolvent  and  causing  it  to  be  sued  upon 
to  prevent  an  attachment  ;^^  or  giving  individual  notes  in 
exchange  for  notes  secured  by  the  signature  and  indorsement 
of  others,  resulting  in  an  execution  on  the  judgment  of  such 
notes  ;'^'^'  or  where  a  state  ordinance  gave  new  debts  a  prefer- 
ence over  old,  and  a  father  gave  his  son  a  new  note  to  take 
the  place  of  the  old  one,  judgment  being  entered  thereon.^'^ 
A  preference  is  created  if  judgment  be  recovered  and  execution 
issue  thereon,  though  the  creditor  had  no  knowledge  of  the 
.debtor's  insolvency.^'  The  taking  of  property  hy  a  receiver 
appointed  by  a  state  court  is  a  taking  under  legal  process.'*- 

§953. payment  of  money.— A  payment  of  money  to 

apply  on  a  debt  past  due  is  a  transfer  of  property*^  and,  if 

33  Haughey  v.  Albin,  2  N.  B.  R.  414,  F.  C.  12787;  Rogers  v.  Palmer, 
129,  2  Bond_244,  F.  C.  6222;  Fitch  19  N.  B.  R.  471,  102  U.  S.  563; 
V.  McGie,  2  N.  B.  R.  164,  F.  C.  Zahm  v.  Fry,  9  N.  B.  R.  546,  F.  C. 
4835;  In  re  Terry  &  Cleaver,  4  N.  18198;   In  re  Dibble,  2  N.  B.  R.  185, 

B.  R.  33,  F.  C.  13835;  Vogel  v.  3  Ben.  203,  F.  C.  3884;  In  re  Baker, 
Lathrop,  4  N.  B.  R.  146,  F.  C.  16985.  14  N.  B.  R.  433,  F.  C.  763;  Shaffer 

34  Bk.  V.  Jones,  11  N.  B.  R.  38,  v.  Fritchery,  4  N.  B.  R.  179,  F.  C. 
21  Wall.  325.  1269. 

35  Golson  V.  Neihoff,  5  N.  B.  R.  3>*  In  re  Williams,  3  N.  B.  R.  74, 
56,   2  Biss.  434,  F.   C.  5524;    In  re  1   Lowell,  406.  F.  C.  17703. 
Herpich,   15  N.   B.  R.   426,  7  Biss.  so  Sage,   Jr.,   v.   Wyncoop,   68   N. 
387,  F.   C.  6418.  B.  R.   63,  F.  C.   12215. 

36  Zahn  V.  Fry,  9  N.  B.  R.  546,  F.  4o  Little  v.  Alexander,   12  N.  B. 

C.  18198;    Catlin  v.  Hoffman,  9  N.     R.  134,  21  Wall.  500. 

B.  R.  342,  2  Sawy.  486,  F.  C.  2521;  4i  in  re  Metzger  Toy  &  Novelty 

Webb  v.  Sachs.  15  N.  B.  R.  168,  4  Co.,  114  F.  R.  957. 

Sawy.    158,    F.    C.    17325;     Bk.    v.  42  Hardy  v.  Clark  et  al.,  3  N.  B. 

Campbell.  6  N.  B.  R.  352,  14  Wall.  R.  99,  7  Blatch.  262,  F.  C.  6058. 

87.  43  Carson,   Pirie.   Scott  &   Co.  v. 

37  Shimer  v.  Huber,  19  N.  B,  R.  Trust  Co.,  182  U.  S.  438,  5  A.  B.  R. 


Ch.  go 


PREFERENCES. 


593 


made  by  an  insolvent  debtor,  with  the  effect  of  enabling  the 
creditor  to  obtain  a  greater  percentage  of  his  debt  than  other 
creditors  of  like  class,  is  a  preference  without  regard  to 
whether  it  was  made  innocently  in  the  usual  course  of  business 
or  not;-*^  whether  on  a  running  account  with  the  creditor,  so 
that  the  balance  is  to  be  considered  one  debt;^^  or  if  the  dif- 
ferent transactions  constitute  debts  which  should  be  stated  as 
distinct  causes  of  action  in  a  complaint,  as  notes,  and  the 
payment  is  of  one  or  more  in  full  ;^s  or  the  payment  of  wages, 
notwithstanding  that  part  of  them  were  entitled  to  priority, 
814;  Sherman  v.  Luckhart,  9  A.  B.     Jones,   2  N.  B.  N.  R.  961,  4  A.   B. 


R.  307. 

*i  In  re  Arndt,  3  N.  B.  N.  R.  2. 
104  F.  R.  234;  In  re  Christensen, 
2  N.  B.  N.  R.  695,  101  F.  R.  802; 
In  re  Fixen,  2  N.  B.  N.  R.  885, 
102  F.  R.  295.  4  A.  B.  R.  10;  In  re 
Sloan,  102  F.  R.  116,  4  A.  B.  R. 
356;  Strobel  v.  Knost,  99  F.  R. 
409,  1  N.  B.  N.  403,  2  A.  B.  R.  471; 
In  re  Kamsler,  2  N.  B.  N.  R.  97, 
97  F.  R.  194;  In  re  Jourdan,  2  N. 
B.  N.  R.  581;  In  re  Conhaim,  2  N. 
B.  N.  R.  148,  3  A.  B.  R.  249.  97  F. 
R.  923;  In  re  Cain,  1  N.  B.  N.  389, 

2  A.  B.  R.  378;  In  re  Tirre,  2  A. 
B.  R.  493,  1  N.  B.  N.  402,  95  F.  R. 
425;  In  re  Wise,  2  N,  B.  N.  R.  151; 
Shutts  V.  Bk.,  2  N.  B.  N.  R.  320, 

3  A,  B.  R.  492,  98  F.  R.  705;  Blakey 
V.  Bk.,  1  N.  B.  N.  411,  2  A.  B.  R. 
460,  95  F.  R.  267;  In  re  Hoffman, 
2  N.  B.  N.  R.  554;  In  re  Thomp- 
son, 2  N.  B.  N.  R.  1016;  In  re  Fort 
Wayne  Elec.  Corp.,  2  N.  B.  N.  R. 
434,  99  F.  R.  400,  s.  c.  3  A.  B.  R. 
186,  96  F.  R.  803,  citing  and  over- 
ruling In  re  Piper,  2  N.  B.  N.  R. 
7,  but  see  In  re  Ryan,  2  N.  B.  N. 
R.  693;  Contra,  In  re  Smoke,  2  N. 
B.  N.  R.  996,  4  A.  B.  R.  434,  104  F. 
R.  289,  aff'g  2  N.  B.  N.  R.  831;  In 
re  Alexander,  2  N.  B.  N.  R.  997.  4 
A.  B.  R.  376,  102  F.  R.  464;  In  re 
Piper,  2  N  B.  N.  R.  7,  8;  see  also 
In  re  Baker.  2  N.  B.  N.  R.  195;  In 
re  Nathan.  2  N.  B.  N.  R.  613;  In  re 


R.  563;  In  re  Warner,  5  N.  B.  R. 
414.  F.  C.  17177;  Farrin  v.  Craw- 
ford, 2  N.  B.  R.  181,  F.  C.  4686;  In 
re  Dibble,  2  N.  B.  R.  185,  3  Ben. 
283,  F.  C.  3884;  Phelan  v.  Bk.,  16 
N.  B.  R.  308,  4  Dill.  88,  F.  C. 
11069;  Rison  v.  Knapp,  4  N.  B.  R. 
114,  1  Dill.  186.  F.  C.  11861;  In  re 
Forsyth,  7  N.  B.  R.  174,  F.  C.  4948; 
Maurer  v.  Frantz,  4  N.  B.  R.  142, 
In  re  Ore.  Bull.  Pr.  &  Pub.  Co.,  13 
N.  B.  R.  503;  In  re  Doyle,  3  N.  B. 
R.  158.  F.  C.  4051;  In  re  Gay,  2  N. 
B.  R.  114,  1  Hask.  108,  F.  C.  5279; 
In  re  Foster,  2  N.  B.  R.  81,  F.  C. 
4961;  In  re  Finn,  8  N.  B.  R.  525, 
F.  C.  4795;  In  re  Jones,  12  N.  B. 
R.  48,  F.  C.  7452;  In  re  Burgess, 
3  N.  B.  R.  47,  F.  C.  2153;  In  re 
Clark,  19  N.  B.  R.  301,  F.  C.  2812; 
In  re  Edelstein.  1  N.  B.  N.  168. 

*5  In  re  Wise,  2  N.  B.  N.  R.  151; 
In  re  Teslow,  2  N.  B.  N.  R.  1024. 
46  In  re  Wise,  2  N.  B.  N.  R.  151; 
Reed  v.  Phinney,  2  N.  B.  N.  R. 
1007;  In  re  Castle,  2  N.  B.  N.  R. 
985,  4  A.  B.  R.  357;  In  re  Siegel- 
Hillman  Dry  Goods  Co.,  2  N.  B.  N. 
R.  933;  In  re  Berwick,  2  N.  B.  N. 
R.  808;  In  re  Rogers  Milling  Co., 
2  N.  B.  N.  R.  973,  102  F.  R.  687,  4 
A,  B.  R,  540;  In  re  Myers  v.  Char- 
ni,  2  N.  B.  N.  R.  765;  Contra.  In 
re  Jourdan.  2  N.  B.  N.  R.  581;  In 
re  Hoffman,  2  N.  B.  N.  R.  554. 


{ 


694  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  GO 

for  that  can  only  be  settled  in  the  bankruptcy  proceedings;'*^ 
or  payment  for  goods  delivered  without  the  collection  of  the 
price,  though  the  tei'ms  be  cash,  since  the  title  passed  on 
delivery,  the  payments  not  being  for  a  present  consideration.*^ 
The  payment  of  the  rent  of  the  premises  in  which  the  busi- 
ness is  carried  on  is  not  necessarily  a  preference,'*'^  but  if  made 
with  the  purpose  of  carrying  on  the  business  in  fraud  of 
creditors,  it  should  be  so  regarded.""'*^  Where  an  insolvent 
leaseholder  with  the  proceeds  of  a  sale  of  such  lease  pays 
debts  charged  thereon  or  necessarily  payable  to  secure  a  fair 
price,  such  payments  are  not  a  preference ;  so  payment  of 
back  rent  on  a  lease  non-assignable  without  the  landlord's 
consent  is  proper  because  necessary  to  secure  its  value  for 
creditors.^^  The  payment  of  one  of  several  notes  held  by  a 
bank  against  an  insolvent  debtor  out  of  the  collateral  security 
given  to  secure  the  note  is  not  a  preference ;  nor  the  payment 
of  interest  for  the  renewal  of  a  note.^^  jf  ^  debtor  entering 
into  a  composition  with  his  creditors,  secretly  pays  one  of 
them  more  than  the  amount  stated  in  the  composition,  the 
preference  is  fraudulent  and  voidable.^^ 

§  954. stoppage  in  transitu.— The  right  of  stoppage  in 

transitu  is  a  legal  right  and  exists  in  the  vendor  until  delivery 
of  the  goods  to  the  vendee,  who  though  insolvent  may  consent 
to  the  vendor  retaking  the  goods  without  giving  him  a  prefer- 
ence.^'* 

§  955. creditors    of    same    class.— Whether  or  not  a 

transaction  is  a  preference  depends  upon  the  result  merely. 
If  it  will  result  in  the  benefit  or  advantage  of  one  creditor 

47  In  re  Kohn,  2  N.  B.  N.  R.  367,  1009;  In  re  Barrett,  6  A.  B.  R.  199. 
7  A.  B.  R.  Ill,  note;  In  re  Jones,  ""-'O  In  re  Lange.  2  N.  B.  N.  R.  85, 
2  N.  B.  N.  R.  961,  4  A.  B.  R.  563;      3  A.  B.  R.  231,  97  F.  R.  197. 

In  re  Proctor,  6  A.  B.  R.  660;    In  si  in  re  Pearson,  1  N.  B.  N.  402, 

re  Henry  C.  King  Co.,   116   F.   R.  2  A.  B.  R.  482,  95  F.  R.  425;    but 

110,  7  A.  B.  R.  619;  In  re  Kenyon,  see  In  re  Merchants'  Ins.  Co.,  6  N. 

6  N.  B.  R.  238;   Contra,  In  re  Feu-  B.  R.  43,  3  Biss.  162,  F.  C.  9441. 
erlicht,  8  A.  B.  R.  550;  In  re  Read,  52  Reed  v.  Phinney,  2  N.  B.  N. 

7  A.  B.  R.  111.  R.    1007. 

48  In  re  Durham,  2  N.  B.  N.  R.  53  Jn  re  Chaplin,  115  F.  R.  162, 
1101;    In  re  Arndt,  3  N.  B.   N.  R.  8  A.  B.   R.    121. 

101,  104  F.  R.  234,  4  A.  B.  R.  773.  ■'',4  See  Stoppage  in  Transitu,  un- 

49  Reed  V.  Pinney,  2  N.  B.  N.  R.     der  post,   §  1219. 


Ch.  (iU  PREFERENCES.  595 

over  any  other  of  a  like  class  it  constitutes  a  preference/'^ 
The  test  of  the  classification  of  creditors  is  the  percentage  of 
their  claims  they  are  entitled  to  draw  out  of  the  bankrupt's 
estate,  and  not  the  relation  of  the  creditors  to  parties  other 
than  the  bankrupt.  If  entitled  to  the  same  percentage  they 
are  in  the  same  class,  even  though  certain  of  them  are  secured 
by  indorsement  or  guaranty  and  others  are  not.^*^  Workmen, 
clerks  and  servants  constitute  a  distinct  class,  and  if  the  assets 
are  sufficient  to  pay  them  in  full,  payments  oh  account  before 
bankruptcy  but  during  insolvency,  are  not  preferential.-''^ 

§  956. intent  to  prefer  not  necessary.— An  intent  to 

prefer  is  not  required  but  is  conclusively  presumed  from  the 
effect  of  the  transaction  in  giving  one  creditor  a  greater  per- 
centage of  his  debt  than  any  other  creditor  of  like  class.''*^ 

§  957. immaterial  whether  voluntary  or  involuntary.— 

Whether  the  preference  given  is  voluntary  or  involuntary  is 
immaterial,  or  whether  done  by  reason  of  threats  or  coercion  •,'^^ 
so  an  assignment  to  one  creditor,  though  made  under  pressure, 
is  a  preference.^*^  Compulsory  legal  proceedings  also  fre- 
quently result  in  preferences. 

§  958. eflfect  of. — A  preference  voidable  under  sub- 
division "b"  disqualifies  the  creditor  receiving  it  from  having 
his  claim  allowed  unless  and  until  he  surrenders  what  he  has 
received  as  a  preference  f^  or  from  taking  part  in  the  man- 
agement and  administration  of  the  estate.^^ 

§  959.  Only  creditors  can  be  preferred.— Only  a  creditor 
can  be  preferred,  and  if  the  person  who  receives  the  benefit  is 
not  a  creditor,  the  question  of  preference  does  not  arise.'^^     An 

55  In  re  Conhaim,  2  N.  B.  N.  R.  923;  In  re  Bashline,  109  F.  R.  965, 

148,  3  A.   B.  R.  249,  97  F.  R.  923;  6  A.  B.  R.  194;  Contra,  In  re  Hall, 

In  re  Fixen.  2  N.  B.  N.  R.  885,  102  2  N.  B.  N.  R.  1126. 

F.   R.    295,    4   A.    B.   R.   10;    In   re  •-■.,.  strain  v.  Gourdin,  11  N.  B.  R. 

Read  et  al.,  7  A.  B.  R.  111.  156,  2  Woods,  380,  F.  C.  13521. 

■■■6  Swaits  V.  Fourth  Nat.  Bank  of  go  Jn   re   Batchelder,  3  N.  B.   R. 

St.  Louis,  117  F.  R.  1.  8  A.  B.  R.  37,  1  Lowell,  313,  F.  C.  1098;  Grow 

673.  V.    Ballard.    2   N.    B.   R.   69,   F.    C. 

■■■'7  In  re  Read  &   Knight,  supra.  5848. 

•'■'8  In  re  Griffin  Pants  Factory  v.  «!  See  §  873. 

Nelms  Racket  Store  Co.,   2   N.    B.  n-  in  re  Walker,  1  N.  B.  N.  510,  3 

N.  R.  630;   In  re  Piper,  2  N.  B.  N.  A.  B.  R.  35,  96  F.  R.  550. 

R.    7,   8;    In   re  Conhaim,  2   N.   B.  es  in  re  Rudnick,  2  N.  B.  N.  R. 

N.  R.  148,  3  A.  B.  R.  249,  97  F.  R.  975,  102  F.  R.  750,  4  A.  B.  R.  531; 


odd  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  60 

accoiniuoclation  maker  on  a  note  executed  by  a  bankrui)t  is 
not  a  creditor  of  the  bankrupt,  when  not  called  on  to  pay  the 
note  or  any  part  thereof,  and  hence  cannot  be  considered  to 
have  received  a  preference.*^* 

§  960.  Within  four  months. — A  preference  is  only  created 
if  the  act  complained  of  was  within  four  months  before 
the  filing  of  a  petition,  or  after  the  filing  of  the 
petition  and  before  the  adjudication.'^^  In  computing 
the  time  the  first  day  is  excluded  and  the  last  included, 
unless  it  fall  on  a  Sunday  or  a  holiday,  in  which  case  it 
also  is  excluded  ;^6  and  the  same  rule  is  applied  in  counting 
months  or  years.^^  The  four  months  begin  to  run  from  the 
time  the  preference  took  effect ;  which  depends  on  the  state 
law  as  to  what  is  required  to  render  the  judgment  or  transfer 
effective,  as  docketing,  delivery,  filing,  acknowledging  or  re- 
cording as  the  case  may  be  •,^^  but  it  is  the  actual,  not  condi- 
tional or  partial,  taking  effect. 

Where  the  preference  consists  in  a  transfer,  the  time  com- 
mences to  run  from  the  date  of  recording  or  registering  of 
the  transfer,  if  by  law  such  recording  or  registering  is  required. 
A  deed  delivered  with  the  understanding  that  it  should  not 
take  effect  until  the  grantee  should  so  elect  and  he  did  not 
make  such  election  until  within  the  four  months,  is  voidable  ;^'-' 
or  where  a  preferential  deed  was  withheld  from  record  until 
within  four  months;'"  or  where  the  creditor  takes  possession 
of  property  just  before  the  bankruptcy  though  the  agreement 
to  pledge  it  was  made  more  than  four  months  before  that 
time;'^^   and  a  deed  executed  without  authority  by  an  officer 

Darby's  Tr.  v.  Lucas,  5  N.  B.  R.  cs  See   Sawyer  v.   Turpin,  13  N. 

437,  F.  C.  3572.  B.   R.  371,  91  U.  S.  114;    Clark  v. 

04  Swarts    v.    Siegel,    114    F.    R.  Iselin,   9   N.    B.    R.   19,   10   Blatch. 

1001,   8  A.  B.  R.  220.  204,  11  N.  B.  R.  337.  21  Wall.  360; 

«">  In     re      Siegel-Hillman     Dry  Wood  v.   Owings,   1   Cranch,   239; 

Goods  Co..  2  N.  B.  N.  R.  933;    In  In  re  Wynne,  4  N.  B.  R.  5,  F.  C. 

re  Kindt,  101  F.  R.  107,  4  A.  B.  R.  18117;    Matthews    v.    Westphall,    1 

148,  rev'g  2  N.  B.  N.  R.  369.  McCrary,  446;    Seaver  v.  Spink,  8 

B'i  Sec.  31.  act  of  1898;    Whitley  N.    B.    R.    218;    under    the   act    of 

Grocery  Co.  v.  Roach,  8  A.  B.  R.  1867   as   illustrative. 

505.  ♦'9  Bk.    V.   Conway,    14    N.    B.    R. 

(■'-  In   re   Stevenson,    1    N.   B.   N.  175,  1  Hughes,  37,  F.  C.  1037. 

313,  2  A.  B.  R.  66,  94  F.  R.  110;  In  to  Bk.  v.  Harris,  14  N.  B.  R.  510, 

re  Dupree,  1  N.  B.  N.  513,  97  F.  R.  F.  C.  4595. 

28;  In  re  Lang,  2  N.  B.  R.  151,  F.  ti  in  re  Sheridan,  95  F.  R.  406, 

C.'8056.  3  A.  B.  554. 


Ch.  60  PREFERENCES    VOIDABLE.  591 

of  a  corporation  more  than  four  months  before  the  bankruptcy 
but  ratified  within  that  period  must  be  considered  in  the  light 
of  the  situation  when  ratifiedJ- 

If  the  transfer  occurred  more  than  four  months  prior  to 
bankruptcy  it  ceases  to  be  voidable,  whether  the  creditor  had 
reasonable  cause  to  believe  a  preference  was  intended  or  not,"-" 
and  may  be  retained,  although  he  knew  of  debtor's  insolvency. 
The  act  must  have  been  complete,'^^  since  the  law  does  not 
refer  to  preferences  created  long  prior  to  its  enactment,  or 
more  than  four  months  before  the  petition  was  filed.'^^ 

§961.  'b.  Voidable  preference.— If  a  bankrupt  shall  have 
'given  a  preference,  and  the  person  receiving  it,  or  to  be 
'benefited  thereby,  or  his  agent  acting  therein,  shall  have  had 
'reasonable  cause  to  believe  that  it  was  intended  thereby  to 
'give  a  preference,  it  shall  be  voidable  by  the  trustee,  and 
'he  may  recover  the  property  or  its  value  from  such  person, 
'And,  for  the  purpose  of  such  recovery,  any  court  of  bank- 
'ruptcy,  as  hereinbefore  defined,  and  any  state  court  which 
'would  have  had  jurisdiction  if  bankruptcy  had  not  intervened, 
'shall  have  concurrent  jurisdiction. '^^^ 

■'s  In  re  Kansas  City  S.  &  Mfg.  thereby,  or  his  agent  acting  there- 
Co.,  9  N.  B.  R.  76,  F.  C.  7610.  in,  shall  have  had  reasonable  cause 
'3  In  re  Kindt,  101  F.  R.  107.  4  to  believe  that  it  was  intended 
A.  B.  R.  148;  rev'g  2  N.  B.  N.  R.  thereby  to  give  a  preference,  it 
369;  In  re  Woodward,  1  N.  B.  N.  shall  be  voidable  by  the  trustee, 
352,  2  A.  B.  R.  233;  In  re  Dow,  6  and  he  may  recover  the  property 
N.  B.  R.  10,  F.  C.  4036;  Potter  v.  or  its  value  from  such  person." 
Coggeshall,  4  N.  B.  R.  19,  F.  C.  Analogous  provision  of  act  of 
11322.  1867.  "Sec.  35.  .  .  .  That  if 
'i  In  re  Foster,  18  N.  B.  R.  64,  any  person,  being  insolvent,  or  in 
F.  C.  4964.  contemplation  of  insolvency,  with- 
es In  re  Ferguson,  2  A.  B.  R.  586,  in  four  months  before  the  filing 
95  F.  R.  429;  In  re  Folb,  1  N.  B.  of  the  petition  by  or  against  him, 
N.  134,  91  F.  R.  107,  1  A.  B.  R.  122.  with  a  view  to  give  a  preference 
"fi  Subdivision  "b"  was  amended  to  any  creditor  or  person  having  a 
by  the  act  of  February  5,  1903,  by  claim  against  him,  or  who  is  under 
the  enactment  of  the  matter  in  the  any  liability  for  him,  procures  any 
text  for  the  following:  "b.  If  a  part  of  his  property  to  be  attached, 
bankrupt  shall  have  given  a  pref-  sequestered,  or  seized  on  execu- 
erence  within  four  months  before  tion,  or  makes  any  payment, 
the  filing  of  a  petition,  or  after  the  pledge,  assignment,  transfer,  or 
filing  of  the  petition  and  before  conveyance  of  any  part  of  his 
the  adjudication,  and  the  person  property,  either  directly  or  indi- 
receiving    it,    or    to   be   benefited  rectly,  absolutely  or  conditionally. 


598 


THE    NATIONAL   BANKRUPTCY    LAW. 


Ch.60 


§  962.  Constituents  of  voidable  preferences.— Tli is  subdivi- 
sion must  be  construed  in  connection  with  subdivision  "a," 
since  the  "preference"  liere  mentioned  is  defined  in  that 
subdivision.  To  bring  a  transaction  within  its  requirements 
(1)  the  debtor  must  have  been  insolvent  at  the  time;  (2)  he 
must  have  procured  or  suffered  the  judgment,  or  made  the 
transfer;  (3)  its  result  must  be  to  give  one  creditor  a  greater 
percentage  of  his  claim  than  others;  (4)  such  creditor  must 
have  had  reasonable  cause  to  believe  this  result  was  intended ; 
and   (5)   it  must  have  been  within  four  months  of  the  filing 

conveyance  shall  be  void,  and  the 
assignee  may  recover  the  property, 
or  the  value  thereof,  as  assets  of 
the  bankrupt.  And  if  such  sale, 
assignment,  transfer,  or  convey- 
ance is  not  made  in  the  usual  and 
ordinary  course  of  business  of  the 
debtor,  the  fact  shall  be  prima 
facie  evidence  of  fraud.  Any  con- 
tract, covenant,  or  security  made 
or  given  by  a  bankrupt  or  other 
person  with,  or  in  trust  for,  any 
creditor,  for  securing  the  pay- 
ment of  any  money  as  a  consid- 
eration for  or  with  intent  to  in- 
duce the  creditor  to  forbear  op- 
posing the  application  for  dis- 
charge of  the  bankrupt,  shall  be 
void;  and  if  any  creditor  shall 
obtain  any  sum  of  money  or  other 
goods,  chattels,  or  security  from 
any  person  as  an  inducement  for 
forbearing  to  oppose,  or  consent- 
ing to  such  application  for  dis- 
charge, every  creditor  so  offending 
shall  forfeit  all  right  to  any  share 
or  dividend  in  the  estate  of  the 
bankrupt,  and  shall  also  forfeit 
double  the  value  or  amount  of 
such  money,  goods,  chattels,  or  se- 
curity so  obtained  to  be  recovered 
by  the  assignee  for  the  benefit  of 
the  estate. 

"Sec.  39.  .  .  .  And  if  such 
person  shall  be  adjudged  a  bank- 
rupt, the  assignee  may  recover 
back  the  money  or  other  propertrj 


the  person  receiving  such  pay- 
ment, pledge,  assignment,  transfer 
or  conveyance,  or  to  be  benefited 
thereby,  or  by  such  attachment, 
having  reasonable  cause  to  believe 
such  person  is  insolvent,  and  that 
such  attachment,  payment,  pledge, 
assignment,  or  conveyance  is  made 
in  fraud  of  the  provisions  of  this 
act,  the  same  shall  be  void,  and  the 
assignee  may  recover  the  property, 
or  the  value  of  it,  from  the  person 
so  receiving  it,  or  so  to  be  bene- 
fited; and  if  any  person  being  in- 
solvent, or  in  contemplation  of  in- 
solvency or  bankruptcy,  within 
six  months  before  the  filing  of  the 
petition  by  or  against  him,  makes 
any  payment,  sale,  assignment, 
transfer,  conveyance,  or  other  dis- 
position of  any  part  of  his  prop- 
erty to  any  person  who  then  has 
reasonable  cause  to  believe  him 
to  be  insolvent,  or  to  be  acting  in 
contemplation  of  insolvency,  and 
that  such  payment,  sale,  assign- 
ment, -transfer,  or  other  convey- 
ance is  made  with  a  view  to  pre- 
vent his  property  from  coming  to 
his  assignee  in  bankruptcy,  or  to 
prevent  the  same  from  being  dis- 
tributed under  this  act,  to  defeat 
the  object  of,  or  in  any  way  im- 
pair, hinder,  impede,  or  delay  the 
operation  and  effect  of,  or  to  evade 
any  of  the  provisions  of  this  act, 
the  sale,   assignment,  transfer,  or 


Ch.  60  PREFERENCES    VOIDABLE.  599 

of  the  petition,  or  between  the  filing  and  ad  judication  J" 
There  is  involved  no  element  of  moral  or  actual  fraud.  It  is 
simply  a  constructive  fraud  established  by  law  upon  the  exist- 
ence of  eertam  facts  and  prohibited  by  it.  There  is  nothing 
dishonest  or  illegal  in  a  creditor  obtaining  payment  of  a  debt 
due  him  from  a  failing  debtor;  nor  in  his  attempting  by 
proper  and  ordinary  effort  to  secure  an  honest  debt,  though 
such  act  may  afterwards  become  a  constructive  fraud  by 
reason  of  the  filing  of  a  petition  and  adjudication  in  bank- 
ruptcy.'^*^ 

It  will  be  observed  that  this  subdivision  makes  preferences 
under  the  conditions  named  voidable  by  the  trustee.  Another 
provision  of  the  act^'^  provides  that  "a  lien  created  by  *  * 
any  proceeding  at  law  *  *  including  attachment  on  mesne 
process  or  a  judgment  by  confession,  which  was  begun  within 
four  nKmtlis  before  the  filing  of  a  petition  *  *  shall  be 
dissolved  by  the  adjudication  *  *  "  if  (1)  such  lien  was 
obtained  while  defendant  was  insolvent  and  will  work  a 
preference,  or  (2)  the  party  benefited  had  reasonable  cause 
to  believe  defendant  was  insolvent  and  in  contemplation  of 
bankruptc}^  or  (3)  such  lien  is  in  fraud  of  the  act;  and  still 
another  provision  provides  that  "all  *  *  liens  obtained 
through  legal  proceedings  *  *  within  four  months  prior 
to  the  filing  of  the  petition  *  *  shall  be  *  *  void:" 
and  yet  another,*^^  that  "all  conveyances,  transfers  *  * 
within  four  months  prior  to  the  filing  of  a  petition,  with  intent 
*     *     to  hinder,  delay  or  defraud  his  creditors     *     *     shall 

so  paid,   conveyed,  sold,   assigned,  Riorden,    14   N.    B.    R.    332,   F.    C. 

or  transferred  contrary  to  this  act,  11852;    In    re    Bousfield     &     Poole 

provided  the  person  receiving  such  Mfg.   Co.,   16   N.    B.   R.   489,   F.  C. 

payment  or   conveyance    had    rea-  1703;  Kohlsaat  v.  Hoguet,  5  N.  B. 

sonable    cause    to    believe    that    a  R.  159,  4  Ben.  565,  F.  C.  7919;    In 

fraud  on  this  act  was  intended,  or  re  Lewis,  2  N.  B.  R.  145;    Sharpe 

that  the  debtor  was  insolvent,  and  v.  Warehouse  Co.,  19  N.  B.  R.  378; 

such  creditor  shall  not  be  allowed  Waring  v.  Buchanan,   19  N.  B.  R. 

to  prove  his  debt  in  bankruptcy."  502,    F.     C.     17176;     Sedgwick    v. 

"  In  re  Broich,  15  N.   B.  R.  11,  Place,  5  N.  B.  R.  168,  5  Ben.  184, 

7  Biss.  303,  F.  C.  1921.  F.  C.  12620;  In  re  Tonkin,  4  N.  B. 

78  In  re  Jacobs,  1  N.  B.  N.  183,  R.    13,  F.  C.   14094;    In   re  Rosen- 

1  A.  B.  R.  518;   In  re  Baker,  2  N.  field,  1  N.  B.  R.  161,  F.  C.  12058. 

B.  N.  R.  195;  Whithed  v.  Pillsbury,  79  Sec.  67c,  act  of  1898. 

13  N.  B.  R.  241,  F.  C.  17572;  In  re  so  See.  67f  and  e,  act  of  1898. 


600  THE   NATIONAL   BANKRUPTCY   LAW.  ClI.  00 

be  void."  Thus  a  preference  given  by  a  bankrupt  within  four 
months  of  the  filing  of  a  petition  is  voidable  by  the  trustee 
if  the  party  benefited  had  reasonable  cause  to  believe  a  pref- 
erence was  intended.^i  But  a  preference  is  the  procuring  or 
suffering  a  judgment  the  enforcement  of  which  enables  a 
creditor  to  get  a  greater  percentage  of  his  debt  than  any 
other  creditor  of  like  class,**^  which  if  the  proceeding  was 
begun  within  the  four  months  would  by  the  provision  above^'^ 
be  rendered  void  by  the  adjudication  and  by  the  other  pro- 
vision^-* the  same  effect  is  produced  by  the  adjudication  with- 
out regard  to  the  time  the  proceeding  was  commenced.  So, 
too,  if  the  preference  is  by  "transfer  of  property"  it  would, 
in  many  cases,  come  within  the  provision^-''  avoiding  transfers 
which  hinder,  delay  or  defraud  creditors. 

As  far  as  possible,  however,  the  act  should  be  construed  so 
as  to  give  effect  to  every  part  of  it,  and  this  to  some  extent 
may  be  accomplished  by  limiting  section  60b  to  preferential 
judgments  and  transfers  including  payments  of  money,  where 
the  party  benefited  had  reasonable  cause  to  believe  that  a 
preference  was  thereby  intended;  section  67e  to  conveyances, 
transfers,  assignments  or  incumbrances  of  property  other  than 
money  which  were  not  made  in  good  faith  and  supported  by 
a  present  consideration ;  section  67c  to  liens  obtained  through 
legal  proceedings  begun  within  four  months  of  the  filing  of 
the  petition ;  and  section  67f  to  liens  acquired  within  four 
months  of  the  filing  of  the  petition  through  legal  proceedings 
without  regard  to  when  such  proceedings  were  commenced. ^^ 
The  provisions  overlap,  but  this  may  have  been  done  for 
greater  certainty;  and  since  these  inconsistencies  cannot  be 
reconciled,  under  the  rule  of  construction  that  the  last  pro 
vision  is  to  be  preferred,  the  facts  of  each  case  should  be  tried 
by  each  of  the  provisions  set  forth,  commencing  at  the  last, 
which  is  also  the  broadest  \^^  or  the  conflict  between  the 
provisions  may  be  due  to  their  being  taken  from  different 
proposed  bills  and  not  having  been  examined  as  a  whole. 

§963.     Reasonable  cause  to  believe.— A  preference,  as  here 

SI  Sec.  60b,  act  of  1898.  se  Blakey  v.  Bk..  1  N.  B.  N.  411. 

82  Sec.  60a,  act  of  1898.  95  F.  R.  267,  2  A.  B.  R.  459. 

83  Sec.  67c,  act  of  1898.  -t  in  re  Richards.  2  N.  B.  N.  38. 
»*  Sec.  67f,  act  of  1898.  96  F.  R.  935,  3  A.  B.  R.  145. 

^3  Sec.  67e.  act  of  1898. 


Ch.  go 


PREFERENCES    VOIDABLE. 


601 


inbefore  described,  given  within  four  montlis  before  the  filing 
of  a  petition,  or  after  the  filing  of  the  petition  and  before  the 
adjudication,  is  voidable  if  the  person  receiving  it,  or  to  be 
benefited  thereby,  or  his  agent  acting  therein,  had  reasonable 
cause  to  believe  a  preference  was  intended.'^^'*  The  creditor  is 
not  charged  with  knowledge  of  his  debtor's  financial  condition 
from  the  mere  non-payment  of  his  debt,  or  from  circumstances 
which  give  rise'  to  mere  suspicion  in  his  mind  of  possible 
insolvency;  nor  is  it  essential  that  the  creditor  should  have 
actual  knowledge  of,  or  belief  in,  his  debtor's  insolvency,  but 
that  he  should  have  reasonable  cause  to  believe  his  debtor  to 
be  insolvent.  He  has  reasonable  cause  so  to  believe  if  facts 
and  circumstances  with  respect  to  the  debtor's  financial  con- 
dition are  brought  home  to  Fiim,  such  as  would  put  an  ordi- 
narily prudent  man  upon  inquiry,  for  he  is  charged  with 
knowledge  of  the  facts  which  such  inquiry  should  reasonably 
be  expected  to  disclose;  or  if  he  has  knowledge  of  facts  and 
circumstances  which  would  cause  a  reasonably  prudent  man 
so  to  believe.'^^     While  constructive  notice  is  sufficient  ground 


S8  Levor  v.  Seiter  et  al.,  8  A.  B. 
R.  459;  In  re  Ratliff.  107  F.  R.  80, 
5  A.  B.  R.   713. 

s!'  In  re  Bggert,  2  N.  B.  N.  R. 
185.  s.  c.  2  N.  B.  N.  R.  390,  98  F. 
R.  843,  aff'd  102  F.  R.  735,  4  A.  B. 
R.  449;  In  re  Jacobs,  1  N.  B.  N. 
183,  1  A.  B.  R.  518;  Crittenden  v. 
Barton,  5  A.  B.  R.  775;  Grant  v. 
Bank.  97  U.  S.  80,  81;  Barbour  v. 
Priest,  103  U.  S.  293,  296;  Stucky 
V.  Bk.,  108  U.  S.  74;  Toof  v.  Mar- 
tin, 13  Wall.  40,  6  N.  B.  R.  49; 
Buchanan  v.  Smith,  16  Wall.  277, 
7  N.  B.  R.  513;  Wager  v.  Hall, 
16  Wall.  584,  600;  s.  c.  5  N.  B.  R. 
131,  3  Biss.  28,  F.  C.  5951;  Dutcher 
V.  Wright,  94  U.  S.  553,  557.  16 
N.  B.  R.  331;  Bank  v.  Cook.  95 
U.  S.  343,  346,  16  N.  B.  R.  391;  In 
re  Ft.  Wayne  Elec.  Corp.,  2  N.  B. 
N.  R.  434.  99  F.  R.  400,  3  A.  B.  R. 
634;  Nat.  Exch.  Bk.  v.  Pepperdine. 
2  N.  B.  N.  R.  675;  In  re  Rudnick. 
2  N.  B.  N.  R.  769;  In  re  Blair.  2 
N.   B.  N.   R.   890,  102  F.  R.  987,  4 


A.  B.  R.  220;  Taft  v.  4th  Nat.  Bk., 
2  N.  B.  N.  R.  1145;  Bk.  v.  Hunt,  4 
N.  B.  R.  198;  Lloyd  v.  Strobridge, 
16  N.  B.  R.  197,  F.  C.  8435;  In  re 
Hauck,  17  N.  B.  R.  158,  F.  C.  6219; 
In  re  McDonough,  3  N.  B.  R.  53, 
F.  C.  8775;  Burfee  v.  Bk.,  9  N.  B. 
R.  314;  Armstrong  v.  Rickey  Bros., 
2  N.  B.  R.  150,  F.  C.  546;  Boothe 
V.  Brooks.  12  N.  B.  R.  398,  F.  C. 
1650;  Singer  v.  Sloan,  12  N.  B.  R. 
208.  3  Dill.  110.  F.  C.  12898;  Lou- 
don V.  Bk.,  15  N.  B.  R.  476,  2 
Hughes,  420,  F.  C.  8525;  Scammon 
V.  Cole,  5  N.  B.  R.  257,  3  ClilT. 
472,  F.  C.  12432;  Webb  v.  Sachs, 
15  N.  B.  R.  168.  F.  C.  17325;  Rice 
V.  Melendy.  41  Iowa.  399;  Graham 
V.  Stark.  3  B.  R.  357.  3  Ben.  250; 
Otis  V.  Hadley.  112  Mass.  100;  Al- 
derdice  v.  Bk..  11  N.  B.  R.  398,  1 
Hughes,  47,  F.  C.  154;  In  re 
Wright,  2  B.  R.  490;  Hill  v.  Simp- 
son, 7  Ves.  170;  Brooke  v.  Mc- 
Craken.  10  N.  B.  R.  461.  F.  C.  1932; 
Grow  V.  Ballard,  2  N.  B.  R.  69,  F. 


602  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  60 

for  such  beliof,  yet  the  circumstances  upon  which  such  notice 
is  predicated  must  be  of  a  character  to  induce  belief  as  dis- 
tinguished from  mere  suspicion,""  What  constitutes  "reason- 
able cause  to  believe"  is  a  question  of  fact,  and  each  case 
depends  upon  its  own  peculiar  circumstances,  and  no  rigid 
rule  can  be  established  applicable  to  every  case.^^  In  an 
action  to  recover  a  preference  the  declaration  must  allege 
that  there  was  reasonable  cause  to  believe  that  a  preference 
was  intended.-^2 

§  964.  Knowledge  of  agent  or  attorney.— The  act  expressly 
provides  that  it  is  sufficient  if  the  agent,  which  would  include 
the  attorney,  acting  in  the  transaction,  has  reasonable  cause 
to  believe.  This  is  merely  an  affirmance  of  the  general  rule 
that  the  principal  is  charged  with  the  knowledge  acquired,  or 
possessed,  by  his  agent  within  the  scope  of  his  employment  f^ 
but,  if  the  knowledge  of  the  agent  has  been  acquired  in  such 
a  way  as  to  make  it  improper  for  him  to  communicate  it  to 
his  principal,  as  if  acquired  in  confidence  as  the  attorney  of 
another,  the  reason  for  the  rule  ceases  and  it  does  not  apply .^* 
The'  same  rule  applies  to  a  corporation,  and  where  it  is  gov- 
erned by  a  board  of  managers  or  directors,  the  knowledge  of 
the  officer  will  be  imputed  to  the  corporation,^^  Where  a 
creditor  places  his  claim  in  the  hands  of  a  collection  agent 
who  forwards  it  to  a  firm  who,  knowing  of  the  debtor's  insol- 
vency,  induces  him   to   confess  judgment  for  the   debt,   and 

C.  5848;   Bucknam  v.  Goss,  13  N,  93  in   re   Dunavant,   1   N.   B.   N. 

B.  R.  337,  1  Hask.  630,  F,  C,  2097;  542,  3  A.  B.  R.  41,  96  F.  R.  542; 

Stranahan  v.  Gregory,  4  N.  B.  R.  Babbit  v.    Kelly,   9  A.   B.   R.    335; 

142,  F.  C.  13522;  In  re  RatlifE,  107  Rogers  v.  Palmer,  19  N.  B.  R.  471, 

F.   R.   80,   5   A.   B.   R.   713;    In   re  102  U.    S.  263;    Sage  v.  Wynkoop, 

Dundas,  111  F.  R.  500,  7  A.  B.  R.  16  N.  B.  R.  363,  F.  C.  12215;  Vogle 

129;    Brown  v.   Guichard,  7   A.   B.  v.   Lathrop,   4  N.  B.  R.   146,  F.  C. 

R.   515;    McNair  v.   Mclntyre,   113  16985;     Mayer     v.     Hermann.     10 

F.  R.  113,  7  A.  B.  R.  638;  Pirie  v.  Blatch.  256,  F.  C.  9344;  Graham  v. 

Trust  Co.,  182  U.  S.  446,  5  A.  B.  R.  Stark,  3  N.  B.  R.  93,  3  Ben.  520,  F. 

814.  C.  5676;  Wight  v.  Muxlow,  8  Ben. 

90Taft  V.   Bank,   2    N.   B.   N.  R.  52,  F.  C.  17629;  In  re  Graham,  110 

1145.  F.  R.  133,  6  A.  B.  R.  750. 

91  Crittenden  v.  Barton,  5  A.  B.  »*  In  re  Egbert,  1  A.  B.  R.  340; 
R.  775.  see  Crooks  v.  Bank,  5  A.  B.  R.  754. 

92  Peck  V.  Connell,  8  A,  B.  R.  95  Crooks  v.  Bank,  5  A.  B.  R. 
500;  Hicks  v.  Longhorst,  6  A.  B.  754;  In  re  Gillette,  104  F.  R.  769, 
R.  178.  5  A.  B.  R.  119. 


Ch.  60  PREFERENCES    VOIDABLE.  603 

collects  and  forwards  it  to  the  collection  agent,  the  amount 
would  be  recoverable  on  suit  of  the  trustee.^*^ 

§  965.  Transactions  out  of  the  usual  course.— Transactions 
not  in  the  usual  course  of  trade  or  of  the  accustomed  dealings 
between  the  parties  is  notice  of  probable  wrong,  and  the 
creditor  is  thereby  put  on  inquiry  and  is  chargeable  with  all 
such  inquiry  would  have  produced.  Such  a  transaction  is 
prima  facie  evidence  of  fraud/  and  the  presumption  must  be 
overcome  by  proof  of  proper  inquiry  into  the  seller's  pecuniary 
condition.2  In  determining  if  it  was  unusual,  regard  must 
be  had  to  the  character  of  the  business.^'  Thus  it  is  unusual 
for  a  chair  manufacturer  to  sell  legs  used  in  his  business;^  so 
is  a  sale  of  the  entire  stock  in  trade  ;^  or  a  sale  at  night, 
without  invoice,  for  cash;^  or  a  mortgage  of  the  entire  stock 
in  trade  for  a  pre-existing  debt  ;^  or  a  confession  of  judgment 
enabling  the  creditor  to  seize  the  stock  and  close  out  the 
business.^ 

The  knowledge  that  bankrupt  was  a  little  short  of  money 
and  desired  the  creditor  to  substitute  one  security  for  another, 
is  not  sufficient  to  show  the  creditor  had  reasonable  cause  to 
believe  the  debtor  insolvent  ;^^  nor  is  the  giving  of  a  mortgage, 
as  it  is  only  prima  facie  fraudulent  and  may  be  explained.^  i 
The  diligence  required  in  the  inquiry  is  proportioned  to  the 
suspiciousness  of  the  transaction.^  ^ 

§  966.  Fraudulent  preferences  voidable,  not  void.— Fraudu- 
lent preferences,  that  is,  any  transaction  which  constitutes  a 

»6  Hoover  v.   Wise,   14  N.  B.   R.  N.  B.  R.  124,  F.  C.  7593,  2  Biss.  383. 

264,  91  U.  S.  308;   see  In  re  Flick,  e  Davis  v.  Armstrong,  3  N.  B.  R. 

3  N.  B.  N.  R.  71.  7,  F.  C.  3624. 

1  In  re  Hunt,  2  N.  B.  R.  166,  F.  t  Rison    v.    Knapp,    4    N.    B.    R. 

C.  6881;   In  re  Krum,  7  Ben.  5,  F.  114,  1  Dill.  187,  F.  C.  11861;   Gra- 

C.   7943.  ham  v.  Stark,  3  N.  B.  R.  93,  3  Ben. 

2Walbrun  v.  Babbitt,  9  N.  B.  R.  520,  F.  C.  5676;    Hurley  v.   Smith, 

1,  16  Wall.  577;    Brooks  v.  Davis,  1  Hask.  308,  F.  C.  6920. 

F.  C.  1950.  8  Webb  v.  Sachs,  15  N.  B.  R.  168, 

3  Judson  V.  Kelty,  6  N.  B.  R.  165,  4  Sawy.  158,  F.  C.  17325. 

5  Ben.  348,  F.  C.  7567.  lo  Collins  v.  Bell,  3  N.  B.  R.  146. 

■»  Schrenkeisen  v.  Miller,  9  Ben.  F.  C.  3010. 

55,  F.  C.  12480.  n  Steadman  v.  Bank  of  Monroe, 

r.  Main  v.  Glen,  7  Biss.  86,  F.  C.  117  F.  R.  237,  9  A.  B.  R.  4;  Moore 

8973;    North  v.  House,  6  N.  B.  R.  v.  Young,  4  Biss.  128,  F.  C.  9782. 

365,  F.  C.  10310;   In  re  Kahley,  4  12  Schulenberg    v.    Kabureck,    2 


604  THE   NATIONAL   BANKRUPTCY   LAW.  ClI.  60 

preference  as  hereinbefore  described,  given  or  received^ ^ 
within  four  months  before  the  filing  of  a  petition,  or  after  the 
filing  of  the  petition  and  before  the  adjudication,  if  the 
creditor  had  reasonable  cause  to  believe  a  preference  was 
intended,  are  voidable,  not  void-^**  This  makes  the  English 
doctrine  that  a  suit  in  the  nature  of  trover  cannot  be  brought 
by  the  trustee  unless  he  alleges  and  proves  a  demand  for 
restoration  and  a  refusal  to  restore  the  property  transferred 
applicable  here.i^  While  such  a  transfer  is  fraudulent  and 
voidable,  it  is  not  so  because  morally  wrong,  but  because  the 
act  says  it  is.^^ 

A  voidable  preference  is  not  a  mere  preference  in  fact,  but 
the  creditor  must  have  reasonable  cause  to  believe  that  he 
was  obtaining  the  statutory  preference,  that  is,  a  preferenc»? 
in  law,  the  gist  of  which  is  the  debtor's  insolvency.  If  the 
creditor  had  reason  to  believe  when  property  was  transferred 
to  him  within  four  months  of  the  filing  of  the  petition  that 
a  preference  was  intended,  it  is  immaterial  whether  it  was 
taken  as  payment  or  as  security,  in  either  case  it  is  voidable ; 
but,  in  the  absence  of  such  knowledge  it  is  not,^^  and  the  same 
is  true  of  a  payment  in  money. ^^ 

See  also  Fraudulent  Transfers,  post  §  1104. 

§967.  Actions  affecting  preferences.— The  distinction  be- 
tween a  creditor  who  is  innocently  preferred  and  one  who 
received  his  preference  with  reasonable  cause  to  believe  a 
preference  was  intended,  is  drawn  in  this  section.^^  In  the 
latter  case-"  if  the  preference  was  given  within  the  four 
months'  period,  the  creditor  has  no  option  as  to  retaining  or 
surrendering  it.  but  it  is  discretionary  with  the  trustee  whether 

Dill.   132,   F.  C.    12487;    Wilson   v.  is  In   re   Phelps,   2  N.   B.   N.   R. 

Stoddart,  4  N.  B.  R.  76,  F.  C.  17838.  484,  3  A.  B.  R.  396. 

13  In  re  Conhaim,  2  N.  B.  N.  R.  le  in  re  Cobb,  1  N.  B.  N.  557,  3 
148,  3  A.  B.   R.   249,   97  F.  R.  923.  A.  B.  R.  129,  96  F.  R.  821. 

14  In  re  Ft.  Wayne  Elec.  Corp.,  i-  In  re  Eggert,  2  N.  B.  N.  R. 
2  N.  B.  N.  R.  434,  99  F.  R.   400,  3  185,   390.   98   F.   R.   834,   102  F.   R. 

A.  B.  R.  634;    In  re  McLam,  1  N.  735;  In  re  Baker,  2  N.  B.  N.  R.  195. 

B.  N.  402,  3  A.  B.  R.  245;  Stern  v.  is  in  re  Wise.  2  N.  B.  N.  R.  151; 
Louisville  Trust  Co.,  Newborg  v.  Blakey  v.  Bk..  1  N.  B.  N.  411,  2  A. 
Same,    112  F.   R.   501,   7  A.   B.    R.  B.  R.  460,  95  F.  R.  267. 

305.  '9  Sec.  60a  and  b,  act  of  1898. 

-'"  Sec.  60b.  act  of  1898. 


Ch.  go  preferences  voidable.  605 

he  will  avoid  it,^^  and  he  is  the  proper  person  to  bring  suit.-- 
The  nature  and  situation  of  the  property  which  is  the  subject 
of  the  preference  will  determine  the  course  to  be  pursued.  If 
the  bankrupt  has  procured  or  suffered  a  judgment  to  be 
entered  and  nothing  more  than  the  entry,  further  proceedings 
may  be  stayed;-^  if  an  execution  has  been  issued  and  levied, 
the  same  course  may  be  pursued.  If  the  money  has  been 
collected  and  is  still  in  the  sherift"s  hands,  the  trustee  may 
apply  to  the  court  in  which  the  execution  issued  for  an  order 
directing  the  sheriff  to  turn  it  over  to  him,  and  if  he  refuses,  sue 
him  for  money  had  and  received,  or  proceed  against  him  by 
attachment  for  contempt. ^^  If  the  sheriff  has  turned  the 
money  over  to  the  execution  creditor,  or  the  preference  is  by 
transfer  to  the  creditor,  or  for  his  benefit,  and  the  property 
is  in  the  hands  of  a  third  person,  claiming  adversely,  the 
trustee  may  bring  suit  either  in  a  state  court  or  the  court  of 
bankruptcy.^"''  In  ease  of  money  collected  on  execution  and 
turned  over  to  the  execution  creditor,  recovery  can  only  be 
had  if  the  creditor  had  reasonable  cause  to  believe  a  preference 
was  intended.-^ 

The  fact  that  a  trustee  failed  to  contest  the  allowance  of  a 
claim  because  of  a  preferential  payment,  would  not  bar  him 
from  subsequently  suing  to  recover  the  proceeds  of  such 
preferential  transfer  of  property.^^  He  may  also  bring  such 
suits  without  an  order  of  the  bankruptcy  court  to  justify  him, 
as  such  action  is  incident  to  his  duty  and  title  to  the  bankrupt's 
property.2^ 

An  action  to  recover  a  voidable  preference  may  now  be 
brought  in  the  court  of  bankruptcy  or  a  state  court. 

§968.  'c.  New  credit  after  preference.— If  a  creditor  has 
'been  preferred,  and  afterwards  in  good  faith  gives  the  debtor 
'further  credit  without  security  of  any  kind  for  property 
'which  becomes  a  part  of  the  debtor's  estates,  the  amount  of 
'such  new  credit  remaining  unpaid  at  the  time  of  the  adjudi- 
'  cation  in  bankruptcy  may  be  set  oft'  against  the  amount  which 
'would  otherwise  be  recoverable  from  him.' 

21  In    re  Castle,    2   N.    B.   N.   R.  25  See.  23b,  act  of  1898. 

985,  4  A.  B.  R.  357;   In  re  Nathan,  2c  in  re  Blair,  102  F.  R.  987,  2  N. 

2  N.  B.  N.  R.  613.  B.  N.  R.  890,  4  A.  B.  R.  220. 

-•2  Sec.  67,  act  of  1898.  27  Buder  v.    Columbia   Distilling 

2".  Sec.  11,  act  of  1898.  Co.,  9  A.  B.  R.  331. 

24  Sec.  70,  act  of  1898.  28  Chisni  v.  Bank.  5  A.  B.  R.  56. 


606  THE    NATIONAL   BANKRUPTCY    L-AW.  Ch.  60 

§  969.  Set-off. — The  recovery  of  what  has  been  given  as  a 
preference  is  not  for  the  bankrupt's  benefit  but  for  that  of 
his  creditors,  and  this  provision  treats  it  as  a  debt  due  as 
opposed  to  the  debt  owing  on  account  of  the  new  credit  and 
the  rule  as  to  mutual  debts  is  applied.  The  receipt  by  a 
creditor  of  payments  upon  an  account  current  in  the  usual 
course  of  business,  followed  by  new  credits,  does  not  constitute 
a  preference  under  the  law.^^ 

This  subdivision  does  not  restrict  the  creditors  to  whom  it 
applies  to  such  as  received  preferences  with  reasonable  cause 
to  believe  a  preference  was  intended  and  the  use  of  the  term 
"good  faith"  seems  to  imply  that  an  innocent  preference  was 
in  the  legislators'  minds  as  much  as  the  opposite.^^  In  spite 
of  the  use  of  the  word  "recoverable,"  this  subdivision  is  not 
limited  in  its  application  to  cases  where  the  trustee  sues  to 
recover  the  preferences.^^  Under  the  act  the  surrender  cannot 
be  said  to  be  voluntary  since  it  is  required  if  the  creditor 
would  participate  in  the  dividends;^-  though  the  contrary  is 
held  by  the  greater  number  of  cases.^^  A  creditor  may  under 
this  provision  set  off  his  new  credits  although  he  did  not  have 
reasonable  cause  to  believe  a  preference  intended  and  though 
the  property  is  not  recoverable  by  the  trustee,^^  but  any  excess 
of  payments  over  the  new  credits  must  be  surrendered  before 
proof  of  the  claim  can  be  allowed.^^ 

29  Jacquith  v.  Alden,  188  U.  S.  — .  ham  Steers  Lumber  Co.,  110  F.  R. 

30  In  re  Thompson,  112  F.  R.  651,  738,  6  A.  B.  R.  315,  112  F.  R.  406, 
7  A.  B.  R.  214.  7  A.  B.  R.  332. 

31  Sec.  60b,  act  of  1898;  In  re  32  in  re  Beswick,  2  N.  B.  N.  R. 
Ryan,  105  F.  R.  760,  2  N.  B.  N.  R.  808;  In  re  Hoffman,  2  N.  B.  N.  R. 
693;  Peterson  v.  Nash  Bros.,  112  554;  McKee  v.  Lee,  3  N.  B.  N.  R. 
F.  R.  311,  7  A.  B.  R.  181;  McKey  262,  105  F.  R.  923,  5  A.  B.  R.  267. 
V.  Lee,  105  F.  R.  923,  5  A.  B.  R.  33  in  re  Christensen,  101  F.  R. 
267;    In  re  Ryan,  105  F.  R.  760,  5  802,  4  A.B.  R.  202;  aff'g  2  N.  B.  N. 

A.  B.  R.  396;  In  re  Both  well,  8  A.     R.   695;    In  re  Thompson,  2  N.  B. 

B.  R.  213,  and  cases  cited;    Kahn     N.   R.  1016;    and   see  In  re  Ryan, 
V.  Cone  Export  &  Commission  Co.,     supra. 

115  F.  R.  290;   In  re  Seckler,  106  34  c.  S.  Morey  Mercantile  Co.  v. 

F.  R.  484,   5  A.  B.   R.   579;    In  re  Scheffer,  114  F.  R.  447,  7  A.  B.  R. 

Southern  Overalls  Mfg.  Co.,  Ill  F.  670. 

R.  518,  6  A.  B.  R.  633;   In  re  Sol-  3.^;  Qans    v.    Ellison,    8   A.    B.    R. 

dosky,  111  F.  R.   511,   7  A.  B.  R.  153,  114  F.  R.  734;   In  re  Thomp- 

123;    Contra,   In  re  Keller,  109  F.  son's  Sons,  7  A.  B.  R.  214. 

R.  118,  6  A,  B.  R.  334;  In  re  Abra- 


Ch.  60  PREFERENCES    VOIDABLE.  607 

A  creditor  seeking  to  obtain  the  set-off  of  a  credit  must 
plead  the  essential  facts  entitling  him  thereto  in  the  same 
manner  as  if  he  sought  to  maintain  a  separate  action  on  sucn 
elaim.2^  If  a  debtor  give  in  payment  a  check  which  becomes 
protested,  and  afterwards  more  goods  are  ordered  and  a  pay- 
ment made  oil  account,  such  payment  cannot  be  applied  to 
the  check  so  as  to  make  the  date  of  the  check  the  date  of  the 
preference  and  entitle  the  creditor  to  set  off  the  new  credit.^'^ 
Where  an  account  is  paid  in  full  more  than  four  months  prior 
to  bankruptcy,  although  the  debtor  is  insolvent,  and  later 
another  debt  is  contracted,  the  payment  cannot  be  treated  as 
a  set-off  against  the  debt  sought  to  be  proved.^^ 

§970.  'd.  Court  determines  reasonableness  of  attorney's 
'fee. — If  a  debtor  shall,  directly  or  indirectly,  in  contemplation 
'of  the  filing  of  a  petition  by  or  against  him,  pay  money  or 
'  transfer  property  to  an  attorney  and  counselor  at  law,  solicitor 
'in  equity,  or  proctor  in  admiralty  for  services  to  be  rendered, 
'the  transaction  shall  be  re-examined  by  the  court  on  petition 
'of  the  trustee  or  any  creditor  and  shall  only  be  held  valid  to 
'the  extent  of  a  reasonable  amount  to  be  determined  by  the 
'court,  and  the  excess  may  be  recovered  by  the  trustee  for 
'the  benefit  of  the  estate.' 

§  971.  Attorney's  fee.— The  services  of  an  attorney  are 
necessary  in  a  case  of  involuntary  bankruptcy  to  enable  a 
debtor  to  prepare  the  necessary  papers,  procure  the  adjudica- 
tion and  reference,  bring  the  debtor  before  the  referee,  conduct 
examinations  and  otherwise  perform  the  duties  imposed 
upon  the  bankrupt  in  involuntary  proceedings  as  well  as  to 
oppose  the  latter  when  improperly  brought.  This  provision 
recognizes  this  fact  and  approves  the  payment  by  bankrupt  to 
such  attorney  of  reasonable  compensation.  The  reasonableness 
of  it  may  be  inquired  of  by  the  court  upon  the  petition  of  the 
trustee  or  any  creditor.  This  proceeding  is  administrative  in 
character,  in  which  the  jurisdiction  of  the  court  is  not  depen- 
dent on  the  service  of  process  but  is  expressly  given  by  stat- 
ute and  a  notice  of  hearing  therein  given  by  mail  a  reasonable 
time  before  the  hearing  is  sufficient.-'^''    The  word  "counselor" 

3G  In  re  Oliver,  109  F.  R.  784,  6  ss  in  re  Abraham  Steers  Lumber 

A.  B.  R.  626.  Co.,  112  F.  R.  406,   7  A.  B.  R.  332. 

37  In  re  Bartey,  110  F.  R.  928,  7  89  In  re  Lewln,  103  F.  R.  850,  4 

A.  B.  R.  26.  A.  B.  R.  632. 


G08  THE   NATIONAL   BANKRUPTCY   LAW.  ClI.  60 

as  here  used  is  practically  synonymous  with  the  word  ' '  attor- 
ney," but  is  used  doubtless  to  indicate  that  the  services  in- 
tended to  be  provided  for  are  not  limited  to  those  of  an 
attorney  as  such.  The  allowances  for  counsel's  services  should 
be  confined  to  the  bankruptcy  proceeding  itself,  excluding 
previous  consultations  or  advice,  as  also  all  unnecessary 
attendance  as  counsel  in  the  course  of  the  proceedings  and 
excluding  especially  all  claims  for  services  in  aiding  the  bank- 
rupt to  conceal,  justify  or  extenuate  questionable  acts  or 
transactions  ;*o  or  to  resist  the  distribution  of  his  property 
under  the  law.^^ 

Among  the  debts  given  priority  is  one  reasonable  attorney's 
fee,  for  the  professional  services  actually  rendered,  irrespec- 
tive of  the  number  of  attorneys  employed,  to  the  petitioning 
creditors  in  involuntary  cases,  to  the  bankrupt  in  involuntary 
cases  while  performing  the  duties  prescribed,  and  to  the  bank- 
rupt in  voluntary  cases,  as  the  court  may  allow.'*-  This  limits 
the  fee  to  services  actually  rendered,  but  not  as  to  time  of 
payment.  The  two  provisions  are  to  be  construed  together 
and  their  purpose  is  the  same,  that  the  attorney  who  serves  a 
l)ankrupt  client  shall,  even  after  the  latter 's  estate  has  passed 
from  his  hands,  be  paid.  Though  contemplating  bankruptcy, 
in  fact,  as  a  preparation  therefor,  a  debtor  may  pay  his  attor- 
ney a  reasonable  fee  for  the  work  involved,  but  it  must  be 
confined  to  necessary  work  connected  therewith.-*^  If  such 
fee  is  not  paid  in  advance  the  attorney  can  ask  for  it  out  of 
the  estate,  or  the  bankrupt  may  himself  pay  it,  as  by  an  order 
for  money  due  as  wages  though  not  yet  payable  ;*^  or  by  the 
transfer  of  property,  but  any  excess  over  what  the  court  deems 
reasonable  must  be  returned  to  the  trustee. ^^ 

An  agreement  by  an  insolvent,  made  after  the  filing  of  a 
petition  in  involuntary  bankruptcy  against  him  and  in  con- 
templation of  the  filing  of  a  voluntary  petition,  that  his  attor- 
ney should  take  certain  goods  in  payment  for  his  services, 
where  there  was  no  actual  delivery  or  change  of  possession 

40  In  re  Kross,  1  N.  B.  N.  566,  3  43  in  re  Goodwin,  2  N.  B.  N.  R. 
A.  B.  R.  187,  96  P.  R.  816.  445. 

41  Goodrich  v.  Wilson,  14  N.  B.  44  in  re  Lewin,  103  F.  R.  852,  4 
R.  555.  A.  B.  R.  632. 

42  Sec.  64b  (3),  act  of  1898.  45  in   re  Tollett,    2  N.   B.  N.  R. 

1096,  1099. 


Ch.  60    REASONABLENESS  OF  ATTORNEY'S  FEE.       609 

until  after  the  adjudication  upon  the  voluntary  petition,  does 
not  constitute  a  transfer  of  the  property,  within  the  meaning 
of  this  section,  and  the  goods,  having  been  removed  after  such 
adjudication  and  while  they  were  in  custodia  legis,  must  be_ 
restored  to  the  trustee.*^  The  payment  of  attorney's  fees  for 
services  previously  rendered  and  to  be  rendered  does  not  con- 
stitute a  preference,  even  as  to  the  services  to  be  rendered, 
if  the  amount  is  reasonable  i^"^  but  a  mortgage  given  after  the 
commencement  of  proceedings,  to  secure  payment  for  the  ser- 
vices of  the  mortgagee  in  resisting  the  petition  may  be  sum- 
marily set  aside  and  a  bill  in  equity  is  not  necessary.^^ 

«  In  re  Corbett,  104  F.  R.  872,         *»  In   re  Sims,  16  N.  B.  R.  251, 
5  A.  B.  R.  224.  F.  C.  12888. 

*-  In  re  Sidle,  2  N.  B.  R.  77,  F.  C. 
12844. 


39 


CHAPTER  LXI. 

DEPOSITORIES    FOR   MONEY. 

§972.  (61a)  Court  to  designate  de-       973.    Deposits  and  disbursements, 
positories. 

§  972.  '  (Sec.  61a)  Court  to  designate  depositories.— Courts 
'of  bankruptcy  shall  designate,  by  order,  banking  institutions 
*as  depositories  for  the  money  of  bankrupt  estates,  as  con- 
S'enient  as  may  be  to  the  residences  of  trustees,  and  shall 
'require  bonds  to  the  United  States,  subject  to  their  approval, 
*to  be  given  by  such  banking  institutions,  and  may  from  time 
'to  time  as  occasion  may  require,  by  like  order  increase  the 
'number  of  depositories  or  the  amount  of  any  bond  or  change 
'such  depositories.'^ 

§  973.  Deposits  and  disbursements.— Trustees  are  required 
to  deposit  to  their  credit^  all  moneys  received  by  them  in  one 
of  the  designated  depositories  and  disburse  the  same  only  by 
check  or  draft  on  the  same.^  Under  the  Act  of  1867,  the  banks 
were  not  required  to  keep  a  separate  account  with  each  bank- 
rupt estate,  in  which  the  deposits  were  made  in  the  name  of 
the  United  States  District  Court,  and  the  same  rule  would 
doubtless  apply  under  the  present  law,**  but  this  would  not  be 
true  if  deposited  to  the  credit  of  the  trustee.  No  moneys  shall 
be  drawn  from  the  depository  unless  by  check  or  warrant, 
signed  by  the  clerk  of  the  court  or  by  a  trustee,  and  counter- 
signed by  the  judge  of  the  court,  or  by  a  referee  designated 
for  the  purpose,  or  by  the  clerk  or  his  assistant,  under  an  order 
from  the  judge.  The  name  of  any  referee  or  judge  authorized 
to  countersign  such  checks  must  be  furnished  to  the  deposi- 
tory.5 

1  Analogous  provision  of  act  of  2  in  re  Carr,  117  F.  R.  572,  8  A. 

1867.     "Sec.  17.     .     .     .     That  the  B.  R.  635. 

assignee  shall,  as  soon  as  may  be  3  sec.  47a,  act  of  1898. 

after  receiving  any  money  belong-  ^  state  Nat.  Bk.  v.  Dodge,  124  U. 

ing  to  the  estate,  deposit  the  same  S.  333. 

in  some  bank  in  his  name  as  as-  s  g.  O.  XXIX;   In  re  Cobb,  112 

signee,   or  otherwise  keep   it   dis-  F.  R.  655,  7  A.  B.  R.  202. 
tinct    and    apart    from    all    other 
money  in  his  possession." 

610 


Oh.  61  DEPOSITORIES    FOR    MONEY.  611 

A  bank  in  which  funds  are  deposited  to  the  credit  of  a  trus- 
tee in  bankruptcy  has  no  power  to  pay  out  any  of  said  funds 
except  upon  proper  warrant  under  the  authority  of  the  court 
of  bankruptcy.  A  state  court  has  no  authority  to  order  such 
a  bank  to  pay  out  of  such  funds  a  judgment  rendered  against 
the  trustee.^ 

«  Havens  v.  Bank,  13  N.  B.  R.  95. 


CHAPTER   LXII. 

EXPENSES    OF    ADMINISTERING    ESTATES. 

§974.   (62a)    Report   and    approval       975.  Compensation  and  expenses, 
of  expenses.  976.  Accounts. 

§  974.  '  (Sec.  62a)  Report  and  approval  of  expenses,— The 
'actual  and  necessary  expenses  incurred  by  officers  in  the 
'administration  of  estates  shall,  except  where  other  provisions 
'  are  made  for  their  payment,  be  reported  in  detail,  under  oath, 
'and  examined  and  approved  or  disapproved  by  the  court.  If 
'approved,  they  shall  be  paid  or  allowed  out  of  the  estates  in 
'  which  they  were  incurred. '  ^ 

§  975.  Compensation  and  expenses.— The  compensation  of 
referees,-  trustees,^  clerks,  marshals,*  and  stenographers'^  is 
fixed  by  law  and  is  in  full  for  their  services,  but  does  not 
include  certain  expenses  necessarily  incurred  in  the  perform- 
ance of  their  duties  and  allowed  upon  the  settlement  of  their 
accounts.  Fees  not  required  to  be  paid  before  filing  the  peti- 
tion may  be  ordered  by  the  judge  at  any  time  paid  out  of  the 
estate,  or,  after  notice  and  proof  that  bankrupt  can  pay  them, 
require  him  to  do  so.^  Before  incurring  any  expense  in  pub- 
lishing or  mailing  notices,  or  in  traveling,  or  in  procuring 
witnesses,  or  perpetuating  testimony,  the  clerk,  marshal  or 
referee  may  require  from  the  person  desiring  the  service  in- 
demnity for  such  expense,  and  money  advanced  for  such 
purpose  must  be  repaid  as  part  of  the  costs  of  administering 

1  Analogous  provision  of  act  of  frame  general  rules  and  orders  in 
1867.  "Sec.  28.  .  .  .  If  at  any  accordance  with  the  provisions  of 
time,  there  shall  not  be  in  his  (as-  section  ten,  from  prescribing  a  tar- 
signee's)  hands  a  sufficient  amount  iff  of  fees  for  all  other  services  of 
of  money  to  defray  the  necessary  the  officers  of  courts  of  bankrupt- 
expenses  required  for  the  further  cy,  or  from  reducing  the  fees  pre- 
execution  of  his  trust,  he  shall  not  scribed  in  the  section  in  classes  of 
be  obliged  to  proceed  therein  until  cases  to  be  named  in  their  rules 
the  necessary  funds  are  advanced  and  orders." 
or  satisfactorily  secured  to  him.  2  Sec.  40,  act  of  1898. 
...  3  Sec.  48,  act  of  1898. 

"Sec.  47.     .     .     .     The  enumera-  *  Sec.  52,  act  of  1898. 

tion    of    the   foregoing   fees    shall  5  See.  38,  act  of  1898. 

not  prevent  the  judges,  who  shall  ^G.  0.  XXXV. 

612 


Oh.  G2  expenses  of  administration.  613 

the  estate."  In  involuntary  cases,  where  the  debtor  resists  the 
adjudication,  and  the  court,  after  hearing,  adjudges  the  debtor 
a  bankrupt,  the  petitioning  creditor  shall  recover,  and  be  paid 
out  of  the  estate,  similar  costs  as  are  allowed  to  a  party  recov- 
ering in  a  suit  in  equity ;  and,  if  the  petition  be  dismissed,  the 
debtor  will  recover  like  costs  against  the  petitioner.^  The  cost 
of  preserving  the  estate  subsequent  to  filing  the  petition,  the 
cost  of  administration,  including  witness  fees  and  mileage 
according  to  the  laws  of  the  United  States,  and  one  reasonable 
attorney's  fee,  are  debts  entitled  to  priority  of  payment.*^ 

§  976.  Accounts.— The  marshal  is  required  to  make  a  veri- 
fied return  ;i°  as  is  also  the  referee.^  ^  This  section  clearly 
makes  it  the  duty  of  the  officers  to  render  itemized  accounts 
under  oath  and  that  the  court  shall  examine  and  approve  or 
disapprove  the  same ;  in  other  words,  that,  upon  an  accounting 
by  a  trustee,  while  creditors  have  a  right  to  examine  and  object 
to  such  account  and  be  heard  thereon,  it  is  the  duty  of  the 
referee  to  examine  the  items  in  detail.^  2  Exceptions  should 
be  promptly  filed  if  a  receiver's  account  is  objected  to  and 
after  the  questions  thus  raised  are  determined  by  the  referee, 
any  party  in  interest  can  bring  the  matter  to  the  attention  of 
the  court;  but,  after  an  account  has  been  approved  by  the 
referee  without  objection,  and  a  further  period  of  acquiescence 
has  elapsed,  good  reasons  should  appear  for  permitting  objec- 
tions to  be  made.^^ 

7  G.  0.  IX.  re  Carr,  116  F.  R.  556,  8  A.  B.  R. 

f<  G.  O.  XXXIV.  635. 

9  Sec.  64b,  act  of  1898.  is  In    re    Reliance    Storage    and 

10  G.  O.  XIX.  Warehouse  Co.,  100  F.  R.  619.  4  A. 

11  G.  O.  XXVI.  B.   R.   49;    In   re   Tebo,   101  F.  R. 

12  In  re  Baginsky,  Michel  &  Co.,     419,  4  A.  B.  R.  235. 
1  N.  B.  N.  360,  2  A.  B.  R.  243;  In 


CHAPTER   LXIII. 

DEBTS  WHICH  MAY  BE  PROVED. 


i977. 

(63a)    Provable  debts. 

993. 

Fines. 

978. 

Test  of  provability. 

994. 

After     petition — 

979. 

What   debts    are    provable — 

merger. 

alimony. 

995. 

Limitations,      claims 

980. 

Assignee  or  receiver. 

barred  by  statute  of. 

981. 

Attorney's  fee. 

996. 

Mortgagee. 

982. 

Bank. 

997. 

Open  account. 

983. 

Commercial  paper. 

998. 

Partnership. 

984. 

Contract  founded  on. 

999. 

Rent. 

985. 

Costs. 

1000. 

Secured  claims. 

986. 

Endorser. 

1001. 

Stocks  and  stockholders. 

987. 

Guarantor,  surety,  etc. 

1002. 

Debts    due    the    United 

988. 

Husband  and  wife. 

States  or  a  State. 

989. 

Insurance. 

1003. 

Fraud   or    preference   as   af- 

990. 

Interest. 

fecting. 

991. 

Joint  obligations. 

1004. 

b.  Liquidation  of  claims. 

992. 

Judgments  —  seduction 

— fraud,  etc. 

1005. 

Unliquidated  claims. 

§  977.  '  (Sec.  63a)  Provable  debts.— Debts  of  the  bankrupt 
'may  be  proved  and  allowed  against  his  estate  which  are: 

'  (1)  A  fixed  liability,  as  evidenced  by  a  judgment  or  an 
'instrument  in  writing,  absolutely  owing  at  the  time  of  the 
'  filing  of  the  petition  against  him,  whether  then  payable  or  not, 
'with  any  interest  thereon  which  would  have  been  recoverable 
'at  that  date  or  with  a  rebate  of  interest  upon  such  as  were 
'  not  then  payable  and  did  not  bear  interest ; 

'  (2)  Due  as  costs  taxable  against  an  involuntary  bankrupt 
'who  was  at  the  time  of  the  filing  of  the  petition  against  him 
'plaintiff  in  a  cause  of  action  which  would  pass  to  the  trustee 
'and  which  the  trustee  declines  to  prosecute  after  notice; 

'(3)  Founded  upon  a  claim  for  taxable  costs  incurred  in 
'  good  faith  by  a  creditor  before  the  filing  of  the  petition  in  an 
'action  to  recover  a  provable  debt; 

'  (4)  Founded  upon  an  open  account,  or  upon  a  contract 
'express  or  implied;   and 

*  (5)  Founded  upon  provable  debts  reduced  to  judgments 
'after  the  filing  of  the  petition  and  before  the  consideration  of 
'the  bankrupt's  application  for  a  discharge,  less  costs  incurred 

614 


Ch.  63 


PROVABLE  DEBTS— ALIMONY. 


615 


*and  interests  accrued  after  the  filing  of  the  petition  and  up 
*to  the  time  of  the  entry  of  such  judgments.'  ^ 

§  978.  Test  of  provability.— Provable  debts  under  the  pres- 
ent act  must  have  two  characteristics.  They  must  be  fixed, 
that  is  "determined,  settled,"  as  opposed  to  "undetermined, 
unsettled,  uncertain, ' '  and  they  must  be  absolutely  owing,  that 
is  "completely,  perfectly,  finally,  without  any  condition  or 
encumbrance,"-  as  opposed  to  depending  on  some  condition  or 
the  doing  of  some  act,  or  happening  of  some  event,  at  the  time 
the  petition  is  filed,^ 

§979.  What  debts  are  provable— Alimony.— The  Supreme 
Court  of  the  United  States  in  considering  the  question  of 
alimony  held  that  it  was  neither  released  by  a  discharge,  nor 
was  it  such  a  liability  as  was  provable  in  bankruptcy,  whether 
past  due  or  to  become  due.^     While  its  conclusions  are  sweep- 


1  Analogous  provision  of  act  of 
1867.  "Sec.  19.  .  .  .  That  all 
debts  due  and  payable  from  the 
bankrupt  at  the  time  of  the  ad- 
judication of  bankruptcy,  and  all 
debts  then  existing  but  not  pay- 
able until  a  future  day,  a  rebate  of 
interest  being  made  when  no  inter- 
est is  payable  by  the  terms  of  the 
contract,  may  be  proved  against 
the  estate  of  the  bankrupt.  All 
demands  against  the  bankrupt  for 
or  on  account  of  any  goods  or  chat- 
tels wrongfully  taken,  converted, 
or  withheld  by  him  may  be  proved 
and  allowed  as  debts  to  the  amount 
of  the  value  of  the  property  so 
taken  or  withheld,  with  interest. 
If  the  bankrupt  shall  be  bound  as 
drawer,  indorser,  surety,  bail,  or 
guarantor  upon  any  bill,  bond, 
note,  or  any  other  specialty  or  con- 
tract, or  for  any  debt  of  another 
person,  and  his  liability  shall  not 
have  become  absolute  until  after 
the  adjudication  of  bankruptcy, 
the  creditor  may  prove  the  same 
after  such  liability  shall  have  be- 
come fixed,  and  before  the  final 
dividend  shall  have  been  declared. 


In  all  cases  of  contingent  debts 
and  contingent  liabilities  contract- 
ed by  the  bankrupt,  and  not  herein 
otherwise  provided  for,  the  cred- 
itor may  make  claim  therefor,  and 
have  his  claim  allowed,  with  the 
right  to  share  in  the  dividends,  if 
the  contingency  shall  happen  be- 
fore the  order  for  the  final  divi- 
dend. .  .  .  Where  the  bankrupt 
is  liable  to  pay  rent  or  other  debt 
falling  due  at  fixed  and  stated 
periods,  the  creditor  may  prove 
for  a  proportionate  part  thereof  up 
to  the  time  of  the  bankruptcy,  as 
if  the  same  grew  due  from  day  to 
day,  and  not  at  such  fixed  and 
stated  periods." 

-  Bouvier's  Law  Die. 

3  In  re  Burka,  104  F.  R.  326,  5  A. 
B.  R.  12;  In  re  Chambers,  Calder  & 
Co.,  2  N.  B.  N.  R.  864;  In  re  Arn- 
stein,  101  F.  R.  706,  4  A.  B.  R.  246, 
aff'g  2  N.  B.  N.  R.  106;  In  re  Scraf- 
ford,  14  N.  B.  R.  184,  F.  C.  12557; 
In  re  Frost,  11  N.  B.  R.  69,  6  Biss. 
213,  F.  C.  5134. 

4  Audubon  v.  Shufeldt,  181  U.  S. 
575,  5  A.  B.  R.  829;  In  re  Loch- 
meyer,  18  N.   B.  R.   270,   14  F.  C. 


GIG  THE    NATIONAL   BANKRUPTCY   LAW.  Ch.  G3 

ing  they  appear  to  have  been  based  upon  the  fact  that  alimony 
is  not  founded  upon  a  contract,  but  is  rather  in  the  nature 
of  a  penalty  imposed  for  failure  to  perform  a  duty. 
See  also  Alimony,  not  released,  ante,  §  422. 

§  980. of  assignee  or  receiver.— Claims  of  an  assignee 

under  an  assignment  for  the  benefit  of  creditors  for  his  com- 
pensation and  expenditures  in  administering  the  estate  prior 
to  the  filing  of  the  petition  are  not  provable,  not  being  debts 
of  the  bankrupt,  but  debts  incurred  by  the  assignee  himself 
in  an  attempt  to  prevent  the  administration  of  the  estate  in 
bankruptcy.  It  is  immaterial  that  he  acted  in  good  faith  and 
in  conformity  to  the  insolvency  laws  of  the  state.-"'  The  costs 
incurred  by  him  in  the  care  and  preservation  of  the  property, 
when  they  result  in  benefit  to  the  estate  generally  and  do  not 
lead  to  a  duplication  of  charges,  and  a  reasonable  sum  as  cus- 
todian, in  the  court 's  discretion,  under  its  equity  powers  might 
be  allowed  to  be  proved,  provided  the  utmost  good  faith  has 
been  shown  throughout.*^  Thus  a  judgment  creditor,  who  had 
set  aside  a  fraudulent  conveyance  but  lost  his  prior  right  to 
the  fund  by  the  adjudication  of  the  bankrupt,  is  allowed 
reasonable  indemnity  for  his  expenses  in  securing  such  result.' 
If  the  assignee,  pejiding  an  adjudication  in  bankruptcy,  make 
a  beneficial  sale  of  the  insolvent's  estate,  he   is  entitled  to 

914;    In  re  Shepard,  97  F.  R.  187.  Kenney,  2  N.  B.  N.  R.  140.  97  F.  R. 

5  A.  B.  R.  857;  In  re  Anderson,  97  554,  3  A.  B.  R.  353;  Wilbur  v. 
F.  R.  321,  5  A.  B.  R.  858;  In  re  Watson,  111  F.  R.  493,  7  A.  B.  R. 
Nowell,  99  F.  R.  931,  3  A.  B.  R.  54;  In  re  Busey,  6  A.  B.  R.  603; 
837;  Barclay  v.  Barclay,  184  111.  In  re  McCauley,  2  N.  B.  N.  R. 
375,  2  N.  B.  N.  R.  552;  In  re  Smith,  1089;  In  re  Peter  Paul  Book  Co., 
3  A.  B.  R.  67;  Contra,  In  re  Hon-  5  A.  B.  R.  105;  see  Louisville 
estro,  94  F.  R.  119,  2  A.  B.  R.  107;  Trust  Co.  v.  Cominger,  184  U.  S. 
In  re  Van  Orden,  96  F.  R.  86,  2  A.  18,  7  A.  B.  R.  421. 

B.  R.  801;    In  re  Challoner,  98  F.  e  in  re  Pauly,  1  N.  B.  N.  405,  2 

R.  82,  3  A.  B.  R.  442.  A.  B.  R.  333;   In  re  Kingman.  1  N. 

5  Stearns  v.  Flick,  2  N.  B.  N.  R.  B.  N.  518;   In  re  Tatum,  112  F.  R. 

1046,  103  F.  R.  919;   In  re  Gilblom  50,  7  A.  B.  R.  52;  In  re  Mayo,  114 

6  King,  2  N.  B.  N.  R.  60;  In  re  F.  R.  600,  7  A.  B.  R.  764;  In  re 
Solomon,  2  N.  B.  N.  R.  460;  see  Busey,  6  A.  B.  R.  603;  In  re  Lock- 
also  In  re  Francis-Valentine  Co.,  Stub  Check  Co.,  5  A.  B.  R.  106, 
1  N.  B.  N.  529,  94  F.  R.  793,  2  A.  note. 

B.  R.  522,  aff'g  1  N.  B.  N.  532.  93  t  in  re  Lesser,  2  N.  B.  N.  R. 
F.  R.  953,  2  A.  B.  R.  188;   In  re     599,  100  F.  R.  433,  3  A.  B.  R.  815. 


Ch.  63  PROVABLE    DEBTS.  617 

retain  a  reasonable  sum,  allowed  by  the  state  court,  for  the 
services  of  himself  and  his  attorneys.^ 

The  assignment  of  a  claim  against  a  bankrupt  gives  the 
assignee  a  provable  claim  if  the  assignor  be  estopped  from 
making  the  same  claim.^     See  also  post,  §  1018. 

Prior  to  the  amendment  of  1903,  it  was  held  that  on  the 
adjudication  of  an  insolvent  as  a  bankrupt,  whose  affairs  were 
being  administered  by  a  receiver,  the  latter  should  first  be  paid 
for  his  services  out  of  the  estate,  and  whatever  remained  was 
to  be  turned  over  to  the  trustee.^*^  As  the  appointment  of  a 
receiver  or  trustee  is  of  itself  an  act  of  bankruptcy,  the  same 
rule  with  reference  to  the  provability  of  a  claim  for  compen- 
sation of  these  officers  would  apply  as  in  the  case  of  an 
assignee, 

§981. attorney's    fee.— A   reasonable    attorney's    fee 

dependent  on  the  services  rendered  and  their  value,  to  be 
determined  on  evidence  or  the  court's  knowledge,^!  including 
the  services  of  counsel  when  really  required,  which  must  be 
confined  to  the  bankruptcy  proceedings,  excluding  previous 
consultations  or  advice,  as  well  as  all  unnecessary  attendance 
during  the  proceeding  as  counsel,^^  ig  provable  and  is  entitled 
to  priority  in  three  cases  (1)  when  the  services  were  rendered 
the  petitioning  creditors  in  involuntary  cases,  (2)  to  the  bank- 
rupt in  involuntary  cases  while  performing  the  duties  pre- 
scribed by  the  act  and  (3)  to  the  bankrupt  in  voluntary  cases.'-'' 
An  attorney's  fee  of  a  certain  per  cent  of  the  amount  of  the 
debt,  provided  for  in  a  mortgage  in  case  of  foreclosure,  is  not 
provable  against  the  bankrupt  mortgagor's  estate,  though  the 
mortgagee  has  proved  his  claim  as  a  secured  claim  and  the 
property  mortgaged  has  been  sold  by  the  trustee  at  private 
sale,  the  attorney's  fee  not  having  become  due  according  to 
the  contract.'^  Where  a  trustee  is  substituted  for  a  bankrupt 
in  a  suit,  but  afterwards  withdraws  and  assigns  all  interest 

8  In  re  Scholtz,  106  F.  R.  834,  5         12  in  re  Kross.   1  N.  B.  N.  566. 

A.  B.  R.  782.  96  F.  R.  816,  3  A.  B.  R.  187. 

9  In  re  Miner,  114  F.  R.  998,  8  A.         is  Sec.    64b,    post.    §§    1029-1035; 

B.  R.  248.  see  also  Sec.  60d,  ante,  §  970. 

10  Mauran  v.  Crown  Carpet  Lin-  14  in  re  Roche,  101  F.  R.  956.  4 
ing  Co.,  6  A.  B.  R.  734;  Wilson  v.  A.  B.  R.  369;  see  Maybin  v.  Ray- 
Parr,  8  A.  B.  R.  230.  mond,  15  N.  B.  R.  353,  F.  C.  9338. 

11  In  re  Curtis,  100  F.  R.  784,  4 
A.  B.  R.  17. 


618  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  03 

to  another,  an  attorney's  fee  is  provable  only  for  the  period 
the  trustee  occupied  the  bankrupt's  place.^'^ 

§  982. of  bank.— The  claim  of  a  bank  holding  bank- 
rupt's note,  payable  after  the  filing  of  the  petition,  for  the 
balance  after  applying  bankrupt's  deposit  as  a  set-off  against 
the  amount  of  the  note  is  provable  ;^^^  but  a  note  taken  for 
money  loaned  by  a  savings  bank  prohibited  by  law  from  loan- 
ing money  on  personal  security  is  not  a  provable  debt.^'^  Where 
a  depositor  gave  a  check  for  the  full  amount  of  his  deposit 
and  received  the  dividend  thereon,  which  the  bank  offered, 
there  is  nothing  to  prove.^^ 

§983. commercial    paper.— A    debt    is    provable    if 

absolutely  owing  at  the  time  of  filing  the  petition,  though  not 
then  payable,^  ^  The  taking  of  a  note  does  not  discharge  the 
original  debt,  and  either  is  provable,  and,  if  the  original  con- 
tract was  in  violation  of  statutory  provisions  regarding  con- 
tracts by  counties,  the  county  may  waive  it  and  the  other 
party  cannot  urge  it;^^  nor  does  the  giving  of  a  renewal  note 
to  a  bank,  where  it  retains  the  original,  discharge  the  pre- 
cedent debt  for  which  it  was  given,  unless  such  is  the  arrange- 
ment.2^  Unstamped  notes  given  during  the  operation  of  the 
War  Revenue  Law  are  not  provable,  though  they  may  be  al- 
lowed to  be  withdrawn  to  remedy  the  defect  ;22  nor  a  non- 
negotiable  note  in  the  hands  of  an  assignee  unless  his  as- 
signor could  have  done  so  ;23  nor  notes  purchased  for  less  than 
their  face  by  creditors  at  bankrupt's  request  to  secure  an  ex- 
tension of  time,  the  creditors  being  unaware  of  bankrupt's 
insolvency  and  acting  in  perfect  good  faith,  though  the  amount 

15  In  re  Litchfield,   18  N.  B.  R.  i9  See  In  re  McCauley  &  Sons,  2 

347,  F.  C.  8386.  N.  B.  N.  R.  1085;   In  re  Schaefer, 

icin   re   Kalter,    2   N.   B.   N.   R.  104  F.  R.  973;   In  re  Loder,  F.  C. 

264;  Hough  v.  Bk.,  4  Biss.  349,  F.  8457;  In  re  Riker,  F.  C.  11833;  see 

C.   6721 ;    Ex  p.  Howard  Nat.  Bk.,  contra,  In  re  Gerson,  3  N.  B.  N.  R. 

16  N.  B.  R.  420,  2  Lowell,  487,  F.  C.  249,  5  A.  B.  R.  89,  105  F.  R.  891. 

6764;  In  re  Petrie,  7  N.  B.  R.  332,  20  in  re  Worcester  Co.,  102  F.  R. 

5  Ben.  110,  F.  C.  11040.  808,  4  A.  B.  R.  496. 

IT  In  re  Jaycox  &  Green,  13  N.  B.  21  Hadden   v.    Dooley,   92   F.  R. 

R.  122,  F.  C.  7244.  274. 

18  Bk.  V.  Dewey,  19  N.  B.  R.  314,  22  In  re  Dobson,  2  N.  B.  N.  R. 

F.  C.  897;   Hodeman  v.  Dewey,  7  514. 

N.  B.  R.  269,  2  Hughes,  341,  F.  C.  23  Jn  re  Goodman  Shoe  Co.,  96 

6607.  F.  R.  949,  3  A.  B.  R.  200. 


Ch.  G3  provable  debts.  619 

paid  is  provable.2^  A  note  on  which  an  undischarged  bank- 
rupt is  endorser,  maturing  after  the  bankruptcy  and  paid  by 
him  after  protest,  is  provable  by  him  as  after  acquired  prop- 
erty against  the  estate  of  the  other  bankrupt.--'"'  Notes  claimed 
to  have  been  given  for  a  gaming  contract,  until  the  party  at- 
tacking them  shows  by  clear  and  conclusive  evidence  that  they 
are  invalid,  are  provable.-*^ 

A  note  for  a  subscription,  partly  paid  and  on  the  faith  of 
which,  together  with  other  subscriptions,  liabilities  are  in- 
curred, is  provable  ;2'^  or  a  note  assigned  after  the  filing  of 
the  petition  ;-s  or  a  note  on  which  the  holder  has  received,  or 
becomes  entitled  to  receive,  a  dividend  from  one  party  to  it, 
is  provable  against  the  other  only  for  the  difference.^^^  Notes 
void  between  the  original  parties  thereto,  pledged  as  collateral 
security  for  an  indebtedness,  are  provable  by  the  pledgees 
for  enough  to  secure  dividends  to  the  full  amount  of  their 
claim.20  A  note  is  provable  in  full  against  the  estate  of  the 
maker,  though  the  endorser  has  paid  part,  the  excess  of  the 
sum  due  the  holder  being  payable  to  the  endorser  ;3i  and  so 
long  as  both  payments  do  not  exceed  the  face  of  the  note,  not- 
withstanding payments  by  the  maker,  a  note  is  provable 
against  an  endorser.^^  jf^  after  a  composition  the  debtor  gives 
new  notes  for  notes  held  before  the  composition,  and  makes 
some  payments,  and  again  becomes  bankrupt,  the  new  notes 
are  provable.^^  Notes  are  not  provable  if  given  for  a  claim 
upon  which  bankrupt  is  not  legally  liable  ;3*  or  if  based  on  a 
prior  gift  as  consideration  ;35  or  if  subject  to  off-set  for  an 
amount  greater  than  the  amount  of  the  note  ;^^  or  where  in- 

24  In  re  Glassburner,  2  N.  B.  N.  F.  R.  796,   2  A.  B.  R.  223;    Ex  p. 

R.   634.  Talcott,  9  N.  B.  R.  502,  2  Lowell, 

2-5ln  re  Smith,  1  N.  B.  N.  136,  1  320,  F.  C.  13184;    In  re  Ellerhorst 

A.  B.  R.  37.  &  Co.,  5  N.  B.  R.  144,  F.  C.  4381. 

-•5  Hill  V.  Levy,  2  N.  B.  N.  R.  180.  32  in  re  Weeks,  13  N.  B.  R.  263. 

98  F.  R.  94,  3  A.  B.  R.  374.  8  Ben.  265,  F.  C.  17349. 

-'■  Sturgis  V.  Colby,  18  N.  B.  R.  •"••■'  In    re    Merriman's    estate.    18 

168,  F.  C.  13566.  N.  B.  R.   411,  44  Conn.  587,  F.  C. 

2s  In  re  Murdock.  3  N.  B.  R.  36,  9497. 

1  Lowell,  362,  F.  C.  9939.  '^i  In  re  Young,  15  N.  B.  R.  205, 

29  Ex  p.  Talcott,  9  N.  B.  R.  502,     F.  C.  18149. 

2  Lowell,  320,  F.  C.  13184.  sr,  in  re  Cornwall,  6  N.  B.  R.  305. 

30  Bailey  v.  Nicholas,  2  N.  B.  R.     9  Blatch.  114,  F.  C.  3250. 

151,  F.  C.  741.  36  In  re  Ford,  16  N.  B.  R.  426,  F. 

31  Swarts  V.  Fourth  Nat.  Bank,     C.  4932. 
8  A.  B.  R.  673;  In  re  Bingham.  94 


C20  THE   NATIONAL   BANKRUPTCY   LAW.  Ch.  03 

terest  in  advance  has  been  put  into  a  note,  and  the  maker  is 
adjudged  a  bankrupt  before  it  becomes  due  for  the  interest 
yet  to  accrue;''^  or  where  the  individual  note  of  one  joint 
maker  is  accepted  in  payment  of  the  joint  note,  the  old  note  is 
not  provable  against  the  estate  of  the  other  joint  maker.^* 

See  also  Endorsers,  post  >5  986. 

§984. debts  founded    on    contract.— If    the    liability 

arising  under  a  contract  is  fixed  and  absolutely  owing,  when 
the  petition  is  filed,  it  is  provable ;  as  a  claim  of  a  county  for 
services  performed  by  its  convicts  ;•'*'•*  or  the  payments  which 
had  become  due  under  an  agreement  to  pay  a  certain  sum 
monthly;^"  or  a  claim  for  spirituous  liquors  sold  and  delivered 
in  the  original  imported  packages,  though  in  a  state  where  the 
sale  of  such  liquors  is  prohibited  by  law;"*^  or  a  claim  for 
wages  held  by  an  assignee  in  which  the  assignment  was  made 
subsequent  to  filing  the  petition.-*-  A  claim  founded  on  the 
verbal  promise  of  bankrupt  to  another  to  pay  a  certain  sum, 
if  such  other  would  subscribe  a  portion  of  the  church's 
debt  to  him,  expenses  having  been  incurred  on  the  faith  of 
the  subscriptions  generally;*^  is  provable,  though  voluntary 
subscriptions  are  not  generally  provable."**  A  claim  for  the 
purchase  price  of  goods  left  in  a  vendor's  warehouse  and 
marked  with  vendee's  name  and  there  destroyed  by  fire;'*'^  or 
the  claim  of  a  garnisheeing  creditor  for  wages  where  bank- 
rupt secures  their  release  from  garnishment  by  a  new  agree- 
ment, are  provable.*^  If  a  contract  to  supply  goods  be  broken, 
the  loss  to  the  purchaser  may  be  proved  for  the  entire  term, 
though  it  had  not  elapsed  at  the  time  of  filing  the  claim,  if 
at  the  time  of  breaking  the  market  price  had  increased.*'^   If  a 

37  In    re   Riggs,    Lechtenberg    &  C.  14111;  In  re  Murray,  3  N.  B.  R. 
Co.,  8  N.  B.  R.  90.  187,  1  Hask.  267,  F.  C.  9954. 

38  In  re  Morrill,  8  N.  B.  R.  117,  2  *-'  in  re  Brown,  3  N.  B.  R.  177. 
Sawy.  356,  F.  C.  9821.  4  Ben.  142,  F.  C.  1974. 

39  In  re  Wright,  2  A.  B.  R.  592,  ^3  Capelle     v.     Trinity     M.     E. 
1  N.  B.  N.  428,  95  F.  R.  807.  Church,    11    N.    B.    R.    536,    F.    C. 

40  Bray  v.  Cobb,    2  N.   B.  N.   R.  2392. 

586,  100  F.  R.  270,  3  A.  B.  R.  788;  44  In    re    Ore.    Bull.    Pr.   &    Pub. 

In  re  Bartenbach,  11  N.  B.  R.  61,  Co.,   13  N.  B.  R.  503,  F.  C.  10559. 

F.  C.  1068;    In  re  Haake,  7  N.  B.  45  Ex  p.  Safford,  15  N.  B.  R.  564. 

R.  61,  2  Sawy.  231,  F.  C.  5883;    In  2  Lowell,  563,  F,  C.  12212. 

re  New  Brunswick   Carpet  Co.,   4  46  in  re  Bragg,  2  N.  B.  N.  R.  82. 

F.  R.  574.  47  In   re  Stern,  116  F.  R.  604,  8 

41  In  re  Town,  8  N.  B.  R.  38,  F.  A.  B.  R.  569;  In  re  Manhattan  Ice 


Ch.  63  PROVABLE    DEBTS.  6'?1 

broker  make  a  general  assignment  or  be  adjudged  a  bankrupt, 
a  demand  and  tender  are  not  necessary  to  enable  the  customer 
to  assert  a  breach  of  contract.^^ 

It  has  been  held  that  a  debt  is  not  provable,  if  for  money 
advanced  a  debtor  to  aid  him  in  committing  an  act  of  bank- 
ruptcy ;*^  or  incurred  as  a  speculative  option,  commonly  called 
"a  put;"^^  or  a  claim  growing  out  of  a  slave  contract ;^^  or 
of  a  workman,  thrown  out  of  employment  by  the  bankruptcy 
of  his  employer,  for  wages  which  would  have  accrued  subse- 
quent to  the  filing  of  the  petition,^^  though,  if  thrown  out  by 
the  voluntary  act  of  the  employer  prior  to  the  bankruptcy, 
whatever  claim  existed  against  the  employer  at  the  time  the 
petition  was  filed  would  be  provable.^^  ^^  claim  for  damages 
for  breach  of  warranty,  though  based  on  a  contract,  is  not 
founded  on  a  contract.^'* 

§  985. costs.— There  are  two  classes  of  costs  which  are 

provable,  (1)  costs  taxable  against  an  involuntary  bankrupt  as 
plaintiff  if  the  cause  of  action  would  pass  to  the  trustee  and 
he  declines  to  prosecute,  and  (2)  taxable  costs  incurred  in 
good  faith  by  a  creditor  in  an  action  on  a  provable  debt,  but 
both  must  be  prior  to  the  filing  of  the  petition.  It  was  held 
under  the  act  of  1867  that  the  debt  or  principal  must  be 
proved  and  allowed  before  the  costs,^^  though  there  appears 
to  be  no  reason  under  the  present  law  why  they  may  not  be 
proved  together.  Costs  incurred  in  an  attachment  proceed- 
ing, founded  on  a  provable  debt,  prior  to  the  filing  of  the  peti- 
tion, may  be  proved  and  allowed^^  and  will  be  entitled  to 
priority  of  payment  if  such  is  given  by  the  state  law,  other- 
wise not,^"  though  the  contrary  appears  to  have  been  the  rule 

Co..  114  F.  R    399,  7  A.  B.  R.  408.  S3  In  re  Silverman,  101  F.  R.  219, 

4s  In  re  Swift,  112   F.  R.  315,   7  4  A.  B.  R.  83. 

A.  B.  R.  374.  54  In   re  Morales,   105  F.  R.  761. 
«  In  re  Hatje,  12  N.  B.  R.  543,  5  A.  B.  R.  425. 

6  Biss.  436,  F.  C.  6215.  55  In  re  Preston,  5  N.  B.  R.  293. 

50  In  re  Chandler,  9  N.  B.  R.  514,     F.  C.  11393. 

F.  C.  2590;  see  In  re  Green,  15  N.         56  in  re  Lewis,  99  F.  R.  935,  4  A. 

B.  R.  198,  7  Biss.  338.  F.  C.  5751.     B.  R.  51;   In  re  Allen,  96  F.  R.  512, 

51  Buckner  v.  Street,  7  N.  B.  R.  3  A.  B.  R.  38;  but  see  In  re  Young. 
255,  F.  C.  2098.  2  A.  B.  R.   673,  1  N.  B.  N.  428,  96 

52  In  re  Pevear,  17  N.  B.  R.  461,     F.  R.  606. 

F.  C.  11053.  57  In    re    Lewis,    supra;      In    re 

Allen,  supra. 


G22  THE    NATIONAL    BANKRUPTCY    LAW.  ClI.  63 

under  the  former  law.-''^  Costs  awarded  by  a  state  court 
against  the  trustees  of  a  bankrupt,  as  substituted  defendants 
in  an  action  of  replevin,  pending  at  the  time  of  the  bankruptcy, 
are  provable.-''"  Exi)enses,  but  not  costs,  defrayed  by  an  at- 
taching creditor  after  the  dissolution  of  his  lien  by  the  adjudi- 
cation in  bankruptcy  in  the  care  and  preservation  of  the  prop- 
erty, may  be  allowed  for  such  sum  as  was  reasonably  neces- 
sary for  that  purpose  under  that  provision  of  the  law  author- 
izing the  actual  and  necessary  costs  for  preserving  the  estate 
subsequent  to  filing  the  petition.^^  Costs  adjudged  against 
bankrupt  after  his  adjudication  in  a  suit  brought  by  him 
prior  to  the  filing  of  the  petition,  are  not  provable.^^ 

See  also  Judgments,  post  §  992. 

§  986. of  endorser.— The  liability  of  an  endorser  prior 

to  the  maturity  of  the  obligation  is  not  a  fixed  liability  but  a 
conditional  one,  and  not  a  debt  absolutely  owing  until  the 
happening  of  the  contingency  of  dishonor  by  the  maker  and 
notice  to  the  endorser  thereof.  Where  the  obligation  does  not 
become  due  until  after  the  filing  of  the  petition,  the  endorser's 
liability  is  not  a  fixed  one  absolutely  owing  when  the  petition 
is  filed  and  hence  his  claim  is  not  provable  under  subdi- 
vision a,  (1)^-  though  it  has  been  held  that  a  claim  upon  a 
contract  of  endorsement  of  a  promissory  note  is  provable  under 
clause  4  of  subdivision  "a"  of  this  section,  even  if  the  note  does 
not  fall  due  and  the  liability  become  fixed  until  after  the 
petition  is  filed.^^  Commercial  paper  acquired  in  good  faith 
before  maturity  may  be  proved  by  the  indorsee,  upon  showing 

5s  In  re  Preston,  6  N.  B.  R.  545,  In    re    Loder,    F.    C.    8457;    In    re 

F.  C.  11394;   In  re  Jenks,  15  N.  B.  Riker,  F.  C.   11833;    In  re  McCau- 

R.  301,  F.  C.  7276.  ley,  2  N.  B.  N.  R.  1085;   see  In  re 

59  In  re  Neely,  108  F.  R.  371,  5  Dunnigan,    2    N.    B.    N.    R.    755; 
A.  B.  R.  836.  Hayes  v.  Comstock,  7  A.  B.  R.  493; 

60  In  re  Allen,  supra.  Phillips  v.  Dreher  Shoe  Co.,  112  F. 

61  In  re  Marcus,  104  F.  R.  331,  5  R.    404,    7    A.    B.    R.    326;    Contra, 

A.  B.  R.  19,  s.  c.  in  C.  C.  A.,  3  N.     Smith  v.   Wheeler.  3  N.   B.   N.   R. 

B.  N.  R.  407;   In  re  Marcus  et  al.,     337,  66  N.  Y.  Supp.  780. 

105  F.  R.  907,  5  A.  B.  R.  365;   San-         63  in   re  Gerson,   3   N.   B.   N.   R. 

ford  V.  Sanford,  12  N.  B.  R.  565;  249,  5  A.  B.  R.  89,  105  F.  R.  891; 

In  re  Williams,  2  N.  B.  R.  79,  F.  C.  Mock  v.  Market  St.  Nat.  Bank,  107 

17705.  F.  R.  897,  6  A.  B.  R.  11;  see  In  re 

62  In  re  Chambers,  Calder  &  Co.,  Garlington,  8  A.  B.  R.  602;   In  re 
2  N.  B.  N.  R.  864;    In  re  Schafer,  Marks,  6  A.  B.  R.  641. 

104  F.  R.  973,  3  N.  B.  N.  R.  261; 


Ch.  G3  provable    debts— costs— endorser.  ()2o 

a  valuable  consideration  paid  by  him,'^^  but  not  if  without 
such  consideration,^^  or  on  accommodation  paper.  Paper  in- 
dorsed by  the  bankrupt  can  be  proved  only  for  the  amounts 
actually  paid  by  the  holders  with  lawful  interest;^*'  or  if  a 
dividend  has  been  received  from  the  estate  of  the  maker  only 
for  the  balance  due,*'"  and  the  holder  may  prove  against  the 
estates  of  both  maker  and  indorser.^^  The  claim  of  the  holder 
of  an  accommodation  indorsement  of  bills  of  exchange  against 
a  bankrupt  to  secure  the  payment  of  which  the  drawers  and 
acceptors  have  given  collateral  security,  is  provable  as  if  un- 
secured,*'^ but  not  that  of  a  holder  who  has  granted  an  ex- 
tension of  time  to  the  maker  against  the  estate  of  a  bankrupt 
indorser."*^  An  indorser  who  pays  a  note  after  the  maker 'k 
bankruptcy  holds  a  provable  claimJ^  A  claim  against  an  in- 
dorser should  not  be  rejected  on  its  face  because  of  a  misstate- 
ment that  all  of  certain  notes  v/ere  overdue,  or  because  of  a 
misstatement  of  the  date  of  substitution  of  certain  notesJ- 

See  Commercial  Paper,  §  983,  ante. 

^987. of  surety,  guarantor,  and  persons  secondarily 

liable.— The  claim  of  any  person  as  endorser,  surety,  guar- 
antor, or  otherwise,  secondarily  liable  for  a  bankrupt  is  prov- 
able if  the  creditor  fails  to  prove,  in  the  creditor's  name.'^" 
In  the  event  he  discharges  the  obligation  in  whole  or  in  part 
he  becomes  entitled  to  that  extent  to  the  right  of  subrogation.'^* 
But,  if  a  surety  pays  a  claim  against  which  there  is  a  good 
defense,  his  claim  for  such  payment  is  not  provable."^^  Where 
one  of  three  parties  who  have  signed  a  note  is  adjudicated 

64  In    re    Lake     Superior     Ship         ti  Smith  v.  Wheeler,  5  A.  B.  R. 
Canal,  R.  R.  &  Canal  Co.,  10  N.  B.     46. 

R.  76,  F.  C.  7998.  72  in  re  Stevens,  107  F.  R.  243,  5 

65  In  re  Hook,  11  N.  B.  R.  282,  F.      A.  B.  R.  806. 

C.  6672.  "  Sec.  57i,  ante,  §  885. 

66  In   re  Many,  17  N.  B.  R.  514,         -*  Phillips   v.    Dreher    Shoe    Co., 
F.   C.  9054.  112  F.  R.  404,  7  A.  B.  R.  326;  In  re 

07  In  re  Hicks,  19  N.  B.  R.  299,  Bingham,  94  F.  R.  796,  1  N.  B.  N. 

F.  C.  6456.  351,    2    A.    B.    R.    223;     Jervis    v. 

68  Bk.  V.  Porter,  17  N.  B.  R.  329.  Smith,  3  N.  B.  R.  147;  Ex  p.  Tal- 

6»  In  re  Dunkerson  &  Co.,  12  N.  cott,  9  N.  B.  R.  502,  2  Lowell,  320, 

B.  R.  413,  4  Biss.  253,  F.  C.  4157.  F.  C.  13184;   but  see  In  re  Kalter, 

70  In  re   Granger  &  Sabin,  8  N.  2  N.  B.  N.  R.   264. 

B.  R.  30,  F.  C.  5684;  see  In  re  An-  73  in   re  Spring,   2   N.   B.  N.   R. 

keny,  1  N.  B.  N.  511,  2  N.  B.  N.  R.  509. 
349,  100  F.   R.  614,  4  A.  B.  R.  72, 


624  THE   NATIONAL  BANKRUPTCY   LAW.  Ch.  63 

a  bankrupt  before  the  note  becomes  due,  and  it  is  paid  in  full 
at  maturity  by  the  third  person,  who  is  admittedly  an  accom- 
modation party,  and  contingently  liable,  and  bankrupt's  lia- 
bility to  him  was  contingent  upon  his  paying  the  note  partly 
or  wholly,  such  party  has  no  provable  claimj"^  The  payment  of 
a  note  by  a  surety  relates  back  to  the  signing  thereof,  for  the 
purpose  of  fixing  the  date  when  the  indebtedness  of  the  prin- 
cipal to  him  on  account  of  overpayment  had  its  inceptionJ^ 
When  the  surety  having  actual  knowledge  of  the  bankruptcy 
proceedings  of  the  maker,  pays  the  note,  his  claim  is  barred  by 
the  maker's  discharge J*^ 

See  also  Endorser,  ante,  §  986. 

§  988. of  husband  and  wife.— In  those  states  where  a 

husband  and  wife  may  contract  with  each  other,  there  is  noth- 
ing to  prevent  the  proof  of  a  claim  by  either  husband  or  wife 
against  the  estate  of  the  other  becoming  bankrupt,  if  it  is 
otherwise  provable.  Where  a  marriage  portion  is  placed  by 
the  wife  in  her  husband's  hands  in  good  faith  and  he  uses 
it  in  his  business  a  trust  is  created  for  her.*^*^  In  states  where 
such  contracts  are  not  enforceable,  a  claim  may  be  proved  by 
her  because  of  her  subrogation  where  she  joins  with  her  hus- 
band as  maker  of  a  note,  but  is  in  fact  a  surety  and  pays  the 
note  with  her  money .^^  When  a  wife  deposits  money  with 
her  husband  and  receives  portions  thereof,  leaving  a  balance 
due  at  the  time  of  his  bankruptcy,  such  balance  is  provable 
against  his  estate,  and  cannot  be  offset  by  the  value  of  reason- 
able gifts  from  him,  or  of  an  insurance  policy  on  his  life 
for  the  benefit  of  herself  and  children.^-  If  a  wife  allows  her 
husband  to  appropriate  the  income  from  her  separate  estate  in 
support  of  the  family,  this  does  not  create  such  a  debt  on  his 
part  as  would  be  provable  ;S^  though  it  would  be  different  if  it 
were  principal.^^    If  a  husband  reduces  a  legacy  to  his  wife 

76  In  re  Dunnigan,  2  N.  B.  N.  R.  82  in  re  Bigelow,  2  N.  B.  R.  170. 

755.  3  Ben.  198,  F.  C.  1398;  In  re  Blan- 
ks In  re  Stout,  109  F.  R.  794,  6  din,  5  N.  B.  R.  39,  1  Lowell,  543, 

A.  B.  R.  505.  F.  C.  1527. 

79  Hager  v.  Comstock,  7  A.  B.  R.  ss  in  re  Talbot,  110  F.  R.  924,  7 
493.  A.  B.  R.  29. 

80  In  re  Neiman,  109  F.  R.  113,  6  ^4  in  re  Jones,  9  N.  B.  R.  556, 
A.  B.  R.  329.  6  Biss.  68,  F.  C.  7444. 

81  In   re  Nickerson,    116    F.    R. 
1003,  8  A.  B.  R.  707. 


ClI.  63  PROVABLE    DEBTS.  625 

to  possession  and  gives  her  a  note  for  the  proceeds,  the  note  is 
not  provable  where  it  created  no  separate  estate  in  the  wife.^^ 
An  intended  gift  of  a  husband  is  not  consummated  so  as  to 
become  provable,  where  he  loans  the  money  to  the  firm  of 
which  he  is  a  member  and  executes  to  her,  firm  notes  for  the 
amount,  which  he  retains  in  his  possession.^^  Unless  there  is 
a  specific  agreement  on  the  part  of  a  husband  to  compensate 
his  wife  for  services  rendered  outside  of  her  household  duties, 
none  can  be  implied,  because  he  is  entitled  to  the  personal 
services  and  earnings  of  his  wife,  and  no  provable  claim  can 
arise  in  her  behalf  ;^^  nor  would  such  a  specific  agreement 
create  a  provable  claim  in  certain  states.^^  Under  a  law  provid- 
ing that  a  wife,  who  is  granted  a  divorce,  shall  be  entitled  to 
one-third  of  his  personal  property  absolutely,  the  interest  of 
the  wife  in  the  husband's  personal  property  after  the  com- 
mencement of  an  action  for  divorce  but  before  decree  is  not  a 
provable  claim.^^ 

§  989. insurance.— A  claim  for   the    amount   paid  as 

premium  on  a  fire  insurance  policy  by  a  pledgee  of  such  policy 
is  provable  against  the  estate  of  the  bankrupt  insured,^*'  but 
a  note  given  for  the  insurance  premium  on  a  vessel,  providing 
if  the  note  be  not  paid  at  maturity,  the  policy  becomes  void 
while  it  remains  unpaid  and  after  the  note  becomes  due  the 
vessel  strands,  whereupon  the  note  is  paid,  and  then  a  gale 
destroys  the  vessel,  a  claim  for  the  premium  is  not  provable 
against  the  estate  of  the  bankrupt  insurance  company .'^^  The 
claim  of  a  holder  of  a  fire  insurance  policy  where  he  has  not 
submitted  proper  proof  of  loss,  nor  made  proof  of  debt  in  bank- 
ruptcy proceedings,  nor  commenced  suit  within  the  prescribed 
period,  is  not  provable.^-  A  debt  secured  by  an  insurance 
policy  on  the  life  of  the  bankrupt,  is  provable  less  the  sur- 
render value  of  the  policy.*''^  It  has  been  held  that  policies 
reinsured   in  another  company  upon   the  bankruptcy  of  the 

«•■■  Canby  v.  McLear,  13  N.  B.  R.  no  In  re  Hamilton,  102  F.  R.  683, 

22,  F.  C.  2378.  2  N.  B.  N.  R.  957,  4  A.  B.  R.  543. 

"^G  In  re  Chapman  et  al..  105  F.  9i  Cardwell  v.  Ins.  Co.,  12  N.  B. 

R.  901,  5  A.  B.  R.  570.  R.  253,  F.  C.  2396. 

*<■  In  re  Wolf,  2  N.  B.  N.  R.  908.  02  in  re  Ins.  Co.,  8  N.  B.  R.  123, 

«s  In    re    Kaufmann,    105    F.    R.  F.  C.  4796. 

768,  5  A.  B.  R.   104.  93  In  re  Newland,  7  N.  B.  R.  477, 

S9  Hawk  V.  Hawk,  2  N.  B.  N.  R.  9  Ben.  342,  F.  C.  10170. 
940,  102  F.  R.  679,  4  A.  B.  R.  463. 

40 


626  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  G3 

latter,  are  provable  in  full,  without  reference  to  the  amount 
paid  the  holders."-*  Where  there  is  an  agreement  between  the 
insured  and  the  various  creditors  as  to  the  value  of  the  prop- 
erty of  each  creditor,  burned  while  in  the  bankrupt's  posses- 
sion, proof  of  a  larger  claim  cannot  be  permitted  because  such 
creditor  alleges  his  valuation  did  not  include  a  lien  upon  his 
property."^ 

§  990, interest.— A  claim  for  accrued  interest,"^  as  well 

as  interest  up  to  the  date  of  filing  the  petition  in  bankruptcy, 
is  provable;"'^  while,  if  there  are  sufficient  funds  in  the  hands 
of  the  trustee  to  do  so,  it  should  be  paid  up  to  the  date  of 
payment  of  dividends."^ 

Notes  given  for  the  excess  over  legal  interest  are  not  prova- 
ble;^ and,  where  a  borrower  gives  his  note  for  the  loan,  with 
legal  interest,  and  pays  for  the  accommodation,  such  contract 
is  affected  with  usury,  and  if  the  lex  loci  provide  for  the  for- 
feiture of  the  debt,  it  is  not  provable.-  A  secured  creditor 
has  been  held  to  be  entitled  to  interest  after  the  time  specified 
for  payment  of  the  principal.^ 

§  991. joint  obligations.— A  joint  indebtedness  is  prov- 
able against  the  estate  of  either  of  the  joint  debtors  who  may 
become  bankrupt,  without  reference  to  the  fact  that  it  may 
be  subject  to  be  marshaled.* 

§992. judgments— seduction,    fraud,    etc.— Judgment 

debts  are,  as  a  rule,  provable  in  bankruptcy,  though  a  court 
may  look  beyond  the  form  of  the  judgment  and  consider  the 
nature  of  the  liability  upon  the  original  cause  of  action.^ 
Where  there  has  been  merely  a  verdict  and  no  judgment  prior 

94  In  re  Republic  Ins.  Co.,  8  N.  B.  F.  C.  895;  Wilson  &  Shafer  v.  Bk., 
R.  197,  F.  C.  11705.  10  N.  B.  R.  289,  F.  C.  894. 

95  In  re  Reliable  Storage  &  Ware-  i  Shaffer  v.  Fritchery,  4  N.  B.  R. 
house  Co.,  105  F.  R.  351,  5  A.  B.  179,  F.  C.  12697;  In  re  Moore,  1 
R.  249.  N.  B.  R.  123. 

96  Sloan  V.  Lewis,  12  N.  B.  R.  2  in  re  Pittock,  8  N.  B.  R.  78,  2 
173,  22  Wall.  150.  Sawy.  416,  F.  C.  11189. 

97  In  re  Broich,  15  N.  B.  R.  11,  3  in  re  Bartenbach,  11  N.  B.  R. 
7  Biss.  303,  F.  C.  1921.  61,  F.  C.  1068. 

98  In  re  Hagan,  10  N.  B.  R.  383,  *  Gray  v.  Rollo,  9  N.  B.  R.  337, 
F.  C.  5893;  In  re  Bousfield  &  Poole  18  Wall.  629. 

Mfg.  Co.,  17  N.  B.  R.  153,  F.  C.  s  Turner  v.  Turner,  108  F.  R. 
1704;   In  re  Bk.,  12  N.  B.  R.  130,     785,  6  A.  B.  R.  289. 


Ch,  63  PROVABLE    DEBTS  627 

to  bankruptcy,  the  debt  is  not  provable  as  a  judgment.^  Al- 
though a  judgment  is  rendered  within  four  months  of  the 
bankruptcy  and  therefore  void,  as  a  preference,  it  might  still 
be  evidence  of  the  debt,  but  the  claim  would  have  to  be  proved 
as  unsecured^ 

By  the  amendment  of  1903,  it  is  specifically  provided  that 
liabilities  for  alimony,  maintenance  or  support  of  wife  or  child, 
or  for  seduction  of  an  unmarried  female,  or  for  criminal  con- 
versation, shall  not  be  discharged.  Prior  to  the  amendment  it 
was  held  that  a  judgment  was  provable  in  a  suit  brought  by 
a  woman  against  her  seducer  for  breach  of  contract  to  marry  f 
or  for  the  seduction  of  one's  daughter,  though,  if  the  action 
for  seduction  was  brought  by  the  woman  under  a  statute  giving 
her  this  right  to  sue,  and  in  a  state  where  the  act  is  made  a 
criminal  offense,  it  was  not  provable,  since  it  was  the 
result  of  a  willful  and  malicious  injury  to  the  person,  the 
word  "willful"  meaning  "intentional"  or  "deliberate,"  while 
"malice,"  in  the  legal  acceptance  of  the  word,  is  not  confined 
to  personal  spite  against  individuals,  but  consists  in  a  con- 
scious violation  of  the  law  to  the  prejudice  of  another.^ 

A  judgment  in  action  for  a  tort  may  be  provable  ;i^  or  for 
fraud,  conspiracy  and  deceit ;^i  or  against  the  principal's 
estate,  notwithstanding  a  joint  judgment  has  been  recovered 
therefor  against  both  principal  and  surety  ;^2  or  a  set-off  which 
a  defendant  fails  to  prove  in  a  suit  brought  by  one  who  becomes 
bankrupt  before  trial  and  judgment  is  rendered  against  him.''^ 
A  judgment  from  which  an  appeal  is  taken  before  ban"kruptcy 
has  been  held  to  be  a  provable  debt;  but  no  dividend  will  be 
paid  until  judgment  on  the  writ  of  error  ;^*  and,  on  proof  of 
claim,  the  judgment  of  the  appellate  court  is  not  conclusive, 
where  terms  are  imposed.^'^      Where  a  judgment  ceases  to  be 

6  Black  V.   McClelland,  12  N.  B.  lo  Rowland  v.   Carson,  16  N.  B. 

R.  481,  F.  C.  1462;   In  re  Williams,  R.  372. 

2   N.   B.   R.    79,    2   Low.   72,   F.    C.  n  In  re  Van  Buren,  19  N.  B.  R. 

5203;  see  In  re  Sullivan,  1  N.  B.  N.  149,  F.  C.  16833. 

380,  2  A.  B.  R.  30.  12  In  re   Kitzinger,   19   N.  B.  R. 

~  In  re  Richard,  1  N.  B.  N.  487,  152,  F.  C.  7861. 

94  F.  R.  633,  2  A.  B.  R.  506.  i3  In  re  Safe  Dep.  &  Sav.  Inst.,  18 

s  In  re  McCauley,  101  F.  R.  223,  N.  B.  R.  493. 

4  A.  B.  R.  122;   In  re  Fife,  109  F.  14  in  re  Sheehan,  8  N.  B.  R.  345, 

R.  880,  6  A.  B.  R.  258.  F.  C.  12737. 

"In  re  Sullivan,  1  N.  B.  N.  380,  1- in  re  Shelburne,  19  N.  B.  R. 

2  A.  B.  R.  30.  359,  F.  C.  12745. 


628  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  G3 

a  lien  by  reason  of  lapse  of  time,  unless  renewed  as  provided 
by  the  laws  of  the  state,  it  is  not  provable.^'' 

An  objection  that  the  court  was  without  jurisdiction  of  the 
subject-matter,  or  that  the  judgment  was  obtained  by  fraud, 
may  be  made  to  a  claim  based  on  a  foreign  judgment,  since 
such  a  judgment  is  only  prima  facie  evidence  of  the  debt 
adjudged  to  be  due  to  the  plaintiff,  and  open  to  examination, 
but  not  as  to  a  domestic  judgment  if  rendered  by  a  court  of 
competent  jurisdiction.^'^ 

§  993.  Judgment  for  fine.— A  question  not  without  serious 
doubt  is  as  to  the  provability  of  a  judgment  imposing  a  fine 
as  a  penalty  or  punishment.  While  it  has  been  held  that  a 
judgment  obtained  against  bankrupt  for  fines,  upon  an  indict- 
ment for  unlawful  retailing,  is  dischargeable,  and,  therefore, 
would  be  provable,!^  such  decision  seems  hardly  tenable  in 
view  of  the  fact  that,  if  this  be  true,  a  discharge  would  operate 
substantially  as  a  pardon,  and  which  is  not  within  the  province 
of  a  bankruptcy  law.^^  Under  the  former  Acts,  such  fines 
were  not  considered  debts,^^  while  under  the  present  law  a 
judgment  for  the  support  of  a  bastard  child,  was  considered 
in  the  nature  of  a  police  regulation  and  not  a  civil  debt,  and, 
therefore,  not  released  by  a  discharge.^i  It  may  be  safely 
said,  therefore,  that  a  judgment  for  a  fine,  as  distinguished 
from  a  judgment  on  a  contract  express  or  implied,  or  for 
damages,  is  not  provable,  since  provable  debts  include  only 
civil  liabilities.^- 

§  994. judgment  after  petition  filed— merger.— While 

a  judgment  of  a  state  court,  after  or  within  four  months  prior 
to  the  filing  of  a  petition  in  bankruptcy,  occasions  no  lien  and 
confers  no  additional  rights,  the  bankruptcy  act  recognizes 
two  classes  of  judgment  debts  which  may  be  proved :  1st,  a 
debt  evidenced  by  a  judgment  obtained  prior  to  the  filing  of 
the    petition  in  bankruptcy;    and  2d  a  debt    founded  on  a 

16  In  re  Farmer,  116  F.  R.  763,  9  20  People  v.  Spalding,  4  How.  21. 
A.  B.  R.  19.  10  Paige,  Ch.  R.  284;   In  re  Suth- 

17  Michaels  v.  Post,  12  N.  B.  R.  erland,  3  N.  B.  R.  314,  F.  C.  13639; 
152,  21  Wall.  398.  Macy  v.  Jordan,  2  Den.  570. 

18  In  re  Alderson,  98  F.  R.  588,  21  in  re  Baker,  96  F.  R.  964,  3  A. 
3  A.  B.  R.  554.  B.  R.  101. 

m  In  re  Moore,  111  F.  R.  145,  6  22  in  re  Moore,  111  F.  R.  145,  6 
A.  B.  R.  590.  A.  B.  R.  590. 


Oh.  G3  PROVABLE    DEBTS.  629 

provable  debt  reduced  to  judgment  pending  bankruptcy  pro- 
ceedings, for  this  is  not  a  new  debt,  created  during  the 
bankruptcy,  but  retains  the  character  of  the  indebtedness  out 
of  which  it  arose  and  is  provable  less  costs  incurred  and 
interest  accrued  after  the  filing  of  the  petition  and  up  to  the 
time  judgment  was  entered.-^  But  the  time  for  proving  a 
debt  of  this  class  is  not  enlarged  beyond  the  year  to  which 
proof  is  limited,-^  Where  a  creditor,  between  the  filing  of 
the  petition  and  the  discharge,  entered  judgment  for  an 
amount  smaller  than  his  debt  in  an  action  begun  prior  to  the 
filing  of  the  petition,  the  debt  was  held  not  merged  in  the  judg- 
ment but  still  subsisted  for  the  purpose  of  proof  in  bankruptcy 
and  the  creditor  might  prove  his  debt  with  interest  and  costs 
accrued  in  the  action  to  the  date  of  filing  the  petition,^^ 

§995.  Claims  barred  by  statute  of  limitation.— Formerly 
statutes  of  limitations  were  strictly  construed,  but  it  has  been 
the  tendency  of  the  courts  in  later  years  to  consider  them  as 
statutes  of  repose ;  so  that,  if  a  claim  be  barred  by  the  statute, 
it  will  not  be  revived  unless  the  intent  to  revive  it  is  so  obvious 
that  no  other  construction  could  be  put  upon  the  act  which  is 
claimed  to  be  revived.^^  Whether  a  claim  barred  by  the 
statute  of  limitations  is  provable  unless  the  bar  extends 
throughout  the  United  States,-"  the  statute  being  a  law  of 
the  forum  and  not  controlling  proceedings  in  the  federal 
courts  though  ordinarily  applied  by  them  in  legal  proceed- 
ings arising  within  the  state,^^  is  a  question  of  some  difficulty. 
The  weight  of  authority,  however,  and  sound  reason  seem  to 
require  that  a  claim  barred  by  the  statute  of  limitations  of 
the  state  where  the  petition  is  filed  should  not  be  provable,^^ 

23  In  re  McBride,  2  N.  B.  N.  R.  27  in  re  Ray,  1  N.  B.  R.  203,  2 

345,  3  A.  B.  R.  729,  99  F.  R.  686;  Ben.  53,  F.  C.  11589;   In  re  Shep- 

see  Beers  v.  Hanlin,  99  F.  R.  695,  ard,  1  N.   B.  R.  115,  F.  C.   12753; 

3  A.  B.  R.  745;  In  re  Fife,  109  F.  see  also  In  re  Levy,  95  F.  R.  812. 

R.  880,  6  A.  B.  R.  258.  2  A.  B.  R.  21;   aff'g  1  N.  B.  N.  287. 

2-1  In  re  Leibowitz,  108  F.  R.  617,  28  In  re  Lipman,  1  N.  B.  N.  310. 

6  A.  B.  R.  268.  94  F.  R.  353,  2  A.  B.  R.  46. 

25  In  re  Pinkel,  1  N.  B.  N.  138,  29  in  re  Resler,  1  N.   B.  N.  280. 

161,  1  A.  B.  R.  333.     See  Boynton  95  F.  R.  804,  2  A.  B.  R.  166,  602; 

V.  Ball,  121  U.  S.  457.  In  re  Lipman,  1  N.  B.  N.  310,  94 

2c  In  re  Resler,  1  N.  B.  N.  280,  95  F.   R.    353,   2  A.    B.   R.   46;    In   re 

F.  R.  804,  2  A.  B.  R.  602;    In  re  Farmer,  116  F.  R.  763,  9  A.  B.  R. 

Lorillard,  107  F.  R.  677,  5  A.  B.  R.  19;   In  re  Graves,  9  F.  R.  816;   see 

62.  also  In  re  Doty,  16  N.  B.  R.  202, 


630  THE  NATIONAL  BANKRUPTCY   LAW.  Ch.  63 

whether  the  creditor  resides  in  the  same  state  or  not,^°  or  the 
claim  is  valid  in  the  state  of  the  creditor's  residence.^^ 

A  state  statute  of  limitations  is  suspended  by  the  bank- 
ruptcy proceedings,  and,  if  the  debt  is  not  barred  when  the 
petition  is  filed,  it  is  provable,  though  at  the  time  of  proof  it 
would  otherwise  be  barred,^-  and  such  suspension  continues 
as  long  as  there  is  a  fund  to  distributed^  An  acknowledgment 
of  the  debt  before  the  bar,  if  otherwise  sufficient  to  take  it 
out  of  the  statute,  will  make  the  debt  provable,"*^  and  the 
same  is  true  if  an  insolvent,  within  four  months  of  bank- 
ruptcy, gives  a  bond  and  mortgage  to  secure  a  barred  claim, 
the  bond  revives  the  debt,  though  the  mortgage  is  void  as  a 
preference  ;35  or  if,  within  four  months  of  the  filing  of  the 
petition  and  one  day  before  the  claim  is  barred  judgment  is 
obtained  thereon,  as  this  establishes  the  debt  and  stops  the 
running  of  the  statute.^^  A  claim  is  not  revived  or  made 
provable  because  a  debtor  includes  it  in  his  schedule  of  debts  ;^^ 
nor  is  it  any  ground  for  relief  from  the  bar  of  the  statute  that 
the  creditor  was  led  to  believe  by  an  erroneous  decision  of  a 
court  that  his  claim  was  not  enforceable  and  therefore  did  not 
present  it  until  such  decision  was  overruled  after  the  bar  had 
attached.38  "Where  a  note  payable  in  one  year  is  exchanged 
at  maturity  for  a  new  and  similar  note,  and  this  is  repeated 
year  after  year,  the  statute  runs  from  the  date  of  the  last 

F.  C.  4017;  In  re  Noesen,  12  N.  B.  Contra,  Nicholas  v.  Murray,  18  N. 

R.    422,   6  Biss.   443,  F.   C.   10288;  B.  R.  469,  5  Sawy.  320.  F.  C.  10223. 

In  re  Cornwall,  6  N.  B.  R.  305,  9  33  in  re  Maybin,  15  N.  B.  R.  468, 

Blatch.    114,    126,    137,    138,    F.    C.  F.  C.  9337. 

3250;    In  re  Kingsley,  1  N.  B.  R.  34  in  re  Reed,  supra. 

5266,    1    Lowell,    216,    F.    C.    7819;  35  in  re  Stendts,  1  N.  B.  N.  509. 

In  re  Hardin,  1  N.  B.  R.  97,  1  Hask.  se  in  re  McBride,  2  N.  B.  N.  R. 

163,  F.  C.  6048;   In  re  Reed,  11  N.  340,  99  F.  R.  686,  3  A.  B.  R.  729; 

B.  R.  94,  6  Biss.  250,  F.  C.  11635;  see  also  In  re  Woodard,  1  N.  B.  N. 

Contra,  In  re  Ray,  1  N.  B.  R.  203.  385,  95  F.  R.  260,  2  A.  B.  R.  339. 

F.  C.  11589;   In  re  Shephard,  1  N.  37  in    re    Resler,    supra;     In    re 

B.  R.  115,  F.  C.  12753.  Hardin,    supra;     In    re    Kingsley, 

30  In  re  Resler,  supra.  supra;    In   re   Wooten,   118   F.   R. 

31  In  re  Hardin,  supra.  670,  9  A.  B.  R.  247;  Contra,  In  re 
32ln  re  McKinney,  15  F.  R.  912;  Hertzog,    18    N.    B.    R.    526,    F.    C. 

In  re  Graves,  9  F.  R.  816;   In  re  6433. 

Eldridge,     12    N.     B.    R..   540,     2  ss  in  re  State  Ins.  Co.,  15  F.  R. 

Hughes,    256,    F.    C.    4331;     In    re  736. 

Wright,  6  Biss.  317,  F.  C.  18068; 


Ch.  63  PROVABLE    DEBTS.  631 

note.^^  The  decision  by  a  bankruptcy  court  that  a  claim  is 
barred  by  the  statute  renders  the  question  res  adjudicata 
between  the  parties.^^  A  claim  for  sums  of  money  lent  at 
different  times,  no  notes  being  taken,  does  not  constitute  a 
running  account,  and  each  item  is  unaffected  by  any  other  as 
far  as  the  running  of  the  statute  is  concerned.'*^ 

See  Discharges,  new  promise,  ante,  §  391. 

§  996.  Claim  of  mortgagee.— A  claim  for  the  deficiency  upon 
the  sale  of  mortgaged  property  between  the  amount  due 
under  the  mortgage  and  the  amount  realized  on  the  sale  of 
the  property,  applicable  to  the  mortgage  debt,  is  provable  ;*2 
but,  where  a  mortgagee  sells  the  mortgaged  premises  at 
auction  for  a  small  sum  without  notice  to  the  trustee  and 
without  leave  of  the  court,  neither  the  balance  nor  any  sum 
whatever  is  provable.^^  Where  a  mortgage  is  given  to  in- 
demnify the  mortgagee  for  his  advances  and  he  lends  his 
acceptances  to  the  mortgagor,  and  after  the  bankruptcy  of 
the  latter  buys  up  the  paper  at  a  discount,  only  what  he 
actually  paid  to  take  up  his  acceptance  is  provable.^^  If  a 
mortgage  is  given  on  goods  sold  to  secure  the  purchase  money, 
with  the  understanding  that  the  proceeds  were  to  be  applied 
on  the  mortgage,  but  were  not,  the  proceeds  of  the  unsold 
goods  should  go  to  the  vendor,  who  should  surrender  the 
mortgage  and  'prove  his  claim  for  the  difference  as  unsecured.'*^ 
A  creditor  will  not  be  permitted  to  obtain  a  preference  in- 
directly through  a  mortgage  held  by  a  third  person  to  whom 
the  creditor  had  given  an  indemnity  bond,  and  the  mortgagee 
will  not  be  permitted  to  enforce  the  mortgage  until  he  has 
exhausted  his  remedy  on  the  bond.'*® 

§997. on  open  account.— A  creditor  of  a  bankrupt, 

who  is  also  his  debtor  in  a  larger  amount,  will  not  be  permitted 
to  prove  his  claim  against  the  estate,  so  long  as  his  own  debt 

39  In  re  Schumpert,  8  N.  B.  R.  43  in  re  Miller,  19  N.  B.  R.  78,  F. 
415,  F.  C.  12491.  C.  9555. 

40  In  re  Hargadine-McKittrick  44  Ex  p.  Ames,  7  N.  B.  R.  230,  1 
Dry  Goods  Co.  v.  Hudson,  111  F.  Lowell,  561,  F.  C.  323. 

R.  361.  6  A.  B.  R.  657.  45  Overman  v.  Quick,  17  N.  B.  R. 

41  In  re  Wooten,  118  F.  R.  670,  9     235,  8  Biss.  134,  F.  C.  10624. 

A.  B.  R.  247.  *G  In  re  Beerman,  112  F.  R.  663, 

42  In  re  Veitch,  101  F.  R.  251,  4     7  A.  B.  R.  431. 

A.  B.  R.  112;   In  re  Ruchle,   2  N. 

B.  R.  175.  F.  C.  12113. 


632  THE   NATIONAL   BANKRUPTCY    LAW.  ClI.  Gi) 

remains  unpaid,*'^     See  Debts  founded  on  Contracts,  ante,  § 
984. 

§998. of  partnership.— See  Partnership,  ante,  §§  163- 

166. 

§999. for  rent.— The  rent  accrued  up  to  the  date  of 

the  filing  of  a  petition  in  bankruptcy  is  a  provable  debt.^^ 
Rent  for  the  unexpired  term  of  a  lease  though  it  provides 
that  for  such  unexpired  tenn  it  shall  become  due  and  payable 
upon  lessee's  becoming  bankrupt,  or  upon  default  in  the 
payment  of  rent,  which  occurs  prior  to  the  bankruptcy,  is  not 
provable;'*^  nor  is  a  penalty  provided  in  the  lease  in  case  of 
lessee's  bankruptcy,  nor  notes  given  for  instalments  of  rent 
to  accrue  in  the  future,  since  such  penalty  or  notes  cannot  be 
regarded  as  due  and  owing  at  the  time  of  filing  the  petition, 
but  accrued  subsequently;^^  nor  cost  of  restoring  premises 
under  covenant  to  do  so  at  expiration  of  lease.'^^  The  rent 
to  become  due  during  the  remainder  of  the  term  of  the  lease 
after  the  bankruptcy  of  the  lessee  cannot  be  said  to  be  a 
"fixed  liability  then  absolutely  owing,"  payable  in  the  future 
or  a  debt  of  any  kind,  but  it  is  an  unmatured  obligation  to 
pay  in  the  future  a  consideration  for  the  future  enjoyment 
and  occupancy  of  the  premises,  and  is  not,  therefore,  a  provable 
debt;^2  nor  is  an  indemnity  provided  for  in  the  lease  in  case 
of  lessee's  bankruptcy  against  all  loss  of  rent  and  other  pay- 
ments that  may  be  incurred  by  reason    thereof    during  the 

«  In  re  Gerson,  105  F.  R.  893,  5        si  in  re  Arnstein,  supra. 

A.  B.  R.  850.  52  In   re   Mahler,  3   N.  B.   N.  R. 

48  Bray  v.  Cobb,  2  N.  B.  N.  R.  39;  In  re  Arnstein,  2  N.  B.  N.  R. 
586,  100  F.  R.  270,  3  A.  B.  R.  788;  106,  101  F.  R.  706;  In  re  Frankel, 
In  re  Arnstein,  2  N.  B.  N.  R.  106,  2  N.  B.  N.  R.  840;  In  re  Jefferson, 
101  F.  R.  706,  4  A.  B.  R.  246;  In  re  supra;  In  re  Shilliday,  1  N.  B.  N. 
Jefferson.  1  N.  B.  N.  288,  2  A.  B.  R.  475;  In  re  Collignon.  2  N.  B.  N.  R. 
206,  93  F.  R.  948;  In  re  Shilliday,  660,  4  A.  B.  R.  250;  Bray  v.  Cobb. 
1  N.  B.  N.  475;  In  re  Gerson,  1  N.  supra;  In  re  Mahler,  2  N.  B.  N.  R. 

B.  N.  315,  2  A.  B.  R.  170.  76;   s.  c.  105  F.  R.  428,  5  A.  B.  R. 

49  In  re  Cronson,  1  N.  B.  N.  474;  453;  In  re  Schierman,  2  N.  B.  N. 
In  re  Mahler,  3  N.  B.  N.  R.  39,  R.  118;  In  re  Ells,  2  N.  B.  N.  R. 
105  F.  R.  428,  5  A.  B.  R.  453;  At-  357;  aff'd  2  N.  B.  N.  R.  360,  98  F. 
kins  V.  Wilcox,  105  F.  R.  595,  5  A.  R.  967,  3  A.  B.  R.  564;  In  re  May 
B.  R.  313;  Contra,  In  re  Gold-  &  Merwin,  9  N.  B.  R.  419,  7  Ben. 
stein,  1  N.  B.  N.  422,  2  A.  B.  R.  603.  238,  F.  C.  9325;  Ex  p.  Lake,  16  N. 

50  In  re  Rhoads,  2  N.  B.  N.  R.  B.  R.  497,  2  Lowell,  544,  F.  C. 
179;  Atkins  v.  Wilcox,  105  F.  R.  7991;  Treadwell  v.  Marden,  18  N. 
595,  5  A.  B.  R.  313.  B.  R.  353;  but  see  In  re  Wynne,  4 


Ch.  63  PROVABLE    DEBTS.  633 

residue  of  the  term.^^  Where  premises  under  a  lease  are  con- 
demned for  a  public  use,  and  damages  are  paid  to  the  tenant 
therefor  upon  the  basis  that  his  obligation  to  pay  rent  during 
the  remainder  of  the  term  will  continue,  upon  the  bankruptcy 
of  the  tenant,  the  unpaid  instalments  of  rent,  at  their  value 
at  the  time  of  bankruptcy,  would  doubtless  be  provable.^*  If 
a  note  given  for  rent  is  not  paid  at  maturity  the  claim  is 
provable  as  if  the  note  had  never  been  given.^^  The  action 
of  a  lessor  in  reletting  the  building  to  another  after  the  bank- 
ruptcy of  the  lessee,  amounts  to  the  eviction  of  the  bankrupt 
and  the  termination  of  the  lease.^*' 

See  also  Leases,  post,  §  1171.  . 

§  1000.  Secured  claims.— The  claim  of  a  creditor  who  has 
collateral  therefor  is  provable  without  applying  such  collat- 
eral;^" and  so  is  a  mortgagee's  claim  though  he  has  obtained 
leave  to  foreclose  in  a  state  court,  provided  he  does  not  take 
a  deficiency  judgment,  and  he  has  not  prosecuted  such  suit 
to  judgment;^®  as  is  also  the  claim  of  a  plaintiff  in  a  suit 
pending  when  the  petition  is  filed.^^ 

See  also  Proof  of  Secured  Claims,  ante,  §  842. 

§  1001.  Stocks  and  stockholders.— The  liability  of  the  stock- 
holders of  a  corporation  for  its  debts  is  not  only  a  debt 
created  by  statute,  but  is  also  founded  upon  an  implied  con- 
tract and  provable  in  bankruptcy  if  the  circumstances  are 
such  that  the  claimant  could  have  maintained  a  suit  to  enforce 
the  stockholder's  liability.  It  is  a  collateral  security  for  the 
benefit  of  the  creditors  and  not  a  penalty  for  the  misbehavior 
of  the  directors  or  stockholders,  but  rather  in  the  nature  of 
a  contract  of  suretyship  for  corporate  debts.^*^  Where  one 
owes  an  unpaid  subscription  to  the  capital  stock,  he  cannot 
prove  or  set  off  against  such  subscription  an  individual  claim.^^ 
The  amount  previously  ascertained  to  be  due  for  an  assessment 

N.  B.  R.  5,  Chase,  227,  F.  C.  1817.         57  Lewis  v.  U.  S.,  14  N.  B.  R.  64, 

53  In  re  Ells,  2  N.  B.  N.  R.  360,     92  U.  S.  618. 

98  F.  R.  967,  3  A.  B.  R.  564.  ss  in  re  Linforth,  87  F.  R.  386. 

54  In  re  Clancy,  10  N.  B.  R.  215,  59  Bucknam  v.  Dunn,  16  N.  B.  R. 
F.  C.  2782.  470,  2  Hask.  215,  F.  C.  2096. 

55  In  re  Bowne  &  Ten  Eyck,  12  eo  in  re  Rouse,  1  A.  B.  R.  393; 
N.  B.  R.  529,  F.  C.  1741.  James  v.   Atl.   Delaine   Co.,   11   N. 

56  In  re  Mahler,  105  F.  R.  428,  5  B.  R.  390,  F.  C.  7179. 

A.  B.  R.  453.  ci  In    re    Albert   Goodman   Shoe 

Co.,  96  F.  R.  949,  3  A.  B.  R.  200. 


G34  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  03 

is  provable  against  a  bankrupt  stockholder  where  the  charter 
of  a  corporation  provides  for  the  forfeiture  of  stock  upon 
which  an  assessment  remains  unpaid.*'- 

Where  a  broker  holds  stock  on  a  margin  an  unreasonable 
length  of  time  after  the  buyer's  bankruptcy,  and  then  sells 
without  notice  at  a  loss,  the  balance  is  not  provable  against 
the  buyer's  estate.^^  One  who  puts  up  margins  with  a  broker 
on  purchases  of  commodities  for  future  delivery  cannot  prove 
his  claim  therefor  against  the  estate  of  the  broker,  where  there 
is  no  evidence  to  show  the  result  of  the  transactions,  or  that 
any  returns  were  received  by  the  bankrupt  broker  therefrom.''^ 
A  claim  is  provable  against  a  bankrupt  corporation,  whose 
articles  limit  its  indebtedness  to  one-half  its  paid-up  capital, 
if  it  does  not  exceed  one-half  the  original  capital  stock  and 
the  stock  dividends  duly  authorized,  though  it  does  exceed 
one-half  its  available  assets.^^ 

See  also  post,  §  1216. 

§  1002.  Debts  due  the  United  States  or  State.— The  United 
States  may  prove  their  claim  in  the  bankruptcy  proceedings,®^ 
but  as  they  are  in  nowise  bound  by  a  bankruptcy  act  in  the 
absence  of  a  specific  provision  to  that  effect"'^  they  are  under 
no  obligation  to  do  so,  but  are  considered  as  standing  in  the 
category  of  creditors  who  are  not  affected  by  the  proceedings 
except  as  otherwise  provided.^^  It  is  the  trustee's  duty,  how- 
ever, to  settle  first  the  claims  of  the  United  States,  and  a 
failure  so  to  do  makes  him  personally  liable.®^  While  under 
clause  "j"  of  section  57  debts  of  the  United  States  will  be 
allowed  only  for  the  amount  of  the  pecuniary  loss  where  they 
are  due  as  a  penalty  or  forfeiture,  it  cannot  be  deemed  as  in 
derogation  of  their  general  rights  in  the  collection  of  claims, 
but  is  merely  a  limitation  on  the  amount  of  recovery  out  of 
an  estate. 

It  has  been  held  that  a  state  need  not  prove  its  claim  in 
bankruptcy  in  order  to  recover  taxes  due  it  on  bankrupt's 

62  Gibson  v.  Lewis,  11  N.  B.  R.  Bk.,  101  P.  R.  977,  4  A.  B.  R.  363. 
247,  F.  C.  5393.  ee  Bousfield  &  Poole  Mfg.  Co.,  17 

63  In  re  Daniels,  13  N.  B.  R.  46,     N.  B.  R.  153,  F.  C.  1704. 

6  Biss.  405,  F.  C.  3566.  e?  Lewis  v.  U.  S.,  92  U.   S.  619; 

64  In  re  Knott,  109  F.  R.  626,  6  U.  S.  v.  Herron,  20  Wall.  251;  Har- 
A.  B.  R.  749;  see  Knott  v.  Putnam,     rison  v.  Sterry,  5  C.  R.  289. 

107  F.  R.  907,  6  A.  B.  R.  80.  es  u.  S.  v.  Barnes,  31  F.  R.  705. 

65  Cunningham   v.    German    Ins.         69  u.  S.  Rev.  Stat.,  §§  3466,  3467. 


Cu.  63  PROVABLE    DEBTS.  G35 

property,  nor  could  the  Federal  law  compel  the  proof  of  such 
claim  nor  sell  the  property  so  subject,  free  from  the  tax  lien.'^*^ 

See  Debts  of  United  States  or  State  entitled  to  Priority, 
post,  §  1011 ;  also  Debts  due  the  Government,  ante,  §§  420,  421. 

§  1003.  Fraud  or  preference,  as  affecting  provability.— 
Whether  a  claim  is  created  by  fraud  or  not,  or  a  preference 
be  given  on  it,  or  a  judgment  be  obtained  which  the  bank- 
ruptcy proceedings  annul,  it  is  still  provable  in  the  bankruptcy 
proceedings."^  The  claim  of  a  creditor,  who,  in  ignorance  of 
certain  alleged  fraudulent  transactions,  filed  it  under  a  general 
assignment,  is  provable;'^-  and  so  is  a  claim  which  originated 
in  contract,  even  though  induced  by  fraud  and  prosecuted  in 
an  action  for  damages,  although  the  fraud  may  have  to  be 
proved  to  entitle  the  plaintiff  to  recover.'''^  Where  a  creditor 
demanded  payment  in  full  in  advance  as  a  condition  for 
signing  a  composition,  and  is  required  to  return  the  money  to 
the  trustee,  and  the  composition  fails,'^^  such  claim  is  prov- 
able ;  so  is  the  claim  of  a  creditor  which  he  was  induced  to 
release  by  the  fraudulent  representations  of  another  creditor  ;'^'' 
but  not  if  the  debt  was  contracted,  in  whole  or  in  part,  in 
violation  of  a  law  of  a  state  •,'^^  nor  if  for  expenses  incurred  in 
trying  to  obtain  a  preference.'^'^  A  creditor  obtaining  an  at- 
tachment is  deemed  to  have  a  preference,  and  therefore  does 
not  have  a  provable  debt."^^ 

§  1004.  'b.  Liquidation  of  claims.— Unliquidated  claims 
'against  the  bankrupt  may,  pursuant  to  application  to  the 
'court,  be  liquidated  in  such  manner  as  it  shall  direct,  and 
'may  thereafter  be  proved  and  allowed  against  his  estate. '^^ 

70  stokes  V.  State  of  Ga.,  9  N.  B.  72  in  re  Curtis,  1  N.  B.  N.  357, 
R.   191.  2  A.  B.  R.  226,  94  F.  R.  630. 

71  In    re    Lazarovic,    1   A.    B.    R.  73  in    re    Schwarz,    15    N.    B.    R. 
476;    In    re   Norcross,    1   A.    B.    R.  330,  14  Blatch.  196,  F.  C.  12502. 
644;  In  re  Richard,  2  A.  B.  R.  506,  7iBrookmire  v.   Bean,   12   N.  B. 
1  N.  B.  N.  487,  94  F.  R.  633;   In  re  R.  217,  3  Dill.  136,  F.  C.  1942. 
Black,  17  N.  B.  R.  399,  F.  C.  1459;  7g  Michaels  v.  Post,  12  N.  B.  R. 
In  re  Arnold,  2  N.  B.  R.  61,  F.  C.  152,  21  Wall.  398. 

551;    In  re  Schoenenberger,  15  N.  76  in  re  Paddock,  6  N.  B.  R.  132, 

B.  R.  305,  F.  C.  12473;   In  re  Run-  F.   C.  10657;    In  re  Eady.  3  N.  B. 

die  &  Jones,  2  N.  B.  R.  49,   F.  C.  N.  R.  434. 

12138;   but  see  In  re  Knox,  98  F.  77  in  re  Archenbrown.  8  N.  B.  R. 

R.   585.  429,  F.  C.  503. 

In  case  of  involuntary  surrender  7s  in  re  Schenkein,  113  F.  R.  421, 

of  preference,  see  §  876,  post.  7  A.  B.  R.  162. 

79  Analogous  provision  of  act  of 


63(1  THE   NATIONAL   BANKRUPTCY    LAW.  ClI.  03 

^  1005.  Unliquidated  claims.— This  subdivision  does  not  add 
to  the  de])ts  provable  under  subdivision  a,  but  merely  provides 
lor  the  liquidation  of  such  as  are  unliquidated;  and  hence 
does  not  authorize  the  liquidation  of  claims  arising  ex  delicto, 
unless  they  are  of  such  a  nature  that  the  claimant  may  waive 
the  tort  and  recover  in  quasi  contract.^*^  In  order  to  be 
proved,  a  claim  should  be  liquidated  by  being  reduced  to 
judgment,*^*  and  until  so  liquidated  the  holder  does  not  be- 
come a  creditor.^-  Where  some  of  the  elements  of  a  single 
claim  are  confessedly  unliquidated,  the  claim  as  a  v^rhole  is 
an  unliquidated  one.*^^  These  should  be  liquidated  as  a  stock- 
holder's liability,  which  may  be  by  a  stockholder's  liability 
suit,  or,  if  the  facts  are  all  admitted,  or  are  simple  and  free 
from  complications,  the  court  itself  may  make  the  computation 
and  liquidate  the  claim  ;*"^  or  a  claim  for  salary  to  accrue  of  a 
person  under  annual  employment,  discharged  before  the  expi- 
ration of  his  term.**-^  A  creditor  who  has  been  permitted  to 
rescind  a  sale  on  account  of  fraud  on  the  part  of  the  bankrupt 
in  the  purchase  and  has  secured  a  return  of  the  unsold  goods 
from  the  trustee,  may  have  his  claim  for  the  proceeds  of  the 

1867.       "Sec.     19.     .     .     .     In    all  proved  or  allowed  against  the  es- 

cases  of  contingent  debts  and  con-  tate." 

tingent    liabilities    contracted     by  ^'>  In  re   Hirschman,  2  N.  B.  N. 

the  bankrupt  and  not  herein  other-  R.  1123,  104   F.  R.   69,  4  A.  B.  R. 

wise    provided    for,    the    creditor  716;   In  re  Yates,  114  F.  R.  365,  8 

.     .     .     may  at  any  time  apply  to  A.   B.   R.   69. 

the  court  to  have  the  present  value  '^i  In    re   Hilton,   104    F.   R.    981, 

of  the  debt  or  liability  ascertained  4  A.  B.  R.  774. 

and   liquidated,   which   shall    then  It  has  been  held  that  an  action 

be    done   in    such    manner    as   the  for    damages    for    an    assault   and 

court  shall  order,  and  he  shall  be  battery  should  be  reduced  to  judg- 

allowed  to  prove  for  the  amount  so  ment,  where  it  would  be  provable. 

ascertained.     ...     If  any  bank-  This  seems  to  be   contrary  to  the 

rupt   shall    be   liable   for  unliqui-  law.     Beers   v.   Hanlin,    99   F.    R. 

dated  damages  arising  out  of  any  695,  3  A.  B.  R.  745. 

contract  or  promise,  or  on  account  j^^  in   re   Big  Meadows  Gas   Co., 

of   any    goods   or   chattels   wrong-  113  F.  R.  974,  7  A.  B.  R.  697. 

fully    taken,    converted,    or    with-  ss  in   re   Big  Meadows  Gas  Co.. 

held,   the   court   may    cause    such  113  F.  R.  974,  7  A.  B.  R.  697. 

damages    to    be    assessed    in    such  84  in  re  Rouse,  1  A.  B.  R.  393; 

mode  as  it  may  deem  best,  and  the  In  re  Marshall  Paper  Co.,  1  N.  B. 

sum    so   assessed    may   be    proved  N.  407,   2  A.   B.  R.  656,   95  F.   R. 

against  the  estate.    No  debts  other  419. 

than  those  above  specified  shall  be  ss  In  re  Silverman  Bros.,  2  N.  B. 


Ch.  03  PROVABLE    DEBTS.  637 

•roods  sold  liquidated  under  the  court's  direction,  and  prove 
the  same  as  a  debt  against  the  estate.^^ 

Unliquidated  damages  growing  out  of  a  contract  when 
assessed  are  provable  claims,^'^  and  such  assessment  may  be 
by  judgment  of  a  state  court,^^  and  would  include  a  claim 
for  breach  of  covenant  of  warranty  upon  eviction  ■,^^  or  of  title 
where  there  is  an  unrelinquished  dower  right  and  the  person 
entitled  survives  and  asserts  the  same,^*^  or  the  like. 

A  claim  cannot  be  liquidated  and  proved  for  rent  to  accrue 
under  a  lease  after  the  filing  of  a  petition  in  bankruptcy  ;^^ 
or  as  a  penalty ,^2  or  for  damages  for  breach,^^  or  a  right  of 
action  for  misrepresentation  of  a  firm's  condition,  afterward 
bankrupt,^^  or  a  claim  for  damages  for  an  injury  caused  by 
the  negligence  of  a  special  receiver  or  assignee  while  operat- 
ing a  railroad,-"^  since  they  are  debts  not  affected  by  a  dis- 
charge. That  the  debts  are  contingent,  or  that  it  is  diflficuit 
to  assess  damages  for  a  breach  of  contract  are  not  valid  objec- 
tions to  the  proof  of  a  claim."*' 

A  claim  for  damages  for  breach  of  warranty,  in  the  absence 
of  a  contract,  expressed  or  implied,  fixing  any  amount  of 
damages,  has  been  held  not  to  be  founded  on  a  contract  within 
the  provisions  of  section  63a  (4)  of  the  law,  so  as  to  make  it 
the  basis  of  an  adjudication  in  bankruptcy,  but  is  such  an 
unliquidated  claim,  as  after  an  adjudication  may  be  liquidated 
as  directed  by  the  court  under  subdivision  b  of  this  section.^^ 

N.   760,  101   F.  R.  219,  4  A.  B.  R.  R.  34;    In  re  Morales  et  al.,  105  F. 

83,  s.  c.  1  N.  B.  N.  286,  2  A.  B.  R.  R.  761,   5  A.  B.  R.  425. 

515;    In  re  Hilton,  3  N.  B.  N.  R.  ''o  Rlggin  v.  Maguire,  8  N.  B.  R. 

105;   see  also  Ex  p.  Pollard,  17  N.  484,  15  Wall.  549. 

B.    R.    228,    2    Lowell,    411,    F.    C.  9i  In  re  Collignon,  2  N.  B.  N.  R. 

11252.  660,  4  A.  B.  R.  250. 

86  In  re  Hirschman,  2  N.   B.  N.  92  In   re  Rhoads,  2   N.   B.  N.  R. 

R.  1123,  104  F.  R.  69;  In  re  Heins-  179. 

furter,  1  N    B.  N.  504,  3  A.  B.  R.  f-s  In  re  Arnstein,  101  F.  R.  706. 

113,  97   F.  R.  198;    see  In  re  Wll-  4  A.  B.  R.  246,  aff'g  2  N.  B.  N.  R. 

cox  &  Wright,  1  N.  B.  N.  188,  1  A.  106. 

B.  R.  544.  94  In  re  Schuchardt  &  Wells,  15 

>*■!  In  re  Osage  Valley  &  S.  Kan.  N.    B.    R.    161,   8    Ben.    585,    F.   C. 

R.   R.   Co.,   9   N.   B.   R.    281,   F.   C.  12483. 

10592;    In    re   Claugh,   2  N.    B.   R.  or,  Metz  v.  R.  R.  Co.,  12  N.  B.  R. 

59.  2  Ben.  508,  F.  C.  2905.  559. 

'''<  In  re  Rundle  &  Jones,  2  N.  B.  »g  Ex  p.  Pollard,  17  N.  B.  R.  228, 

R.  49.  F.  C.  12138.  2  Lowell,  411,  F.  C.  11252. 

>^»  Williams  v.  Harkins,  15  N.  B.  07  in  re  Morales,  105  F.  R.   761. 

5  A.  B.  R.  425. 


CHAPTER  LXIV. 


DEBTS    WHICH    HAVE    PRIORITY. 


§1006.   (64a)  Taxes  entitled  to  pri- 
ority. 

1007.  To    what    subdivisions    "a" 

and  "b"  apply. 

1008.  Order  of  priority. 

1009.  Payment   in   case    property 

incumbered. 

1010.  Order    of    payment    where 

lack  of  funds. 

1011.  United    States    entitled    to 

priority. 

1012.  Liability    for    ignoring 

priority. 

1013.  In  what  cases. 

1014.  Taxes  due  a  State,  county, 

or  municipality. 

1015.  Taxation  of  funds  in  hands 

of  trustee,  etc. 

1016.  b.  Order  of  priority. 

1017.  Care    and    preservation    of 

property — Time  covered. 

1018.  Prior  to  filing  petition. 

1019.  Property   recovered   by 

creditor. 

1020.  Includes  rent. 

1021.  Filing  fees  in  involuntary 

cases. 

1022.  Cost  of  administration. 

1023.  Auctioneer's  fees. 

1024.  Witness'  fees  and  mile- 
age. 

1025.  Attorney  or  counsel  fees. 

1026.  Reasonable. 

1027.  Determinable     by     the 

court. 

1028.  For     services    actually 

rendered. 

1029.  Petitioning       creditors 

in  involuntary  cases. 


1030.  Bankrupt,    in    involun- 
tary cases. 

1031.  In        voluntary 

cases. 

1032.  Representing  bankrupt 

and  creditors. 

1033.  To  creditors' attorneys. 

1034.  To  trustees'  attorney. 

1035.  In  case  of  lien  creditor. 

1036.  To    general    assignee's 

attorney. 

1037.  Receiver. 

1038.  Priority  of. 

1039.  Bankrupt's  expenses. 

1040.  Trustee,    extra   allowance — • 

costs. 

1041.  Wages,    whose    entitled    to 

priority. 

1042.  Earned     within     three 

months. 

1043.  Assigned    or    in    judg- 
ment. 

1044.  Debts    entitled    to    priority 

under    State    or    Federal 
laws. 

1045.  Labor  liens. 

1046.  Rent  prior  to  petition. 

1047.  Claims  of  bank  depositors. 

1048.  Claims  on  checks  or  orders. 

1049.  Judgments. 

1050.  Mortgages. 

1051.  Waiver. 

1052.  c.  Disposition    of    property 

on   setting  aside  composi- 
tions or  discharge. 

1053.  Distinction     between     ante 

and  post  creditors. 


§1006.     '(Sec.  64a)     Taxes  entitled  to  priority.— The  court 
■  shall  order  the  trustee  to  pay  all  taxes  legally  due  and  owing 

638 


Ch.  64  DEBTS   ENTITLED  TO   PRIORITY.  639 

'by  tht*  bankrupt  to  the  United  States,  state,  county,  district, 
'or  muwicipality  in  advance  of  the  payment  of  dividends  to 
'creditors,  and  upon  filing  the  receipts  of  the  proper  public 
'officers  for  such  payment  he  shall  be  credited  with  the  amount 
'thereof,  and  in  case  any  question  arises  as  to  the  amount  or 
'legality  of  any  such  tax  the  same  shall  be  heard  and  deter- 
' mined  by  the  court.' 

§  1007.  To  what  subdivision  "  a  "  and  "  b  "  apply.— The  first 
two  subdivisions  (a  and  b)  of  this  section  direct  the  order  of 
distribution  of  the  bankrupt's  property.  Notwithstanding  it 
has  been  hekU  that  it  is  applicable  only  after  the  assets  have 
been  marshaled  and  the  liens  dischargee  and^  that  it  does  not 
affect  liens  which  come  within  other  provisions  of  the  statute, 
the  better  opinion  is  that  it  applies  to  all  of  the  bankrupt's 
property  which  may  come  under  the  control  of  the  bankruptcy 
court  and  is  administered  in  the  bankruptcy  proceedings. 
The  law  provides  for  a  full  and  complete  settlement  of  the 
bankrupt's  affairs  as  of  the  date  of  the  filing  of  the  petition. 
To  do  this  it  is  not  sufficient  to  consider  only  the  unsecured 
creditors  and  the  property  which  remains  after  the  liens  are 
satisfied,  but  it  is  necessary  to  see  that  the  liens  are  satisfied 
in  their  proper  order  and  that  the  balance  of  the  bankrupt's 
property  is  distributed  among  his  other  creditors  in  their 
order.  That  the  act  recognizes  this  fact  is  shown  in  the  re- 
quirement that  all  the  bankrupt's  propert}^  whether  encum- 
bered or  not,  and  all  his  creditors,  secured  as  well  as  unsecured, 
must  be  included  in  his  schedules  ;3  that  the  trustee  is  to 
examine  into  the  securities  and  take  proper  steps  to  save  any 
excess  over  the  amount  secured  ;^  and  that  the  court  of  bank- 
ruptcy may  sell  the  property  free  of  liens,  transferring  the 
liens  to  the  proceeds,  or  subject  to  liens,  or  direct  the  trustee 
to  appear  in  any  proceeding  to  enforce  the  liens,  whichever 
course  will  best  subserve  the  interest  of  the  bankrupt  estate 

1  In  re  Kerby-Denis  Co.,  1  N.  B.  4  in  re  Coffin,  1  N.  B.  N.  507,  2 
N.  399,  95  F.  R.  116,  2  A.  B.  R.  402,  A.  B.  R.  344;  Heath  v.  Shaffer,  1 
aff'g  1  N.  B.  N.  337,  94  F.  R.  818.  N.  B.  N.  399,  93  F.  R.  647,  2  A.  B. 
2  A.  B.  R.  218.  R.  98;   In  re  Holloway,  1  N.  B.  N. 

2  In  re  Frick,  1  N.  B.  N.  214,  1  264,  93  F.  R.  638,  1  A.  B.  R.  659; 

A.  B.  R.  719;   In  re  Sunseri,  3  N.     In  re  N.  Y.  Kerosene  Oil  Co.,  3  N. 

B.  N.  R.  61.  B.  R.  31,  F.  C.  7726;  In  re  Metzger, 

3  Sec.  7  (8),  act  of  1898.  2  N.  B.  R.  114,  F.  C.  9510. 


640  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  64 

and  also  preserve  the  valid  rights  of  the  lienors  ;•''•  at  the  same 
time  the  act  recognizes  as  valid  various  liens.*^  To  illustrate, 
suppose  the  bankrupt  owned  a  recently  improved  residence 
lot,  worth,  with  improvements,  $16,000,  on  which  there  were 
taxes  due,  a  vendor's  lien  for  part  of  the  purchase  money  of 
the  lot,  a  mortgage  for  money  borrowed  to  improve  the  prop- 
erty, a  judgment  subsequent  to  said  mortgage  which  was  a 
lien  on  the  property,  and  labor  and  mechanics'  liens,  which 
by  the  law  of  the  state  took  precedence  of  all  other  liens, 
while  the  bankrupt  claimed  his  homestead  exemption,  which 
the  state  law  limited  in  value,  out  of  the  property,  and  that, 
if  sold  free  of  liens,  the  property  would  sell  for  enough  to  pay 
all  these  claims  and  leave  something  for  the  other  creditors. 
Clearly  it  would  be  the  trustee's  duty  under  the  act  to  apply 
to  the  court  to  order  such  a  sale  and  of  the  court  to  grant  it, 
thus  bringing  the  proceeds  into  the  bankruptcy  court,  to  be 
administered  in  the  bankruptcy  proceedings."  In  many  cases 
claims  subsequent  in  point  of  time  are  prior  liens,  as  a  labor 
claim  over  a  prior  mortgage  ;^  a  mechanic 's  lien  over  a  mort- 
gage;'-* or  a  labor  claim  over  a  landlord's  lien.^^ 

§1008.  Order  of  priority.— The  order  of  priority,  (1)  taxes, 
(2)  cost  of  preserving  the  estate,  (3)  costs  of  administration, 
(4)  wages,  and  (5)  liens  in  their  order, prescribed  (subdivisions 
a  and  b),  is  that  usually  followed  in  equity.  That  all  bank- 
rupt's property  in  the  control  of  the  court  should  be  distrib- 
uted according  to  this  order  is  but  reasonable  and  in  accord 
with  the  course  adopted  in  railroad  receiverships,  which  go 
even  farther  and  give  priority  over  the  mortgages  to  receiver's 
certificates  issued  for  operating  expenses  and  betterments. 
Taxes  are  prior  in  lien  to  all  other  liens  except  judicial  costs,^^ 

5  In  re  San  Gabriel  Sanatorium  155  Mass.  459;  Allen  v.  Oxnard, 
Co.,  2  N.  B.  N.  R.  827,  102  F.  R.  152  Pa.  621;  Lookout  Lumber  Co. 
310,  4  A.   B.  R.  197.  v.  Hotel,  109  N.  C.  658;  Erdman  v. 

6  Sec.  67,  act  of  1898.  Moore  &  Co.,  58  N.  J.  L.  445;   Pa- 

7  In  re  Worland,  1  N.  B.  N.  316,  cific  Mutual  L.  I.  Co..y.  Fisher,  106 
92  F.  R.  893,  1  A.  B.  R.  450.  Cal.   224;    Carriger  v.   Mackey,   15 

8  Seventh    Nat.    Bk.   v.    Shenan-  Ind.  App.  392. 

doah  Iron  Co.,  35  F.  R.  436;  Fidel-  lo  In  re  Byrne,  2  N.  B.  N.  R.  247, 

ity  Ins.  Trust  &  T.  D.  Co.  v.  Iron  97  F.  R.  762,  3  A.  B.  R.  266. 

Co.,  81  F.  R.  439,  453.  n  State  of  Georgia  v.  Railroad,  3 

9  Central  Trust  Co.  v.  Wabash  R.  Woods,  434 ;  Central  Trust  Co.  v.  R. 
R.  30,  F.  R.  332;   Carew  v.  Stubbs,  R.,  110  N.  Y.  250,  41  N.  J.  L.  235. 


Ch.  64  DEBTS    ENTITLED   TO    PRIORITY.  641 

Avliich  costs  usually  include  reasonable  allowance  to  counsel 
and  are  paid  before  even  exemptions  are  set  aside.^-  Wages 
are  almost  universally  given  like  priority  over  statutory  and 
contractual  liens.^^ 

§  1009.  Pajonent  in  case  of  incumbered  property.— Whether 
the  incumbered  property  is  brought  in  voluntarily  or  involun- 
tarily would  seem  to  make  no  difference,  as  the  same  reasons 
exist  in  either  ease  for  subjecting  the  security  to  the  prior 
payments.  No  injustice  is  thereby  done  the  secured  creditor 
since  it  would  not  be  brought  into  the  bankruptcy  proceedings 
unless  there  were  other  claims  which  the  state  or  Federal  laws 
gave  priority  over  such  lien,  or  it  was  believed  that  something 
could  thereby  be  obtained  over  and  above  the  secured  debt.^^ 
T^nless  it  forms  practically  all  the  bankrupt's  property,  in 
which  case  it  would  only  bear  the  costs  and  expenses  of 
realizing  on  it  in  the  best  and  most  economical  manner,  it 
only  bears  its  proportion  of  the  costs.  Similarly  it  has  been 
held  that,  where  incumbered  property  was  disposed  of  through 
the  bankruptcy  proceedings,  the  amount  paid  the  secured 
creditors  was  a  dividend.!^  If  there  is  nothing  apparently  in 
the  property  over  the  security  and  it  is  not  brought  into  the 
bankruptcy  proceedings,  no  service  is  rendered  the  secured 
creditor,  no  benefit  accrues  to  him  from  the  proceedings,  and  no 
reason  exists  for  charging  him  with  any  part  of  the  expenses. 
There  is  no  inequality,  or  lack  of  uniformity,  in  this ;  the  one 
benefits  and  pays;  the  other  receives  nothing  and  is  required 
to  give  nothing.  The  state  insolvency  or  assignment  laws  are 
not  to  be  compared  with  the  bankrupt  law  in  this  respect, 
because  the  state  constitutions  prohibit  laws  impairing  the 
obligations  of  contracts  which  the  United  States  Constitution 
does  not.  A  law,  however,  is  not  to  be  construed  as  impairing 
the  obligations  of  contracts  unless  susceptible  of  no  other 
construction.  The  year  allowed  in  many  states  after  a  sale 
under  a  mortgage  for  the  mortgagor  to  redeem,  during  which 
he  retains  possession,  receives  the  rents  and  profits  and  may 
neglect  and  waste  the  property,  is  a  practical  illustration  of 

12  In  re  Gardner,  2  N,  B.  N.  R.^  92  F.  R.  901,  1  A.  B.  R.  472;  In 
806,  103  F.  R.  922,  4  A.  B.  R.  420.     —re  Lambert,  2  N.  B.  R.  138,  F.  C. 

IS  In    re    Byrne,    supra;    In    re     8026. 
Kerby-Denis  Co.,  supra.  i5  In  re  Barber,  1  N.  B.  N.  559, 

14  In  re  Pittelkow,  1  N.  B.  N.  234.     97  F.  R.  547,  3  A.  B.  R.  306. 


643  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  64 

where  the  contract  does  not  result  according  to  its  terms. 
This  is  sustained  as  relating  to  the  remedy.  This  very  year 
of  redemption  has  been  used  as  a  reason  for  bringing  incum- 
bered propert}'  into  bankruptcy.^ ^ 

§  1010.  Order  of  payment  where  lack  of  funds.— The  debts 
entitled  to  priority  are  to  be  paid  in  full  and  in  the  order 
set  forth  in  section  64  of  the  statute,  and  this  is  true  although 
such  payment  may  exhaust  the  fund  and  leave  nothing  for 
the  satisfaction  of  subsequently  enumerated  priority  claims, 
^ny  liens  not  enumerated  in  this  section,  follow  in  the  order 
provided  by  the  state  law,  and  it  has  been  held  that  although 
there  may  be  specific  liens  on  the  estate  sufficient  in  the 
aggregate  to  exhaust  the  entire  assets,  their  payment  must  be 
postponed  to  the  payment  of  wages  or  the  cost  and  expenses 
of  administration.!^  Furthermore,  where  there  are  only  suffi- 
cient funds  to  pay  priority  claims,  the  trustee  will  not  be 
permitted  to  expend  the  estate  in  litigation  concerning  the 
rights  of  general  creditors.!^ 

If  both  a  state  law  and  the  bankruptcy  act  give  priority  to 
the  same  class  of  debts,  the  latter  not  alone  controls  the  state 
law  in  case  of  absolute  conflict  between  the  two,  but  by  its 
express  regulation  of  these  priorities,  excludes  the  state  law 
altogether.!^ 

§  1011.  United  States  entitled  to  priority.— The  present  law 
as  the  Act  of  1867,  specifically  provides  that  taxes  due  the 
Federal,  state  or  municipal  governments  shall  be  entitled  to 
priority  of  payment,  but,  unlike  the  former,  the  present  law 
so  far  as  the  government  is  concerned  provides  for  priority  of 
taxes  only.  This  provision,  however,  is  not  to  be  considered 
as  superseding,  or  in  anywise  limiting,  sections  3466  and  3467 
of  the  Revised  Statutes,  but  is  to  be  construed  as  supplemen- 
tary and  in  pari  materia,  doubtless  being  inserted  in  the 
present  law  merely  to  recognize  and  reaffirm  the  right  which 
those  sections  gave  to  exclude  the  possibility  of  a  different 
conclusion.     Under  the  general  rule  of  interpreting  statutes 

16  In  re  Barber,  97  F.  R.  547,  1  is  In  re  Sawyer,  16  N.  B.  R.  460, 
N.  B.  N.  559,  3  A.  B.  R.  306.  2  Low.  551,  F.  C.  12396. 

17  In  re  Tebo,  101  F.  R.  419,  4  i9  In  re  Lewis,  99  F.  R.  935,  4 
A.  B.  R.  235;  See  also  In  re  Byrne,  A.  B.  R.  51. 

2  N.  B.  N.  R.  246,  97  F.  R.  762,  3 
A.  B.  R.  268. 


Ch.  64  DEBTS   ENTITLED   TO    PRIORITY.  643 

in  derogation  of  public  rights,  a  repeal  will  not  be  implied, 
but  must  be  in  express  terms,  hence  the  above-mentioned  sec- 
tions of  the  Revised  Statutes  cannot  be  considered  to  be 
affected  by  the  present  law,  or  by  the  act  repealing  the  bank- 
ruptcy law  of  1867.  Consequently,  while  taxes  only  are  men- 
tioned in  the  present  law,  any  debt,  demand  or  claim  which 
the  United  States  may  have  against  the  insolvent,  will  be 
entitled  to  priority  of  payment  under  section  3466,  which 
provides  that  the  debts  due  the  government  must  be  first 
satisfied  out  of  the  estate  of  an  insolvent,  and  this  right  of 
priority  extends  as  well  to  the  cases  in  which  a  debtor,  not 
having  sufficient  property  to  pay  all  of  his  debts,  makes  a 
voluntary  assignment,  or  in  which  the  estate  and  effects  of 
an  absconding,  concealed,  or  absent  debtor  are  attached  by 
process  of  law,  as  to  cases  in  which  an  act  of  bankruptcy  is 
committed. 

The  United  States  may  prove  their  claim  and  assert  their 
priority  in  the  proceedings  in  the  bankruptcy  court,  but  as  in 
the  absence  of  a  specific  provision  they  are  in  nowise  bound 
by  a  bankruptcy  law,-*^  it  has  been  held  that  they  are  under 
no  obligations  to  do  so,  and  hence  may  be  considered  as 
standing  in  the  category  of  creditors  who  are  not  affected  by 
the  proceedings  unless  specifically  mentioned.-^ 

§  1012. Liability  for  ignoring  priority  of  United  States. 

—It  is  provided,  however,  that  every  trustee  or  other  person, 
who  pays  any  debt  due  by  the  person  or  estate  from  whom,  or 
for  which  he  acts,  before  he  settles  and  pays  the  debts  due 
the  United  States  from  such  person  or  estate,  becomes  answer- 
able in  his  own  person  and  estate  for  the  debts  so  due  to  the 
United  States,  or  for  so  much  thereof  as  may  remain  due  and 
unpaid.22  The  assignee  becomes  a  trustee  for  the  United 
States,  and  i&  bound  to  pay  its  debt  first  out  of  the  proceeds 
of  the  debtor's  property.  If,  therefore,  he  has  notice  of  the 
existence  of  the  debt  of  the  United  States,  he  cannot  escape 
personal  liability  for  its  amount,  to  the  extent  of  the  value  of 
the  assets  that  come  to  his  hands,  if  he  fails  to  provide  for  it 
before  making  distribution  to  other  creditors.  Such  is  the 
rigor  of  the  statute  that  he  cannot  invoke  the  judgment  of  a 

20  Lewis  V.  United  States,  92  U.  21  u.  S.  v.  Barnes,  31  F.  R.  705; 
S.  619.  In  re  Huddell,  47  F.  R.  206. 

22  U.  S.  R.  S.  Sec.  3467. 


044  THE   NATIONAL   BANKRUPTCY   LAW.  Cn.  64 

court  of  competent  jurisdiction  directing  him  to  distribute 
the  assets  to  specified  creditors  as  a  justification,  when  it  does 
not  appear  that  the  United  States  were  a  party  to  the  proceed- 
ings, or  that  he  took  proper  measures  to  secure  the  priority 
of  the  United  States  in  the  distribution.-"*  Although  it  has 
been  held  that  this  right  of  priority  must  be  asserted,  and  the 
failure  of  the  government  with  full  knowledge  of  the  adjudi- 
cation, to  make  claim  before  final  settlement,  waives  such 
right  and  leaves  no  ground  on  which  to  hold  the  trustee  re- 
sponsible out  of  his  own  means;-*  this  overlooks  the  fact  that 
laches,  however  gross,  cannot  be  imputed  to  the  government.^^ 

§  1013. in  what  ca^es. — The    provisions   of    the   law 

giving  priority  to  the  United  States  in  cases  of  insolvency, 
now  embodied  in  sections  3466  and  3467  of  the  Revised  Stat- 
utes, originated  in  the  Act  of  Congress  of  1797,  as  supple- 
mented by  the  Act  of  March  2,  1799,  and  have  frequently  been 
considered  by  the  courts.  It  is  established  by  many  adjudi- 
cations, in  which  the  meaning  and  effect  of  these  provisions 
have  been  discussed,  that  such  priority  extends  to  all  classes 
of  debts,  whether  liquidated  or  unliquidated,  joint  or  several, 
legal  or  equitable,  whether  payable  at  present  or  in  the  future ; 
and  when  the  insolvent  debtor  has  made  a  voluntary  general 
assignment,  or  committed  an  act  of  bankruptcy,  that  such 
priority  extends  to  all  his  estate  which  comes  to  the  hands  of 
his  trustee  or  assignee.-^  Thus  they  are  entitled  to  priority 
of  payment  of  penalties  for  violation  of  the  revenue  or  other 
laws  -^"^  and  the  claim  of  the  government  against  a  firm  is  joint 
and  several  and  is  entitled  to  priority  out  of  either  the  joint 
or  several  estates.-^  It  has  also  been  held  that  if  a  person 
purchases  imported  articles  free  of  duty  and  is  compelled  to 
pay  the  duty,  to  get  possession  of  the  article,  he  is  entitled 
to  be  subrogated  to  the  priority  of  the  United  States,-^  which 

23  U.  S.  V.  Barnes,  31  F.  R.  705;  pard,  2  Sumner  133;  U.  S.  v.  Bank 
Field  V.  U.  S.,  9  Pet.  182;  U.  S.  v.  of  N.  Carolina,  6  Pet.  29. 
Murphy,  15  F.  R.  589.  27  in  re  Rosey,  8  N.  B.  R.  509,  6 

24  U.  S.  V.  Murphy,  15  F.  R.  589.  Ben.  507,   F.    C.   12066;    Barnes  v. 

25  U.  S.  V.  Barnes,  31  F.  R.  705;  U.  S.,  12  N.  B.  R.  526,  F.  C.  1023. 
U.  S.  V.  Kirkpatrick,  9  Wheat.  735;  28  Betterlein,  20  F.  R.  109;  U.  S. 
Cooke  V.  U.  S.,  91  U.  S.  389;  Harke  v.  Lewis,  F.  C.  15595;    see  Strass- 
V.  U.  S.,  95  U.  S.  316.  burger,  F.  C.  13526;  but  see  In  re 

26  U.   S.  V.  Barnes,  supra:    Field  Webb.  2  N.  B.  R.  183.  F.  C.  17313. 
V.  U.  S.  9  Pet.  182;  Howe  v.  Shep-        20  in   re   Kirkland,   14   N.  B.  R. 


Ch.  61         PRIORITY    OF    DEBTS   OF    UNITED    STATES.  645 

is  also  true  where  an  official  pays  to  the  government  the 
amount  of  a  dishonored  check  received  by  him  from  a  gov- 
ernment debtor,  he  is  entitled  to  be  subrogated  to  the  rights 
of  the  United  States  against  such  debtor.^*^  Furthermore,  this 
right  of  the  United  States  to  priority  is  independent  of  any 
securities  which  it  may  hold."^^ 

Section  3466  R.  S.  does  not  give  the  United  States  a  lien, 
but  only  a  priority  of  payment  out  of  the  property  or  estate 
of  its  insolvent  debtor,  after  it  has  passed  by  a  voluntary 
assignment,  or  by  operation  of  law,  to  a  third  person,  for  the 
benefit  of  creditors,  or  with  the  intent  to  defeat  such  priority, 
and  this  priority  will  attach  and  prevail  against  judgments, 
but  subject  to  all  prior  valid  liens  thereon.^- 

§1014.  Taxes  due  a  state,  county  or  municipality.— After 
payment  of  the  debts  due  the  United  States,  taxes  legally  due 
and  owing  by  the  bankrupt  to  a  state,  county,  district  or 
municipality,  must  next  be  paid,  and  the  courts  will  not  favor 
any  evasion  of  the  law  by  giving  a  too  liberal  construction  to 
its  words.  The  manifest  intent  of  the  law  is  that,  while  the 
estate  is  in  the  hands  of  the  trustee,  his  custodj^  will  not  con- 
stitute a  barrier  to  prevent  the  collection  of  taxes  which  would 
be  collectible  under  the  law  if  the  property  had  remained  in 
the  possession  and  control  of  the  bankrupt  himself.^^  Taxes 
that  are  due  and  owing  should  be  paid  before  the  secured 
creditors.^^ 

In  order  to  entitle  a  tax  to  priority,  it  should  not  be  a  mere 
claim  clothed  with  the  garb  of  a  tax,  but  should  be  actually  a 
tax,  its  character  being  determined  by  the  laws  of  the  state, 
so  that  if  it  is  merely  a  charge  or  license  exacted  for  the 
privilege  of  carrying  on  business,  as  the  ' '  mulct-tax ' '  of  Iowa, 
it  will  not  be  entitled  to  priority  ;^^  nor  will  it  be  paid  as  a 
priority  claim  out  of  bankrupt's  estate,  where  he  merely  holds 
property  under  a  lease  in  which  he  agreed  to  pay  all  taxes 

139,  2  Hughes  208,  F.  C.  7843;  but  521,  100  F.  R.  268.  4  A.  B.  R.  58; 

see  Kerr  v.  Hamilton,  F.  C.  7731.  In  re  Frick,  1  N.  B.  N.  214,  1  A.  B. 

30  In  re  McBride,  F.  C.  9682;  but  R.  719;  In  re  Sims,  118  F.  R.  356. 
see  Wilkinson  v.  Babbitt,  F.  C.  9  A.  B.  R.  162;  In  re  Baker,  1  A. 
17668.  B.  R.  526;   In  re  Tilden,  1  A.  B.  R. 

31  Lewis  V.  U.  S.,  92  U.  S.  618.  300. 

32  U.  S.  V.  Griswold,  8  F.  R.  496;  34  in  re  Hilberg.  6  A.  B.  R.  714. 
Cottrell  V.  Pierson.  12  F.  R.  805.  3.-.  in  re  Ott.  1   N.   B.  N.  571,  95 

33  In  re  Conhaim,  2  N.  B.  N.  R.  F.  R.  274.  2  A.  B.  R.  637. 


646  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  C4 

against  the  leased  property.^"  Where  personal  property  is 
yearly  assessed  as  of  a  certain  date,  the  trustee  in  selling 
should,  for  the  protection  of  the  purchaser,  provide  for  the 
I)aynieut  of  the  taxes  to  be  subsequently  levied  on  such  prop- 
erty.^''' But  in  the  case  of  taxes  due  a  State,  county  or  munici- 
pality, the  claim  therefor  should  be  proved  like  that  of  any 
other  creditor. 

Under  the  former  law  it  was  held  that  the  claim  of  lessors 
of  a  bankrupt  lessee  for  the  amount  of  taxes  paid  by  them, 
which  the  lessee  had  covenanted  to  pay,  was  not  entitled  to 
priority j-^'^  nor  was  a  debt  due  a  foreign  state  for  taxes.^^  A 
trustee  should  not  pay  taxes  w^here  such  payment  would 
operate  to  the  advantage  of  a  third  party  against  another, 
they  being  in  any  event  secure.'**'  If  under  state  laws  a 
member  of  a  partnership  is  liable  for  the  taxes  due  from  the 
firm,  taxes  levied  against  a  firm  must  be  paid  as  a  preferred 
claim,  from  the  estate  in  bankruptcy  of  a  member  thereof.^^ 
A  license  fee  or  franchise  tax  has  been  held  to  be  entitled  to 
priority  of  payment.^- 

Taxes  due  on  exempt  property  at  the  time  of  bankruptcy 
should  be  paid  by  the  trustee  in  bankruptcy  out  of  the  fund 
which  would  otherwise  go  to  the  general  creditors,  although 
such  taxes  are  a  lien  upon  and  enforceable  against  such  ex- 
empted property,  since  they  are  taxes  legally  due  and  owing 
as  provided  by  this  section,  and  the  bankrupt  is  entitled  to 
the  full  amount  of  exemption  allowed  by  the  state  law.^^ 

§  1015.    Taxation  of  funds  in  hands  of  trustee  or  receiver.— 

The  power  of  a  state  with  reference  to  the  taxation  of  property 
within  its  jurisdiction  extends  to  property  in  the  hands  of 
trustees,  receivers  and  others  acting  in  a  fiduciary  capacity, 
irrespective  of  the  residence  of  the  parties  beneficially  inter- 

36  In     re     Siegel-Hillman     Dry  4i  in  re  Green,  116  F.  R.  118,  8 

Goods  Co.,  2  N.  B.  N.  R.  856.  A.  B.  R.  553. 

3"  In  re  Keller,  109  F.  R.  131,  6  42  in  re  Mutual  Mercantile  Agen- 

A.  B.  R.  334.  cy,    8    A.    B.    R.    435;    Hancock   v. 

38  In  re  Parker,  F.  C.  10719.  Singer  Mfg.  Co.,  62  N.  J.  L.  289; 

39  In  re  Ambler,  8  Ben.  176,  F.  C.  Western  Union  Telegraph  Co.  v. 
271.  Mass.,  125  U.  S.  530,  547. 

40  In  re  Veitch,  101  F.  R.  251,  4  43  in  re  Tilden,  91  F.  R.  500,  1 
A.  B.  R.  112;  Foster  v.  Inglee,  13  A.  B.  R.  300,  1  N.  B.  N.  134;  In  re 
N.  B.  R.  239.  F.  C.  4973.  Baker,  1  A.  B.  R.  526. 


Ch.  64  DEBTS    ENTITLED    TO    PRIORITY.  647 

ostiid  in  the  property.^^  Accordingly  property  in  the  hands  of 
a  trustee  or  receiver  in  bankruptcy  is  subject  to  taxation  by 
the  state  the  same  as  though  in  the  hands  of  the  bankrupt  and 
proceedings  in  bankruptcy  had  not  been  instituted.  Propert}' 
in  the  hands  of  receiver  or  trustee  is  in  the  custody  of  the 
court,  and  is  therefore  not  subject  to  seizure  and  levy  under 
process  issuing  from  a  court  of  the  state  to  enforce  the 
collection  of  a  tax  assessed  under  the  laws  of  a  state.  The 
proper  course  is  for  the  collector  to  apply  to  the  court  or 
referee  for  the  payment  of  the  taxes  due,  in  which  event  such 
claim  when  so  presented  will  be  entitled  to  priority  of  pay- 
ment. As  stated  by  the  Supreme  Court  of  the  United  States 
in  the  case  of  Tyler,  property  in  the  hands  of  a  receiver  is  in 
custodia  legis,  but  is  "not  thereby  rendered  exempt  from  the 
imposition  of  taxes  by  the  government  within  whose  juris- 
diction the  property  is,  and  the  lien  for  taxes  is  superior  to 
all  other  liens  whatsoever,  except  judicial  costs,  when  the 
property  is  rightfully  in  the  custody  of  the  law,  but  this  does 
not  justify  a  physical  invasion  of  such  custody  and  a  wanton 
disregard  of  the  orders  of  the  court  in  respect  of  it. '  '^^ 

§  1016.  'b.  Order  of  priority.— The  debts  to  have  priority, 
'except  as  herein  provided,  and  to  be  paid  in  full  out  of 
'bankrupt  estates,  and  the  order  of  payment  shall  be 

'  (1)  The  actual  and  necessary  cost  of  preserving  the  estate 
'subsequent  to  filing  the  petition; 

*  (2)  The  filing  fees  paid  by  creditors  in  involuntary  cases  ;^'' 
'and,  where  property  of  the  bankrupt,  transferred  or  con- 
'cealed  by  him  either  before  or  after  the  filing  of  the  petition, 
'shall  have  been  recovered  for  the  benefit  of  the  estate  of  the 
'bankrupt  by  the  efforts  and  at  the  expense  of  one  or  more 
'creditors,  the  reasonable  expenses  of  such  recovery. 

'  (3)  The  cost  of  administration,  including  the  fees  and 
'mileage  payable  to  witnesses  as  now  or  hereafter  provided 
'by  the  laws  of  the  United  States,  and  one  reasonable  attor- 
'ney's  fee,  for  the  professional    services    actually  rendered, 

4+  Judson,  Tax.  §  407.  5,  1903,  subdivision  2  merely  pro- 

4r.  In  re  Tyler.  149  U.  S.  164,  182;  vided  that  "the  filing  fees  paid  by 

In  re  Sims,  118  F.  R.  356,  9  A.  B.  creditors     in     involuntary     cases" 

R.  162;   In  re  Conhaim,  supra;   In  should  be  entitled  to  priority.    The 

re     Baker,     supra;     In    re    Frick,  balance     of     this     subdivision     is 

supra.  added  by  the  amendatory  act. 
48  Prior  to  the  act  of  February 


048 


THE   NATIONAL  BANKRUPTCY    LAW. 


Cii.  64 


'irrespective  of  the  number  of  attorneys  employed,  to  the 
*})('titioning  creditors  in  involuntary  cases,  to  the  bankrupt  in 
'involuntary  cases  while  performing  the  duties  herein  pre- 
*  scribed,  and  to  the  bankrupt  in  voluntary  cases,  as  the  court 
'may  allow; 

'  (4)  Wages  due  to  workmen,  clerks,  or  servants  which  have 
'been  earned  within  three  months  before  the  date  of  the  com- 
'mencement  of  proceedings,  not  to  exceed  three  hundred 
'dollars  to  each  claimant;   and 

'  (5)  Debts  owing  to  any  person  who  by  the  laws  of  tlni 
'states  or  the  United  States  is  entitled  to  priority.'^' 

§  1017.  Care  and  preservation  of  property— time  covered.— 
Clause  (1)  of  this  subdivision  gives  priority  to  the  actual  and 
necessary  cost  of  preserving  the  estate  subsequent  to  the  filing 
of  the  petition,  which  would  include  any  expense  that  might 
be  proper  for  its  care,  preservation  or  protection.  It  would 
include  the  expense  of  cultivating  and  harvesting  growing 
crops  omitted  without  fraud  and  harvested  before  debtor  was 
required  to  surrender  them  to  the  trustee  ;^s  or  the  care  of  the 
property  pending    the    adjudication  of  the  trustee's    rights 


<7  Analogous  provision  of  act  of 
1867.  "Sec.  27.  .  .  .  Except 
that  wages  due  from  him  to  any 
operative,  or  clerk,  or  house  ser- 
vant, to  an  amount  not  exceeding 
fifty  dollars,  for  labor  performed 
within  six  months  next  preceding 
the  adjudication  of  bankruptcy, 
shall  be  entitled  to  priority,  and 
shall  be  first  paid  in  full. 

"Sec.  28.  .  .  .  In  the  order 
for  a  dividend,  under  this  section, 
the  following  claims  shall  be  en- 
titled to  priority  or  preference, 
and  to  be  first  paid  in  full  in  the 
following  order: 

"First.  The  fees,  costs,  and  ex- 
penses of  suits,  and  the  several 
proceedings  in  bankruptcy  under 
this  act,  and  for  the  custody  of 
property,  as  herein  provided. 

"Second.  All  debts  due  to  the 
United  States,  and  all  taxes  and 
assessments  under  the  laws  there- 
of. 


"Third.  All  debts  due  to  the 
State  in  which  the  proceedings  in 
bankruptcy  are  pending,  and  all 
taxes  and  assessments  made  under 
the  laws  of  such  State. 

"Fourth.  Wages  due  to  any  op- 
erative, clerk,  or  house  servant, 
to  an  amount  not  exceeding  fifty 
dollars,  for  labor  performed  with- 
in six  months  next  preceding  the 
first  publication  of  the  notice  of 
proceedings  in  bankruptcy. 

"Fifth.  All  debts  due  to  any  per- 
sons who,  by  the  laws  of  the 
United  States,  are  or  may  be  en- 
titled to  a  priority  or  preference. 
in  like  manner  as  if  this  act  had 
not  been  passed:  Always  provided 
That  nothing  contained  in  this  act 
shall  interfere  with  the  assessment 
and  collection  of  taxes  by  the  au- 
thority of  the  United  States  or  any 
State." 

■IS  In  re  Barrow.  3  N.  B.  N.  R.  95. 
98  F.  R.  582,  3  A.  B.  R.  414. 


Ch.  64  DEBTS    ENTITLED    TO    PRIORITY.  649 

where  a  judgment  creditor  contested  the  adjudication  and 
claimed  priority,^''  or  the  like.  It  is  for  the  bankruptcy  court 
to  determine  what  is  the  actual  and  necessary  cost  regardless 
of  what  has  been  paid/^'^ 

§  1018. Prior  to  filing  petition.— An  assignee  in  a  vol- 
untary assignment  is  not  entitled  under  this  provision  to  the 
cost  of  caring  for  the  estate  or  compensation  as  custodian 
prior  to  the  filing  of  the  petition,^^  notwithstanding  that  such 
services  appear  to  have  been  for  the  benefit  of  the  general 
creditors,  but  is  entitled  to  a  reasonable  allowance  for  such 
services  rendered  and  disbursements  made  subsequent  to  the 
filing  of  the  petition/''^  A  plaintiff  in  an  attachment  within 
four  months  of  bankruptcy  is  not  entitled  to  priority  of  pay- 
ment of  the  costs  of  caring  for  property  prior  to  the  petition, 
such  claim  being  held  "a  claim  for  taxable  costs,"  provable 
under  section  63  (3)  of  the  statute^^  unless  given  priority  by 
the  state  law. 

While  costs  for  the  care  and  preservation  of  property 
incurred  prior  to  the  filing  of  the  petition  are  not  within  the 
express  terms  of  this  provision,  when  they  result  in  benefit 
to  the  whole  estate  and  not  to  any  particular  creditor  or  in 
the  duplication  of  charges,  they  are  in  effect  given  practical 
priority  under  the  equity  powers  of  the  bankruptcy  courts  and 
should  be  paid  in  full."'^  Thus  a  judgment  creditor,  who  had 
set  aside  a  fraudulent  conveyance  but  lost  his  prior  right  to 
the  fund  by  the  adjudication  of  the  debtor  bankrupt,  will  be 
allowed  reasonable  indemnity  for  his  expenses  in  securing 
such    result  i^'^   and  an   assignee   in  a  voluntary    assignment, 

49  In  re  Carolina  Cooperage  Co.,  s.  c.  1  N.  B.  N.  532,  2  A.  B.  R.  522, 
1  N.  B.  N.  524,  96  F.  R.  604;  see  94  F.  R.  793.  Contra,  In  re  Klein, 
also  In  re  Gregg,  3  N.   B.  R.  131,     116  F.  R.  523,  8  A.  B.  R.  559. 

F.  C.  5796;  Zeiber  v.  Hill,  8  N.  B.  52  in  re  Peter  Paul  Book  Co.,  104 
R.  239,  F.  C.  18206.  F.  R.  786,  5  A.  B.  R.  105;  Abbott  v. 

50  In  re  Allen,  96  F.  R.  512,  3  A.      Summers,  116  F.  R.  687. 

B.  R.  38.  5^  In  re  Allen,  96  F.  R.  512,  3  A. 

•'^^1  Stearns  v.  Flick,  2  N.  B.  N.  R.  B.  R.  38;  In  re  Lewis,  99  F.  R.  935, 

1046,  103  F.  R.  919,  4  A.  B.  R.  723;  4  A.  B.  R.  51. 

In  re  McCauley,  2  N.  B.  N.  R.  1089;  54  in  re  Kurth,  17  N.  B.  R.  573; 

Hunter  v.  Byng,  9  F.  R.  277;  In  re  Berkholder  v.    Stump,   4   N.   B.   R. 

Gilblom,  2  N.  B.  N.  R.  60;  see  also  597. 

In  re  Solomon,  2  N.  B.  N.  R.  460;  --r,  in  re  Lesser,  2  N.  B.  N.  R.  599, 

In  re  Kenney,  Id.  143;  In  re  Fran-  100  F.  R.  433,  3  A.  B.  R.  815. 
cis  Valentine  Co.,  1  N.  B.  N.  529; 


650  THE  NATIONAL  BANKRUPTCY   LAW.  Ch.  64 

made  in  good  faith  and  who  has  acted  likewise,  has  been 
allowed  the  money  actually  disbursed  by  him  in  preserving 
the  estate  and  a  reasonable  sum  as  custodian,-'^*'  This  was  the 
view  taken  under  the  Act  of  1867,  in  which  the  provision  was 
"costs  *  *  for  the  custody  of  the  property,  as  herein  pro- 
vided, "^'^  implying  clearly  the  custody  after  the  commence- 
ment of  the  proceedings.^^  Under  the  present  act,  it  has  been 
held^-^  that  this  provision  relates  to  costs  directly  connected 
with  the  proceedings  in  bankruptcy  and  does  not  exclude, 
from  the  priority  given  them  by  the  state  law,  fees  and  costs 
accruing,  though  prior  to  the  petition,  in  legal  proceedings 
not  directly  connected  with  the  bankruptcy  proceedings;  and 
also  includes  expenses  incurred  by  a  receiver  appointed  to 
take  charge  of  the  property  by  the  bankruptcy  court.''*' 

§  1019. Property  recovered  for  estate  by  creditor.— 

Whenever  property  of  the  bankrupt  which  is  transferred  or 
concealed  by  him  either  before  or  after  the  filing  of  the  petition, 
is  recovered  for  the  benefit  of  the  estate  by  the  efforts  and  at 
the  expense  of  one  or  more  of  the  creditors,  the  reasonable 
expenses  of  such  recovery  is  entitled  to  priority  of  payment. 
While  the  law  does  not  specifically  provide  for  the  case  where 
a  fund  belonging  to  the  estate  is  rescued  from  destruction, 
expenses  incurred  therein  would  doubtless  be  entitled  to  a 
like  priority.^^  It  is  not  to  be  understood  from  this,  however, 
that  a  creditor  may  indiscriminately  institute  proceedings  for 
the  recovery  of  property  and  thus  burden  the  estate  with 
costs  or  litigation,  but  the  proper  procedure  is  first  to  apply 
to   the  trustee,   who  is  the   logical  representative   of  all  the 

56  In  re  Pauly,  1  N.  B.  N.  405,  2     N.   B.   R.    573,   F.    C.    7948;    In   re 

A.  B.  R.  334;  In  re  Kingman,  1  N.  Stubbs,  4  B.  R.  124,   F.  C.  13557; 

B.  N.  518.  Hunter  v.  Byng,  9  F.  R.  277;  In  re 

57  Sec.  28,  act  of  1898.  New  Hope  Mining  Co.,  7  N.  B.  R. 

58  In  re  Cohn,  6  N.  B.  R.  379,  F.  598;   Webb  v.  Ward,  6  F.  R.  163; 

C.  2966;  MacDonald  v.  Moore,  15  Bartlett  v.  Bramhall,  3  Gray,  257; 
N.  B.  R.  26,  8  Ben.  579,  F.  C.  8763;  White  v.  Hill,  148  Mass.  396; 
Burkholder  v.  Stumph,  4  N.  B.  R.  Clark  v.  Sawyer,  151  Mass.  64. 
191,  597,  F.  C.  2165;  In  re  Ward,  Contra,  Catlin  v.  Foster,  3  B.  R. 
9  N.  B.  R.  349,  F.  C.  17145;  In  re  540;  Bishop  v.  Hart,  28  Vt.  71. 
Irons  &  Coon,  18  N.  B.  R.  95,  F.  C.  59  in  re  Lewis,  99  F.  R.  935,  4 
7067;   Hastings  v.  Spenser,  1  Curt.  A.  B.  R.  51. 

C.  C.  504;   Clark  v.  Marks,  6  Ben.  eo  See.  2  (3),  act  of  1898. 

275;    Piatt  v.   Archer,    13    Blatch.  ci  in   re  Groves,   2  N.  B.   N.   R. 

351;   In  re  Lains,  16  N.  B.  R.  165,  466. 

168,  F.  C.  7985;    In  re  Kurth,  17 


Cll.  04  THE   NATIONAL   BANKRUPTCY    LAW.  G51 

creditors,  to  bring  the  suit,  and  only  if  he  declines  would  the 
creditors  be  authorized  to  proceed.  If  there  be  no  trustee, 
the  creditors  may  proceed.  In  any  case  unless  there  is  a 
resulting-  benefit  to  the  estate,  the  expenses  incurred  by  a 
creditor  would  not  be  entitled  to  priority  under  this  subdivision 
of  the  statute. 

jj  1020. includes  rent.— This  provision  includes  rent 

from  the  time  of  filing  the  petition  until  the  premises  occupied 
can  be  surrendered  with  due  regard  to  the  best  interests  of 
all.  Such  rent  is  compensation  for  use  and  occupation  and 
hence  not  necessarily  determined  by  the  terms  of  a  previously 
existing  lease  or  the  amount  the  bankrupt  had  been  previously 
paying,  though  such  amounts  may  form  the  basis  of  its  com- 
putation, nor  is  it  a  claim  against  the  estate  as  such,  but  an 
expense  incurred  for  its  preservation  and  to  be  paid  pro  rata 
with  other  costs  of  administration.62  The  length  of  such 
occupation  must  be  reasonable  and  the  court  will  determine 
such  fact  and  allow  for  such  time  only.®^  It  has  been  held 
that  the  prevention  of  injury  to  the  premises  by  failing  to 
remove  machinery  and  the  like  is  not  to  be  considered  in 
determining  such  compensation.^^ 

See  Rent  Prior  to  Petition,  §  1045. 

§  1021.  Filing  fees  in  involuntary  cases.— The  present  act^''^ 
gives  priority  to  the  filing  fees  paid  by  creditors  in  involuntary 
cases,^*^  and  allows  petitioning  creditors  in  involuntary  cases, 
if  successful,  the  same  costs  as  in  an  equity  suit.  This  gives 
petitioning  creditors  practically  all  the  former  act  did.  Under 
the  Act  of  1867,  notaries  taking  proofs  of  debt  in  bankruptcy 

62  In  re  Grimes  Bros.,  1  N.  B.  N.  C.  7116;   Buckner  v.  Jewell,  14  N. 

516,  2  A.  B.  R.  730,  96  F.  R.  529;  B.  R.   286;    In  re  Hoagland,  18  N. 

In  re  Jefferson,   1  N.  B.  N.  288,  2  B.  R.  530,  F.  C.  6545;    In  re  Hart 

A.  B.  R.  206,  93  F.  R.  948;  In  re  Mfg.  Co.,  17  N.  B.  R.  459,  F.  C. 
Butler,  6  N.  B.  R.  501,  F.  C.  2236;  8592;  In  re  Mitchell,  8  N.  B.  R.  47, 
In  re  Webb  &  Co.,  6  N.  B.  R.  302,  F.  C.  9657;  In  re  Peabody,  16  N. 
F.  C.  17315;  In  re  Lyon  &  Co.,  3  N.  B.  R.  243,  F.  C.  10866. 

B.  R.  63,  F.  C.   12043;    In  re  Huf-  63  in  re  McGrath  &   Hunt,   5  N. 
nagel,  12  N.  B.  R.  554,  F.  C.  6837;  B.  R.  254,  5  Ben.  183,  F.  C.  8808. 
In  re  Walton,  1  N.  B.  R.  154,  F.  C.  o*  in  re  Breck,  12  N.  B.  R.  215,  8 
17131;  In  re  Merrifield,  3  N.  B.  R.  Ben.  93,  F.  C.  1822. 

1,  F.  C.  9465;   In  re  Hamburger  &         65  Sec.  64b  (2),  act  of  1898. 
Frankel,   12   N.    B.   R.    277,    F.    C.         66  Q.  O.  XXXIV. 
5975;  In  re  Ives,  8  N.  B.  R.  28,  F. 


653  THE  NATIONAi.   BANKRUPTCY    LAW.  Ch.  64 

proceedings  were  held  not  entitled  to  priority  in  the  payment 
of  their  fees.®'^ 

§1022.  Cost  of  administration.— This  cxpi-ession'"'''  refers 
only  to  costs  directly  connected  with  the  proceedings  in  bank- 
ruptcy but  will  not  necessarily  exclude,  from  the  pi'iority 
given  them  by  state  laws,  fees  and  costs  accruinf-'  in  proceed- 
ings not  directly  connected  with  the  bankruptcy  proceedings.'''* 
The  assets  should  be  charged  with  the  payment  of  the  costs 
and  expenses  incurred  in  bringing  the  same  into  the  state 
courtJ*^  The  cost  and  expenses  of  administration  are  to  be 
paid  out  of  an  estate  before  any  distribution  at  all  is  made,'^^ 
notwithstanding  that  there  are  specific  liens  sufficient  to  absorb 
all  the  assets  of  such  estate/-  and  they  have  priority  over 
dower J3  The  proceeds  of  a  bankrupt's  property  subject  to 
liens  should  be  charged  with  the  costs  of  sale  before  the  liens 
are  paid.'^'* 

§1023. Auctioneer's  fees.— As  unless  otherwise  or- 
dered by  the  court,'^^  all  sales  must  be  by  public  auction,  the 
fees  of  the  auctioneer  are  allowable  and  entitled  to  priority. 
It  is  not  true  now,  as  held  under  the  Act  of  1867,  that,  the 
trustee  being  expected  to  conduct  the  sales,  the  necessity  of 
the  auctioneer's  employment  must  be  affirmatively  shown  be- 
fore his  fees  will  be  allowed.'^^ 

§  1024. Witness  fees  and  mileage.— The  witness  fees 

contemplated  are  those  usually  paid  in  United  States  courts, 
$1.50  per  day  for  actual  attendance  and  mileage.'^'^  No  extra 
allowance  can  be  made  to  an  expert  witness,  in  the  absence 
of  a  contract  between  him  and  the  party  summoning  him,  and 
agreements  of  counsel  cannot  bind  the  court  in  matters  such 

67  In  re  Nebe,   11  N.  B.   R.   289,  R.  645;  Contra,  In  re  Frick,  1  N. 

F.  C.  10073.  B.  N.  214,  1  A.  B.  R.  719. 

«8  Sec.  64b  (3),  act  of  1898.  ^3  in  re  Forbes,  7  A.  B.  R.  42. 

«9  In  re  Lewis,  99  F.  R.  935,  4  A.         74  McNair  v.  Mclntyre,  113  F.  A. 

B.  R.  51.  113,  7  A.  B.  R.  638. 

70  Wilson  V.  Parr,  8  A.  B.  R.  230.         7.^,  G.  0.  XVIII   (1). 

71  In  re  Whitehead,  2  N.  B.  R.  7g  in  re  Pegues,  3  N.  B.  R.  19, 
180,  F.  C.  17562;  In  re  Lane,  2  N.  F.  C.  10907;  In  re  Sweet,  9  N.  B. 
B.   R.   100,   3   Ben,  98,   F.   C.   8042;  R.  48,  F.  C.  13688. 

See  In  re  Burke,  6  A.  B.  R.  502.  77  R.  s.  848;   The  William  Bran- 

72  In  re  Tebo.  101  F.  R.  419,  4  A.  foot,  3  C.  C.  A.  155,  52  F.  R.  390, 
B.  R.  235;   In  re  Sink,  2  N.  B.  N.     8  U.  S.  App.  129;  In  re  Rein,  3  N. 

B.  N.  R.  45. 


Ch,  64         ATTORNEY'S  FEE  ENTITLED  TO  PRIORITY.  653 

as  this,  nor  will  they  be  regarded  at  all  unless  in  writing  and 
signed  by  the  parties  to  be  boiindJ^ 

§  1025.  Attorney  or  counsel  fees.— When  services  of  counsel 
are  really  required  they  will  be  allowed,  but  should  be  confined 
to  such  services  during  the  bankruptcy  proceedings,  excluding 
previous  consultations  or  advice,  as  well  as  all  unnecessary 
attendance  during  the  proceedings,'''  though  they  do  not  in- 
clude services  of  counsel  rendered  in  the  matter  of  the  bank- 
rupt's application  for  a  discharge.^^ 

It  will  be  observed  that  this  section  provides  for  the  allow- 
ance of  an  attorney's  fee  in  three  cases,  (1)  to  the  petitioning 
creditors  in  involuntary  cases;  (2)  to  the  bankrupt  in  involun- 
tary cases  while  performing  the  duties  prescribed;  and  (3)  to 
the  bankrupt  in  voluntary  cases  in  the  court's  discretion,  but 
in  each  it  is  required  that  the  fee  must  be  reasonable. 

§  1026. Reasonable.— The    amount    must    always    be 

reasonable  and  depends  upon  the  services  rendered  and  their 
value,  to  be  determined  on  evidence  or  the  court's  knowledge^^ 
of  the  facts  in  each  case,  the  reasonableness  applying  to  the 
counsel  as  well  as  to  the  estate.82  If  an  attorney  has  a  choice 
of  two  courses  which  lead  to  the  same  result  he  will  be 
allowed  a  reasonable  sum  for  the  least  services  actually 
necessary  by  the  less  expensive  course.^^ 

§  1027. Determinable  by  the  court.— The  reasonableness 

of  the  fee  is  to  be  determined  by  the  court  or  referee  and 
may  be  done  ex  parte.^*  Action  thereon  may  be  suspended 
for  a  reasonable  time  to  get  testimony  as  to  the  amount  allow- 
able, but  if  it  is  then  impossible  to  secure  such  testimony,  the 
referee  should  decide  the  question  on  the  evidence  before 
him.s^     Whether  any  fee  at  all  is  to  be  allowed  the  attorney 

"Sin  re  Carolina  Cooperage  Co.,  2  N.  B.  N.  R.  23,  3  A.  B.  R.   154. 

1  N.  B.  N.  534,  96  F.  R.  604.  96  F.  R.  950;   In  re  Curtis,  supra; 

79  In  re  Kross,  1  N.  B.  N.  566,  3  In  re  O'Connell,  2  N.  B.  N.  R.  237, 

A.    B.   R.    187,    96    F.    R.    816;    see  98  F.  R.  83,  3  A.  B.  R.  422. 

generally  In  re  Carr,  117  F.  R.  572,  »:'•  In  re  Goodwin,  2  N.  B.  N.  R. 

9  A.  B.  R.  58.  445. 

so  In  re  Brundin,  112  F.  R.  306.  ^4  in  re  Stotts,  93  F.  R.  438,  1  N. 

7  A.  B.  R.  296.  B.  N.  326.  ^ 

SI  In  re  Curtis.  100  F.  R.  784,  4  s",  in  re  Dreeben,  101  F.  R.  110,  4 

A.  B.  R.  17.  A.  B.  R.  146. 

82  In  re  Carolina  Cooperage  Co., 


654  THE   NATIONAL   BANKRUPTCY    LAW.  ClL  64 

of  a  voluntary  bankrupt  rests  in  the  sound  discretion  of  the 
court,  and,  in  determining  reasonableness,  the  character  and 
condition  of  the  estate,  the  orders  necessary  for  its  protection 
and  the  time  and  attention  of  the  attorney  required  are  to 
be  considered,  so  that  there  can  be  no  fixed  fee.^**' 

The  judge  will  not  disturb  an  allowance  by  the  referee, 
where  there  is  no  evidence  that  it  was  unjust,  excessive  or 
exorbitant,  especially  if  the  referee  gave  creditors  time  to  file 
such  evidence;  and,  if  distribution  has  been  made  and  the 
attorney  paid  the  allowance,  the  right  to  object  will  be 
waived.^'''  But  if  the  fee  asked  for  be  exorbitant,  even  though 
it  be  recommended  by  the  referee,  no  fee  will  be  allowed.^^  In 
involuntary  cases,  the  petitioning  creditors  and  the  bankrupt 
are  entitled  of  right  to  such  fee,  only  its  reasonableness  is  to  be 
determined  by  the  court  ;^^  such  determination  in  neither  case 
to  be  arbitrary  but  in  the  exercise  of  legal  judgment  and  judi- 
cial discretion  and  subject  to  review  by  the  appellate  court.'-^*^ 

§  1028. For  services  actually  rendered.— The  provision 

is  for  the  professional  services  actually  rendered  and  hence  it 
must  be  shown  that  the  services  for  which  the  allowance  is 
asked  were  actually  rendered,  and  that  they  were  necessary 
and  proper,^!  and  unless  it  is  so  shown,  no  allowance  will  be 
made.^2 

§  1029. Petitioning  creditors  in  involuntary  cases. — 

The  attorney  for  such  creditors  is  entitled  to  a  reasonable  fee 
as  of  right  and  its  allowance  or  disallowance  is  not  a  matter  of 
discretion  with  the  court,  but  the  amount  is  to  be  determined 
not  arbitrarily,  but  in  the  exercise  of  legal  judgment  and  judi- 
cial discretion,^3  which  may  be  reviewed  by  the  appellate 
court.'*^  No  allowance  can  be  made  from  the  estate  of  a  bank- 
rupt in  voluntary  proceedings,  for  the  fees  of  the  creditors'  at- 

86  In  re  Burrus,,  97  F.  R.  926,  3  sa  In  re  Curtis,  100  F.  R.  784,  4 

A.  B.  R.  296;  In  re  Kross,  1  N.  B.  A.  B.  R.  17. 

N.  566,  3  A.  B.  R.  187,  96  F.  R.  816;  »«  In  re  Curtis,  supra. 

In  re  Beck,  1  N.  B.  N.  564,  1  A.  B.  si  In  re  Terrill,  103  F.  R.  781,  4 

R.  535,  92  F.  R.   889;    lii  re  Carr,  A.  B.  R.  625. 

117  F.  R.  572,  9  A.  B.  R.  58.  02  in  re  Woodard,  1  N.  B.  N.  430, 

«7  In  re  Tebo,    101   F.  R.   419,   4  2  A.  B.  R.  692,  95  F.  R.  955. 

A.  B.  R.  235.  0''  In  re  Carr,  117  F.  R.  572,  9  A. 
ss  In  re  Carr,  116  F.  R.  556,  8  A.  B.  R.  58. 

B.  R.  635.  ^*lJi  re  Curtis,  supra;   see  al&o 


Ch.  G4         ATTORNEY'S  FEE  ENTITLED  TO  PRIORITY.  655 

torneys.^^  The  policy  of  the  present  act  being  to  minimize  the 
expense  of  administering  estates  the  courts  must  so  construe 
it.^^  It  has  been  held  that  only  "one  reasonable  attorney's 
fee"  is  allowable,  which  should  be  divided  between  the  attor- 
neys of  the  petitioning  creditors,  the  bankrupt,  and  possibly 
the  trustee.^'^  While  such  construction  is  in  harmony  with 
the  policy  to  minimize  the  expenses,  the  correct  reading  of  the 
provision  would  seem  to  refer  the  word  "one"  to  the  words 
"irrespective  of  the  number  of  attorneys  employed,"  rather 
than  to  take  it  to  mean  that  only  one  fee  absolutely  is  to  be 
allowed.  The  result  in  the  case  cited  favors  this  view,  since 
to  divide  the  one  fee  will  give  but  little  to  each,  unless  that 
one  fee  be  made  correspondingly  large.  The  provision  might 
reasonably  be  construed  to  mean  that,  notwithstanding  the 
petitioning  creditors  may  have  many  attorneys  and  the  bank- 
rupt likewise,  only  one  fee  is  to  be  allowed  to  bankrupt's  at- 
torneys, and  one  fee  to  the  creditor's  attorneys.^^  By  this 
means  the  ordinary  meaning  of  the  language  is  preserved  and 
the  result  will  be  more  reasonable.  The  compensation  of  the 
trustee's  attorney  is  not  embraced  by  this  provision,  but  is 
simply  one  of  the  costs  of  administration,  and  will  be  so  al- 
lowed. 

§  1030. Bankrupt  in  involuntary  cases.— A  fee  is  al- 
lowed the  attorney  for  services  to  the  bankrupt  in  involuntary 
cases  while  performing  the  duties  prescribed  by  the  act  and, 
if  he  has  not  performed  them  but  has  been  actively  engaged 
in  trying  to  defeat  and  delay  the  proceedings,  no  allowance  will 
be  made.i  This  allowance  will  not  cover  services  in  connection 
with  the  bankrupt's  application  for  a  discharge.^     The  fact 

In  re  Waite,  2  N.  B.  R.  146;  In  re  F.  R.   123;    In  re  Silverman,  2  N. 

N.  Y.   Mail   S.   S.  Co.,   3    N.  B.  R.  B.  N.  R.  18,  3  A.  B.  R.  227,  97  F. 

155,  185,  7  Blatch.  178,  F.  C.  10208;  R.  325;   In  re  Woodard,  1  N.  B.  N. 

s.  c.  2   N.  B.   R.   170,  F.  C.  10211;  430,  2  A.  B.  R.  642,  95  F.  R.  955. 

In    re    Mitteldorp,    3    N.    B.    R.    1,  ot  in  re  Pauly,  1  N.  B.  N.  405.  2 

Chan.  288,  F.   C.   9675;    In  re  An-  A.  B.  R.  334. 

drews  &  Jones,  11  N.  B.  R.  59.  F.  9*  In  re  Eschwege,  8  A.  B.  R.  282. 

C.  370;  In  re  Comstock,  9  N.  B.  R.  i  In  re  Woodard.  1  N.  B.  N.  430. 

88,  F.  C.  3075.  2  A.  B.  R.  955,  95  F.  R.  955. 

95  In   re  Smith,   108   F.  R.  39,  5  2  in  re  Brundin,  42  F.  R.  306,  7 

A.  B.  R.  559.  A.  B.  R.  296;  but  see  In  re  Kross, 

06  In  re  Harrison  Mercantile  Co.,  96  F.  R.  816,  3  A.  B.  R.  187. 
1  N.  B.  N.  382,  2  A.  B.  R.  419.  95 


656  THE  NATIONAL  BANKRUPTCY   LAW.  Ch.  G4 

that  the  bankrupt  is  guilty  of  a  contempt  will  not  prevent  an 
allowance  for  services  rendered  prior  to  such  contempt,  such 
services  being  confined,  in  any  event,  to  the  preparation  of 
schedules,  attendance  at  examinations  and  other  duties  in  aid 
of  the  estate  and  its  administration,  but  will  not  include  ser- 
vices in  defending  bankrupt  against  charges  of  fraud  and  con- 
cealment of  assets  and  other  matters  involving  personal  liabil- 
ity. The  amount  of  fee  will  be  governed  by  the  extent  of  the 
services,^  and  in  matters  of  difficulty  the  allowance  will  be  cor- 
respondingly increased.^ 

In  case  a  partnership  is  adjudged  a  bankrupt  but  one  allow- 
ance can  be  made  to  it  for  counsel  fees,  although  each  bank- 
rupt appears  by  a  different  attorney.^ 

§  1031. Bankrupt  in  voluntary  cases.— The  question  of 

allowance  in  this  case  rests  in  the  sound  discretion  of  the 
court.®  The  amount  of  fee  is  to  be  determined  by  the  char- 
acter and  condition  of  the  case,  the  orders  necessary  for  its 
protection  and  the  time  and  care  required  of  the  attorney.'''  It 
should  be  for  services  necessary  to  enable  the  bankrupt  to 
bring  his  case  properly  before  the  court,  secure  an  adjudica- 
tion and  reference,  surrender  his  estate  and  perform  his  duties 
for  the  benefit  of  creditors,  and  is  not  necessarily  restricted 
to  services  'beneficial  to  the  estate,  rendered  primarily  in  its 
interest.^     The  statute  presupposes  the  payment  of  fees  for 

3  In  re  Mayer,  101  F.   R.  695,  4  Averill,  1  N.  B.  N.  544;  In  re  Chas- 

A.  B.  R.  238;  In  re  Michel,  1  N.  B.  noff.  3  N.  B.  N.  R.  1;  see  also  In 
N.  265,  1  A.  B.  R.  665,  95  F.  R.  803;  re  Mayer,  101  F.  R.  695.  4  A.  B.  R. 
In  re  Carolina  Cooperage  Co.,  2  N.  238;   In  re  Brundin.  112  F.  R.  306, 

B.  N.  R.  23,  3  A.  B.  R.  154,  96  F.  R.  7  A.  B.  R.  296.  Contra,  In  re  Beck, 
950;  see  In  re  Sav.  Fund  Soc.  11  1  N.  B.  N.  564;  1  A.  B.  R.  535,  92 
N.  B.  R.  303,  2  Hughes,  239,  F.  C.  F.  R.  889,  followed  in  In  re  Stotts. 
11298.  1  N.  B.  N.  326,  93  F.  R.  438,  1  A. 

■i  In  re  Anderson,  103  F.  R.  854,  B.  R.  641;   see  also  In  re  Gies,  12 

4  A.  B.  R.  640.  N.   B.    R.    179,    F.    C.   5407;    In   re 

5  In  re  Eschwege,  8  A.  B.  R.  282.  Heirschberg,  1  N.  B.  R.  195,  2  Ben. 

6  In  re  Beck,  1  N.  B.  N.  564,  1  466,  F.  C.  6329,  6530;  In  re  Han- 
A.  B.  R.  535,  92  F.  R.  889;  In  re  dell,  15  N.  B.  R.  72,  F.  C.  6017;  In 
Tebo,  101  F.  R.  419,  4  A.  B.  R.  235;  re  Evans,  3  N.  B.  R.  62,  F.  C.  4552; 
In  re  Burrus,  97  F.  R.  926.  3  A.  B.  In  re  Rosenfeld,  F.  C.  12057;  In  re 
R.  296.  Jaycox,  7  N.  B.  R.  140,  F.  C.  7239; 

7  In  re  Burrus,  supra.  In   re  Bigelow.  F.  C.   1397;    In  re 
»<  In    re   Kross,   1    N.    B.   N.    566.     Montgomery,  3  N.  B.  R.  35,  3  Ben. 

96  F.  R.  816,  3  A.  B.  R.  187;  In  re     364,  F.  C  9726. 


Ch.  6-J:         ATTORNEY'S  FEE  ENTITLED  TO  PRIORITY.  657 

services  rendered  by  counsel  in  the  ordinary  course  of  the  pro- 
ceedings, and  §  64b,  cl.  3,  contemplates  the  allowance  of  addi- 
tional fees  for  extraordinary  services.^  The  bankrupt  is  not 
entitled  to  be  reimbursed  money  paid  to  his  attorney  before 
the  filing-  of  the  petition  as  a  fee  for  professional  services  and 
in  preparing  the  petition  and  schedules,i*^  though  if  the  fee  has 
not  been  paid,  the  attorney  will  be  entitled  to  an  allowance 
therefor.^  1 

Where  the  petition  in  an  involuntary  proceeding  is  dis- 
missed, the  alleged  bankrupt  is  entitled  to  costs  ;^2  ^^^  ]^q  ig 
not  entitled,  in  addition,  to  counsel  fees,  unless  an  application 
"to  take  charge  of  and  hold"  his  property  prior  to  the  adjudi- 
cation has  been  granted  and  bond  given.^^ 

§1032. Attorney  representing  bankrupt  and  cred- 
itors.— The  interests  of  the  creditors  and  the  bankrupt  can  in 
no  sense  be  considered  compatible,  and  therefore,  under  no 
condition  should  an  attorney  be  permitted  to  represent  the 
bankrupt  and  at  the  same  time  any  of  the  creditors  or  the 
trustee.  Irrespective  of  the  fact  that  to  represent  both  is  to 
represent  adverse  interests,  and  is  a  violation  of  the  ethics 
of  the  profession,  and  is  opposed  to  public  polic}^  the  result 
is  bound  to  affect  injuriously  the  interests  of  the  creditors. 
The  bankrupt  is  required  to  make  a  disclosure  of  his  assets, 
and  if  his  attorney,  as  the  representative  of  the  creditors,  is 
permitted  either  to  have  a  voice  in  the  selection  of  the  trustee 
or  the  attorney  to  represent  him,  he  may  to  a  greater  or  less 
extent  influence  the  efforts  to  obtain  a  disclosure  of  the  assets 
of  the  estate,  or  to  set  aside  conveyances  made  or  liens  created 
against  the  bankrupt.  Accordingly  a  fee  should  not  be  allowed 
an  attorney  for  representing  both  interests.^'* 

§1033. To  creditors'  attorneys.— Whenever  it  is  for 

the  interest  of  the  estate  that  rights  should  be  litigated  or  anj' 

3  In  re  Smith,  108  F.  R.  39,  5  A.  dore  v.  Coats.  6  N.  B.  R.  304,  F.  C. 
B.  R.  559.  4142;    In   re   Sheehan,  8   N.  B.  R. 

10  In    re   Matthews.   3    A.    B.    R.     353,  F.  C.  12738. 

265,  97  F.  R.  772.  i*  See  generally  Keyes  v.  McKir- 

11  In  re  Terrill,  103  F.  R.  781,  3  row.  180  Mass.  261,  9  A.  B.  R.  322; 
A.  B.  R.  625;  In  re  Kross,  supra.         In  re  Wooten,  118  F.  R.  670,  9  A. 

12  G.  0.  XXXIV.  B.  R.  247;  In  re  Kimball.  100  F.  R. 
i-i  Sec.    3e,    act    of    1898;    In    re     777,  2  N.  B.  N.  R.  46,  4  A.  B.  R. 

Ghiglione,  1  N.  B.  N.  351.  1  A.  B.     144;  In  re  Cobb,  7  A.  B.  R.  104. 
R,  580,  93  F.  R.  186;  see  also  Dun- 

42 


658  THE   NATIONAL   BANKRUPTCY   LAW.  Ch.  64 

steps  taken  to  preserve  or  recover  property  belonging  to  it, 
and  the  trustee  either  arbitrarily  or  through  caprice  declines 
to  employ  counsel  for  such  purpose,  the  creditors  may  apply 
to  the  referee  for  authority  to  employ  counsel  to  conduct  such 
litigation  and  his  compensation  will  be  paid  out  of  the  estate.^  ^ 
If  one  of  the  creditors  of  a  bankrupt,  by  his  attorney,  objects 
to  a  claim  made  by  another  creditor  the  trustee  having  left 
the  state  and  his  counsel  refuses  to  act,  resulting  in  the  saving 
of  a  consideraJDle  sum  to  the  estate,  the  attorney  for  such 
contesting  creditor  should  be  paid  out  of  the  estate  j^''  or  where 
a  trustee  refuses  to  move  to  set  aside  a  sale  because  of  the 
stifling  of  competition  and  certain  attorneys  successfully  resist 
the  confirmation  of  such  sale,  thereby  saving  a  large  sum  to 
the  estate,  they  should  be  paid  from  the  estate.^'^ 

§1034. To  trustee's  attorney.— The  fee  for  the  trus- 
tee's attorney  is  not  embraced  in  the  provision  allowing  one 
reasonable  fee,  etc.,  but,  whenever  it  becomes  necessary  for  an 
officer  to  have  legal  assistance,  the  cost  is  one  of  the  expenses 
of  administration.  A  trustee  may  employ  legal  assistance 
when  necessary,  and  a  court  will  not  give  him  any  direction  in 
advance  as  to  such  employment,  but  he  must  decide  in  the 
first  instance  as  to  the  necessity  therefor.^^  Fees  to  a  reason- 
able amount  may  be  allowed  him  as  part  of  the  costs  of  ad- 
ministration by  the  referee  ex  parte -,^9  though,  as  a  general 
rule,  no  allowance  will  be  made  for  services  rendered  prior  to 
his  appointment. 20  In  special  cases  the  court  has  selected 
counsel  to  represent  the  trustee,-^  though  such  a  proceeding 
is  very  unusual. 

The  allowance  of  an  attorney's  fee  is  within  the  sound  dis- 

15  Sec.  64a  (2)  of  act  of  Feb-  N.  B.  N.  136;  In  re  Little  River 
ruary  5,  1903.  Lumber  Co.,  101  F.  R.  558,  3  A.  B. 

16  In  re  Little  River  Lumber  Co.,     R.  682. 

101  F.  R.  558,  3  A.  B.  R.  682.  lo  In  re  Stotts,  1  N.  B.  N.  326,  1 

17  In  re  Groves,  2  N.  B.  N.  R.  A.  B.  R.  641,  93  F.  R.  438;  In  re 
466;  but  see  In  re  Archenbrown,  8  Pauly,  1  N.  B.  N.  405,  2  A.  B.  R. 
N.  B.  R.  429,  F.  C.  503;  In  re  334;  In  re  Davenport,  3  N.  B.  R. 
Eidom,  3  N.  B.  R.  39,  F.  C.  4315;  18,  F.  C.  3587;  In  re  Colwell,  15 
In  re  Robinson,  3  N.  B.  R.  17,  F.  N.  B.  R.  92;  In  re  Pegues,  3  N.  B. 
C.  11943;  In  re  Forsyth,  2  N.  B.  R.  R.  9;  In  re  Tully,  3  N.  B.  R.  19, 
174,  F.  C.  4948;  Freelander  v.  Hoi-  F.  C.  3587. 

loman,  9  N.  B.  R.  331,  F.  C.  5081.  20  in  re  N.  Y.  Mail  S.  S.  Co..  2  N. 

1^  In  re  Abram,  3  N.  B.  N.  R.  28.  B.  R.  137,  F.  C.  10210. 

4  A.  B.  R.  575,  103  F.  R.  272;  but  21  in  re  Arnett.  112  F.  R.  770,  7 

see  In  re  Smith,  1  A.  B.  R.  37,  1  A.  B.  R.  522. 


Ch.  64         ATTORNEY'S  FEE  ENTITLED  TO  PRIORITY.  651) 

cretion  of  the  court,  which  should  be  exercised  in  accord  with 
the  spirit  of  the  act,  and  hence,  where  there  was  no  onerous 
duty,  the  referee's  refusal  to  allow  a  fee  to  the  trustee's  attor- 
ney on  the  ground  that  he  had  received  a  fee  as  attorney  for 
bankrupt  will  be  sustained.^-  A  trustee  will  not  be  allowed 
an  attorney's  fee  for  the  performance  of  ordinary  duties  which 
he  should  as  trustee  have  performed.-^  After  the  appointment 
of  a  trustee,  no  allowance  to  petitioning  creditors  can  be  made 
for  attorney's  fees  on  examinations  of  the  bankrupt,  such  ser- 
vices being  either  for  the  trustee  or  the  individual  creditors.-^ 
The  claim  of  trustee's  attorney  for  a  fee  for  services  rendered 
on  an  examination  undertaken  at  his  suggestion  in  the  hope 
of  discovering  concealed  assets  but  without  resulting  benefit 
to  the  estate  will  not  be  allowable  where  there  is  evident  lack 
of  good  faith  of  either  attorney  or  trustee.^*^  But  an  attorney 
selected  by  the  creditors  to  represent  the  trustee,  who  traces 
and  recovers  concealed  assets,  will  be  allowed  a  reasonable  fee 
by  the  court,  where  the  creditors  refuse  to  pay  it.-^ 

The  question  as  to  allowance  of  attorney's  fees,  like  other 
contested  questions,  may  be  certified  by  the  referee  to  the 
judge  for  his  decision  at  the  instance  of  interested  parties.^" 

§1035. In  case  of  lien  creditor.— Where  a  lien  cred- 
itor's claim  to  priority  is  opposed,  his  attorney  is  entitled  to  a 
lien  on  the  proceeds  for  his  fee  in  prosecuting  such  claim,  and 
the  court  of  bankruptcy  has  jurisdiction  to  pass  on  his  right, 
fix  the  amount,  with  or  without  a  jury,  and  enforce  it  in  the 
distribution  of  the  proceeds,  notwithstanding  that  the  trustee 
maj^  have  paid  such  lien  creditor  his  distributive  share,  it  hav- 
ing been  paid  without  due  authority.^^ 

§  1036. To  general  assignee's  attorney.— "rtie  attorneys 

for  an  assignee  under  a  voluntary  general  assignment,  in  pos- 

22  In  re  Carolina  Cooperage  Co.,  27  in  re  Warshing,  5  N.  B.  R.  350, 
2  N.  B.  N.  R.  23,  3  A.  B.  R.  154,  96     F.  C.  17209. 

F.  R.  950.  28  In  re  Rude,  101  F.  R.  805.  2  N. 

23  In  re  Averill.  1  N.  B.  N.  544;  B.  N.  R.  498,  4  A.  B.  R.  319;  and 
In   re   Smith,  2  A.  B.  R.   648.  see  Freelander  v.   Holloman,  9  N. 

24  In  re  Silverman,  2  N.  B.  N.  R.  B.  R.  331,  F.  C.  5081;  In  re  Devore, 
18,  3  A.  B.  R.  227,  97  F.  R.  325.  16  N.  B.  R.  56.  F.  C.   3847;    In  re 

25  In  re  Rozinsky,  101  F.  R.  229,  Eldridge.  4  N.  B.  R.  162.  F.  C. 
2  N.  B.  N.  R.  787.  3  A.  B.  R.  830.  4330;   Cowlay  v.  Railroad  Co.,  159 

26  In  re  Evans,  117  F.  R.  574,  8  U.  S.  575. 
A.  B.  R.  730,  note. 


660  THE  NATIONAL.   BANKRUPTCY    LAW.  Ch.  64 

session  prior  to  the  bankruptcy  proceedings,  should  not  be 
allowed  any  compensation  out  of  the  estatCj^*)  except  upon  a 
showing  of  absolute  necessity  for  such  employment  and  which 
resulted  in  benefit  to  the  estate.^*^  Nor  should  a  trustee  in  a 
chattel  deed  of  trust  executed  by  an  insolvent  for  the  benefit 
of  creditors,  be  allowed  compensation  for  his  services  in  exe- 
cuting his  trust.^^ 

§  1037. Receiver.— As  in  bankruptcy  matters  litiga- 
tion should  not  as  a  rule  be  conducted  by  a  receiver,  yet  when 
services  of  an  attorney  or  counsel  are  necessary  to  a  proper 
care  of  the  estate  and  the  performance  of  his  duties  as  re- 
ceiver, he  is  entitled  to  an  allowance  for  such  services,  to  be 
charged  and  allowed  as  an  expense  of  the  receivership.  In 
that  case  such  expenses  would  be  entitled  to  priority  of  pay- 
ment.^2 

§  1038. Priority  of.— Priority  of  payment  of  the  fee  oi 

bankrupt's  attorney  out  of  the  funds  on  hand  is  not  lost 
because  a  claim  was  not  presented  until  after  the  declaration 
and  payment  of  the  first  dividend  ;^3  nor  because  there  is  a 
claim  for  rent  which  became  a  lien  upon  the  property  more 
than  four  months  before  the  filing  of  the  petition,  the  order 
of  payment  as  well  as  the  priority  being  fixed  by  this  subdi- 
vision ;^^  nor  because  there  are  specific  liens  on  the  property .^^ 

§  1039.  Bankrupt's  expenses.— While  the  law  makes  no  pro- 
vision for  the  expenses  of  the  bankrupt  or  his  livelihood  be- 
tween the  adjudication  and  his  discharge,  under  the  equity 
powers  of  the  court  there  appears  no  reason  why  a  reasonable 
allowance  might  not  be  made  out  of  the  estate  for  the  actual 
necessities  of  the  bankrupt,  and  if  there  are  exemptions  to  be 
subsequently  set  apart  to  him,  why  he  should  not  be  required 
to  reimburse  the  estate  therefrom,  but  this  allowance  would 
not  include  indulgence  in  vices  or  extravagant  habits  of  living 
or  unnecessary  expenditures.^^ 

29  In  re  Rogers,  116  P.  R.  435;  34  See.  64b,  act  of  1898;  In  re 
but  see  In  re  Pauly,  1  N.  B.  N.  Duncan,  1  N.  B.  N.  340,  2  A.  B.  R. 
405,  2  A.  B.  R.  333.  321. 

30  In  re  Busey,  6  A.  B.  R.  603.  35  in  re  Tebo,  101  F.  R.  419,  4  A. 

31  Abbott  V.  Summers,  116  F.  R.  B.  R.  235;  Contra,  In  re  Frick,  1 
687.  N.  B.  N.  214,  1  A.  B.  R.  719. 

32  In  re  Kelly  Dry  Goods  Co.,  102  36  in  re  Tudor.  2  N.  B.  N.  R.  168. 
F.  R.  747,  4  A.  B.  R.  528.  100  F.  R.  796.  4  A.  B.  R.  78. 

"3  In  re  Scott.  1  N.  B.  N.  353,  2  A. 
B.  R.  324.  96  F.  R.  607. 


Ch.  64  DEBTS    ENTITLED    TO    PRIORITY.  661 

§1040.  Trustee,  extra  allowance;  costs.— If  professional 
services,  necessary  to  the  proper  administration  of  the  trust, 
have  been  rendered  by  the  trustee  himself  he  is  clearly  entitled 
to  such  reasonable  compensation  as  he  would  have  paid  had  he 
employed  other  competent  counsel.^"  A  trustee  who  is  charged 
with  mismanagement  and  removed  at  the  instance  of  creditors, 
will  be  protected  against  costs  of  administration  where  he  acts 
in  good  faith  and  they  will  be  paid  out  of  the  estate  ;3s  as  in 
the  case  of  a  bill  of  complaint  filed  without  sufficient  cause, 
but  where  the  want  is  not  sufficiently  clear  to  impeach  his 
good  faith.3^ 

§  1041.  Whose  wages  entitled  to  priority.— Wages  due  to 
workmen,  clerks  or  servants,  which  have  been  earned  within 
three  months  before  the  date  of  filing  the  petition,  not  to  ex- 
ceed three  hundred  dollars  to  each  claimant,  are  entitled  to 
priority  of  payment.  The  words  workmen,  clerks  or  servants 
as  here  used  are  neither  co-extensive  nor  limited  by  the  word 
wage-earner  as  defined  by  the  law,^"  but  are  to  be  understood  in 
their  ordinary  signification.  Thus  a  clerk  is  one  employed  to 
keep  records  or  accounts,  an  amanuensis,  a  scribe,  and  account- 
ant,*^ or  a  salesman  in  a  store.^^  ^  servant  is  one  employed 
by  another  for  menial  offices,  or  labors  for  the  benefit  of  a 
master  or  employer  and  is  subject  to  command,  a  subordinate 
helper  or  assistant,^^  but  laborers  hired  by  the  day's  work  or 
any  longer  time,  are  not,^^  while  it  would  include  a  salesman 
in  a  retail  store.^^  A  workman  is  one  employed  in  labor, 
whether  in  tillage  or  manufacture,  a  worker,  an  artificer  or 
laborer,  skilled  or  unskilled,  a  mechanic  or  artisan,  a  handi- 
craftsman.^*' The  evident  intent  of  Congress  being  meant  to 
protect  only  persons  in  subordinate  positions,  it  would  not  in- 
clude within  its  provisions  a  traveling  salesman  employed  at  a 

37  In  re  Mitchell,  1  N.  B.  N.  264,  43  Webster;  Cent.  Die;  Flesh  v. 
1  A.  B.  R.  687.  Lindsay,  115  Mo.  1. 

38  In  re  Mallory,  4   N.  B.  R.  38,         **  Bouvier. 

F.  C.  890.  «  See  In  re  Flick,  3  N.  B.  N.  R. 

39  Coxe  V.  Hale,  8  N.  B.  R.  562,  71,  105  F.  R.  503,  5  A.  B.  R.  465. 
F.  C.  3310.  46  Webster;     Cent.    Die;     In    re 

40  Sec.  1  (27),  act  of  1898.  Scanlan,  2  N.  B.  N.  R.  58,  97  F.  R. 

41  Webster;  Cent.  Die.  26,   3  A.   B.  R.   202;    In   re  Green- 

42  In  re  Flick,  105  F.  R.  503,  5  wald,  2  N.  B.  N.  R.  791,  99  F.  R. 
A.  B.  R.  465.  705,  3  A.  B.  R.  696. 


663  THE   NATIONAL   BANKRUPTCY    I^AW.  Ch.  G4 

salary  of  $5,000  per  annum  ;^"  the  president  or  managing  officer 
of  a  corporation  ;*^  a  contractor  using  his  plant  ;^''  an  agent 
selling  goods  on  a  stipulated  commission  f'^'  or  the  like. 

§  1042.  Wages  earned  within  three  months.— Subdivision  4 
of  section  64  of  the  statute  limiting  the  amount  of  wages  to 
that  earned  within  three  months  is  not  to  be  considered  as 
being  affected  or  enlarged  by  any  general  prior  or  subsec^uent 
provision  in  the  law,  as  subdivision  5,  which  accords  priority 
of  payment  to  "debts  owing  to  any  person  who  by  laws  of  the 
states  or  United  States  is  entitled  to  priority,"  but  such  latter 
provision  is  to  be  construed  as  applying  to  debts  other  and 
different  from  those  specified  in  clause  4.^^  Hence,  if  under 
the  laws  of  the  state  wages  for  a  greater  period  than  three 
months  are  entitled  to  priority,  allowance  can  be  made  only  for 
such  as  are  earned  within  the  three  months.^- 

If  a  clerk  permit  his  employer  to  retain  a  portion  of  his 
weekly  wages,  for  a  benefit  fund,  the  clerk  cannot  claim  prior- 
ity for  the  sums  so  retained  during  the  three  months  preceding 
bankruptcy,  as  wages.^^  If  an  employe  under  a  contract  for 
services  for  a  fixed  period  is  discharged,  and  before  the  ex- 
piration of  such  contract  period  the  employer  becomes  bank- 
rupt, the  employe  would  be  entitled  to  priority  of  payment 
for  wages  due  within  the  three  months  prior  to  bankruptc}^ 
not  to  exceed  $300,  provided  such  employe  would  have  a  right 
of  action  and  could  recover  such  wages,  since  they  would  not 
be  merged  by  any  action  that  might  be  necessary  in  order  to 
their  liquidation  or  collection.^^     Wages  earned  subsequent  to 

47  In  re  Scanlan,  supra;  In  re  N.  B.  N.  75,  91  F.  R.  96,  1  A.  B. 
Greenwald,  supra.  R.  234,  rev'g  91  F.  R.  514,  1  A.  B. 

48  In  re  Carolina  Cooperage  Co..  R.  231;  In  re  Lewis,  99  F.  R.  935, 
2  N.  B.  N.  R.  23,  96  F.  R.  950,  3  A.  4  A.  B.  R.  51;  In  re  Union  Planing 
B.  R.  154;  In  re  Grubbs  Wiley  Gro-  Mill  Co.,  2  N.  B.  N.  R.  384;  In  re 
eery  Co.,  1  N.  B.  N.  281,  96  F.  R.  Marshall  Paper  Co.,  1  N.  B.  N.  294; 
183,  2  A.  B.  R.  442;  but  see  In  re  In  re  Falls  City  Shirt  Mfg.  Co.,  1 
Silverman  Bros.,  2  N.  B.  N.  R.  760,  N.  B.  N.  565,  98  F.  R.  592,  3  A.  B. 
101  F.  R.  219,  4  A.  B.  R.  38.  R.  437;  Contra,  In  re  Slomka,  117# 

49  In  re  Rose,  1  N.  B.  N.  212,  1  F.  R.  688,  9  A.  B.  R.  124. 

A.  B.  R.  68.  "3  In  re  Flick,   105  F.  R.  503.   5 

50  In  re  Mayer,  101  F.  R.  227,  4     A.  B.  R.  465. 

A.  B.  R.  119,  aff'g   2   N.  B.  N.  R.         54  In  re  Silverman,  2  N.  B.  N.  R. 

719.  760,  101  F.  R.  219,  4  A.  B.  R.  83; 

51  In  re  Shaw.  109  F.  R.  782,  6  In  re  Anson,  2  N.  B.  N.  R.  567,  101 
A.  B.  R.  501.  F.  R.  698,  4  A.  B.  R.  231. 

52  In  re  Rouse.  Hazard  &  Co.,  1 


Ch.  G4  wages  entitled  to  priority.  GG3 

the  filing  of  the  petition  would  doubtless  be  entitled  to  priority 
under  that  subdivision  providing  for  the  care  and  preservation 
of  the  estate,  if  such  employment  was  necessary  and  to  its 
advantage.^^ 

It  may  be  generally  stated  that  labor  claims  are  entitled  to 
priority  and  payment  in  full  before  the  discharge  of  liens 
against  the  estate  ;^6  and  there  appears  no  reason  why  the 
trustee  might  not  pay  the  same  as  soon  as  sufficient  money 
for  that  purpose  comes  into  his  hauds.^'^ 

§  1043.  Wages  assigned  or  in  judgment.— Debts  of  a  bank- 
rupt for  labor  and  services  which  at  the  commencement  of  the 
proceedings  in  bankruptcy  have  been  assigned,  are  not  due 
to  the  workmen,  clerks  or  servants,  and  therefore  the  assignee 
of  such  claims  would  not  be  entitled  to  priority  of  payment,-^^ 
but  if  such  assignment  is  made  subsequent  to  the  filing  of  the 
petition,  the  claims  would  doubtless  be  entitled  to  priority .^''^ 
There  is  nothing  to  prevent  a  father  from  proving  as  entitled 
to  priority,  a  claim  for  a  minor  son  for  labor  as  an  operative.^*^ 

The  general  rule  that  a  cause  of  action  is  merged  in  the 
judgment,  does  not  apply  to  the  case  of  an  employe  having  a 
claim  against  bankrupt  for  wages  earned  within  three  months 
of  the  commencement  of  the  proceedings  upon  which  he  recov- 
ers a  judgment,  but  such  claim  for  wages  may  be  proved  as  an 
unsecured  debt  and  will  be  entitled  to  priority  of  payment.^^ 

§  1044.  Debts  entitled  to  priority  under  state  or  federal 
laws. — Fifth  in  the  order  of  payment  of  the  debts  entitled  to 
priority  under  the  present  bankruptcy  law  are  ' '  debts  owing  to 
any  person  who  by  the  laws  of  the  states  or  of  the  United 
States  is  entitled  to  priority."  As  has  been  stated,  this  pro- 
vision applies  to  debts  other  than  and  different  from  those 
specified  in  the  previous  clauses  of  the  subdivision;  and  does 
not  affect  or  enlarge  such  specific  provision.^^    But  it  has  been 

55  In  re  Gerson,  1  N.  B.  N.  190,  1  ss  in  re  Weslund,  99  F.  R.  399,  3 

A.  B.  R.  251.  A.  B.  R.  646. 

5G  In   re  Tebo,  101   F.  R.   419,   4  so  in  re  Campbell,  102  F.  R.  686, 

A.  B.  R.  235;  In  re  Byrne,  2  N.  B.  4  A.  B.  R.  535;  In  re  Brown,  3  N  B. 

N.  R.  246,  97  F.  R.  262,  3  A.  B.  R.  R.  177,  4  Ben.  142,  F.  C.  1974. 

268.  *"•  In  re  Harthorn,  4  N.  B.  R.  27, 

57  In  re  Sawyer,  16  N.  B.  R.  460.  F.  C.  6162. 

2    Low.    551,    F.    C.    12396;    Ex   p.  ei  in  re  Anderson,  2  N.  B.  N.  R. 

Rockett,   15   N.   B.    R.   95,   2   Low.  567,  101  F.  R.  698,  4  A.  B.  R.  231. 

522,  F.  C.  11977.  62  Ante,  §  1041. 


664:  THE  NATIONAL  BANKRUPTCY   I^W.  Cii.  G4 

held  on  the  contrary  that  where  wage  claimants  were  entitled 
to  liens  by  virtue  of  a  state  law,  they  are  entitled  to  priority 
under  subdivision  5  of  this  section,  though  the  wages  were 
not  earned  within  three  months  before  the  date  of  the  com- 
mencement of  bankruptcy  proceedings,*'-'^  but  this  is  contrary 
to  the  weight  of  authority.*'^  Provision  is  made  elsewhere 
for  determining  the  validity  of  liens  ;^'''  but,  if  found  valid,  this 
provision  recognizes  their  right  to  priority  according  to  the 
state  or  federal  laws;''"  notwithstanding  that  the  provision  of 
the  state  law  giving  priority  forms  part  of  its  insolvency  law, 
the  insolvency  laws  being  suspended  only  so  far  as  they  come 
into  conflict  with  the  bankrupt  law  or  intrude  on  its  prov- 
ince.^''' 

The  bankrupt  law  makes  no  specific  provision  for  debts  due 
to  states,  counties  or  municipalities,  other  than  as  taxes,  but 
any  other  debts,  if  entitled  to  priority  under  a  state  law,  are 
entitled  to  like  priority  under  the  bankrupt  law,*'^  but  not 
otherwise.^^  Fees  of  a  sheriff,  accruing  on  a  writ  of  attach- 
ment on  a  provable  debt,  issued  before  the  filing  of  the  petition, 
and  continuing  in  force  until  then,  are  entitled  to  priority  un- 
der the  bankruptcy  act,  where  the  law  of  the  state  gives  them 

63  In  re  Slomka,  117  P.  R.  688,  9  F.  R.  745,  6  A.  B.  R.  699;  In  re 
A.  B.  R.  124;  In  re  Lawler,  110  F.  Williams  v.  Crow,  116  F.  R.  Ill,  7 
R.  135,  6  A.  B.  R.  184.  A.  B.  R.  545;  In  re  Hoover,  113  F. 

64  See  Ante,  §  1041.  R.  136,  7  A.  B.  R.  330. 

65  Sec.  67,  act  of  1898.  es  in  re  Wright,  supra;  see  also 

66  In  re  Walker,  2  N.  B.  N.  R.  In  re  Dodge,  4  Dill.  532,  F.  C.  3949; 
1014;  In  re  Collins,  1  N.  B.  N.  290,  In  re  Miller,  17  N.  B.  R.  402,  10 
2  A.  B.  R.  1;  In  re  Goldstein,  1  Ben.  58,  F.  C.  9401;  In  re  South- 
N.  B.  N.  422,  2  A.  B.  R.  603;  In  re  western  Car  Co.,  19  N.  B.  R.  404, 
Falls  City  Shirt  Mfg.  Co.,  1  N.  B.  F.  C.  13192;  In  re  Chamberlain,  17 
N.  565,  98  F.  R.  592,  3  A.  B.  R.  N.  B.  R.  49,  9  Ben.  149,  F.  C.  2580; 
437;  see  also  Reed  v.  Bullington,  Contra,  In  re  Corn  Ex.  Bk.,  15  N. 
11  N.  B.  R.  408;  In  re  Grinnell,  9  B.  R.  431,  7  Biss.  400,  F.  C.  3242; 
N.  B.  R.  35,  7  Ben.  42,  F.  C.  5830;  rev'g  15  N.  B.  R.  212,  F.  C.  3243; 
In  re  Scott,  3  N.  B.  R.  181,  F.  C.  Gardner  v.  Cook,  7  N.  B.  R.  346,  F. 
12517,  C.  5226;    In   re  Williams,  2  N.  B. 

67  In  re  Wright,  1  N.  B.  N.  428,  R.  79,  F.  C.  17705;  see  In  re  Jenks, 
95  F.  R.  807,  2  A.  B.  R.  592;  but  15  N.  B.  R.  301,  F.  C.  7276;  Ex.  p. 
see  In  re  Rieser,  2  N.  B.  N.  R.  859;  Holmes,  14  N.  B.  R.  493,  F.  C.  6631. 
In  re  West  Norfolk  Lumber  Co.,  69  six  Penny  Sav.  Bk.  v.  Est. 
112  F.  R.  759,  7  A.  B.  R.  648;  In  re  Stuyvesant  Bk.,  10  N.  B.  R.  142; 
Oconee  Milling  Co.,  109  F.  R.  866,  12  Blatch.  179,  F.  C.  12919;  s.  c.  9 
6  A.  B.  R.  475;  In  re  Daniels,  110  N.  B.  R.  318. 


Ch.  64  DEBTS    ENTITLED    TO    PRIORITY.  G65 

priority;^**  or  a  judgment  in  favor  of  a  state  against  a  surety 
on  a  bail  bond  given  for  the  appearance  of  a  person  indicted 
for  a  crime  ;'^i  or  the  claim  of  a  county  for  the  labor  of  pris- 
onersJ2 

§  1045.  Labor  liens.— The  statutory  liens  of  laborers  and 
material  men  are  entitled  under  the  bankruptcy  law  to  the 
same  priority  as  under  the  state  law;  but  all  the  require- 
ments of  the  statute  to  preserve  or  render  them  valid,  must  be 
complied  with,  though  if  bankruptcy  intervene  the  limitation 
as  to  time  is  governed  by  the  bankruptcy  actJ^  The  claimant 
may  at  once  appear  in  the  bankruptcy  court  and  be  heard  as 
to  his  claim  without  first  having  it  established  in  another  tri- 
bunal ;'^^  but,  if  some  claimants  have  complied  with  state  stat- 
utes so  as  to  give  them  valid  liens  while  others  have  not,  the 
former  will  be  given  priority  over  the  latter/"'  So  in  Iowa  a 
labor  claim  is  entitled  to  priority  over  the  landlord's  lien  for 
rent;'^^  while  in  Kentucky  the  lien  of  material  men  is  subject 
to  the  landlord's  lien,'^^  and  in  New  Jersey  landlords  and  fac- 
tory operators  have  equal  liensJ^  Where  under  a  state  law  a 
lien  for  wages  is  given  priority  over  all  claims  excepting 
taxes  and  costs  of  administration,  and  the  lien  has  attached 
before  the  fund  is  turned  over  to  the  bankruptcy  court,  and  it 
is  not  such  an  one  as  is  avoided  by  the  bankruptcy  act,  it  will 
be  respectedJ*^  An  attorney  employed  at  a  yearly  salary  is 
held  to  be  within  a  statute  giving  emploj^es  a  first  and  prior 
lien  for  all  work  and  labor  done  for  a  corporation,  and  when 
the  lien  is  filed  it  relates  back  to  the  date  of  employment  but 
fixes  no  time  limit  therefor,  it  is  sufficient  if  filed  during  the 

70  In  re   Lewis,   99  F.  R.   935,  4     324,  98  F.  R.  716,  3  A.  B.  R.  516; 

A.  B.  R.  51;   In  re  Jennings,  8  A.  s.  c.   2  N.   B.  N.  R.  171,  97   F.   R. 

B.  R.  358;  In  re  Beaver  Coal  Co.,  929,  3  A.  B.  R.  282;  In  re  Beclc 
107  F.  R.  5  A.  B.  R.  787.  Provision  Co.,  2  N.  B.  N.  R.  532. 

71  In  re  Cliamberlain,  17  N.  B.  R.  "'^  In  re  Kerby-Denis  Co.,  1  N.  B. 
50,  9  Ben.  149,  F.  C.  2580.  N.  399,  95  F.  R.  116,  2  A.  B.  R.  402, 

72  In  re  Worcester  County,  102  F.  aff'g  1  N.  B.  N.  337,  94  F.  R.  818.  2 
R.  808,  4  A.  B.  R.  497.  A.  B.  R.  218. 

73  In   re   Falls    City  Shirt    Mfg.         7o  in  re  Byrne,  supra. 

Co.,  1  N.  B.  N.  565,  98  F.  R.  582,  3  "  In    re    Falls    City    Shirt   Mfg. 

A.  B.  R.  437.  Co.,  supra. 

74  In  re  Byrne,  2  N.  B.  N.  R.  7.s  in  re  McConnell,  9  N.  B.  R. 
247,  97  F.  R.  762,  3  A.  B.  R.  268;  387,  F.  C.  8712. 

In  re  Emslie,  2  N.  B.  N.  R.  992,  vn  in  re  Laird,  109  F.  R.  550.  6 
102  F.  R.  291;  rev'g  2  N.  B.  N.  R.     A.  B.  R.  1. 


G66  THE   NATIONAL  BANKRUPTCY   LAW.  Ch.  G4 

employment  and,  if  bankruptcy  intervenes  during  the  six 
months  after  filing  such  lien  within  which  suit  may  be  brought, 
the  bankruptcy  limitation  of  one  year  supersedes  the  other.^^ 
Tailors  making  up  garments  by  the  piece,  to  be  returned  in 
whole  or  broken  lots  for  examination,  and  to  be  paid  for  at 
stated  intervals  if  approved,  have  a  lien  on  all  articles  in  their 
hands  for  the  work  done  on  them  and  on  any  portion  of  the 
same  specific  lot  returned  for  examination ;  and  though  a  whole 
lot  had  been  returned  for  examination,  it  is  not  such  a  delivery 
as  deprives  the  workmen  of  their  lien,  unless  the  delay  in  de- 
manding payment  amounts  to  a  waiver.^^  A  truckman  and 
cartman  cannot  claim  priority  under  a  state  statute  relating 
to  general  assignments  since  such  statute  is  incompatible  with 
the  bankrupt  act.^^ 

§  1046.  Rent  prior  to  petition.— A  claim  for  rent  accruing 
prior  to  the  filing  of  the  petition  is  given  priority  by  the  bank- 
ruptcy act  if  entitled  to  such  priority  by  the  state  law ;  but  rent 
which  will  accrue  after  the  filing  of  the  petition  is  not  a  prov- 
able debt,^^  and  not  entitled  to  priority  as  such,^^  but  may  be 
allowed  as  compensation  for  use  and  occupation.^^  If  a  claim 
is  not  entitled  under  the  state  law  to  priority,  neither  is  it  en- 
titled to  priority  under  the  bankrupt  law^^  and  though  enti- 
tled to  priority,  it  is  subject  to  expenses  of  administering  the 

80  In  re  Port  Wayne  Elec.  Corp.,  778,  3  A.  B.  R.  233;  In  re  Butler, 
2  N.  B.  N.  R.  891.  6  N.   B.  R.  501,  F.  C.  2236;   In  re 

81  In  re  Lewensohn,  2  N.  B.  N.  R.  Merrifleld,  3  N.  B.  R.  25,  F.  C.  9465; 
871,  101  F.  R.  776,  4  A.  B.  R.  79.  In  re  Hamburger,  12  N.  B.  R.  277, 

82  In  re  Rieser,  2  N.  B.  N.  R.  859.  F.  C.  5975;    Austin  v.  O'Reilly,  12 

83  Wilson  V.  Penn.  Trust  Co.,  114  N.  B.  R.  329,  2  Woods,  670,  F.  C. 
F.  R.  742,  8  A.  B.  R.  169.  665;    s.    c.    8    N.    B.   R.   129,   F.    C. 

84  In  re  Jefferson,  1  N.  B.  N.  288,  664;  In  re  Hoagland.  18  N.  B.  R. 
93  F.  R.  948,  2  A.  B.  R.  206;  In  re  530,  F.  C.  6545;  Longstreth  v.  Pen- 
Gerson,  1  N.  B.  N.  315,  2  A.  B.  R.  nock.  12  N.  B.  R.  95,  20  Wall.  575; 
170;  In  re  Cronson,  1  N.  B.  N.  474;  In  re  McConnell,  9  N.  B.  R.  387,  F. 
In  re  Shilladay,  1  N.  B.  N.  475;  C.  8712;  Barnes'  Appeal,  13  N.  B. 
In  re  Byrne,  2  N.  B.  N.  R.  247,  R.  543,  91  U.  S.  521;  but  see  In  re 
97  F.  R.  762.  3  A.  B.  R.  268;  In  re  Joslyn,  3  N.  B.  R.  118,  2  Biss.  235. 
Falls  City  Shirt  Mfg.  Co.,  1  N.  B.  F.  C.  7550;  In  re  Lucius  Hart  Mfg. 
N.  565,  98  F.  R.  592,  3  A.  B.  R.  Co.,  17  N.  B.  R.  459,  F.  C.  8592. 
437;    Contra,  as  to  after  accruing  ss  See  ante  1020. 

rent.  In  re  Goldstein,  1  N.  B.  N.  86  in  re  Myers,  2  N.  B.  R.  860. 
422,  2  A.  B.  R.  603;  see  also  In  re  1049,  102  F.  R.  869,  4  A.  B.  R.  536; 
Ruppel,  2  N.  B.  N.  R.  88,  97  F.  R.     In  re  Frankel,  2  N.  B.  N.  R.  840. 


ClI.  G4  DEBTS    ENTITLED    TO    PRIORITY.  QG'i 

ostate.s"  If  the  landlord  has  a  lien  on  the  goods  and  chattels 
for  rent,  this  will  be  enforced  against  the  proceeds  of  the  sale 
by  the  trustee,^*^  though  it  has  been  held  that  this  would  not 
extend  to  the  proceeds  of  a  license  to  sell  liquors  on  such  prem- 
ises.^'-* During  the  time  the  premises  are  occupied  by  the  re- 
ceiver or  trustee,  the  allowance  is  not  rent,  strictly  speaking, 
but  for  use  and  occupation  and  is  given  priority  as  part  of  the 
"cost  of  administration"  and  not  under  this  provision."" 

§  1047.  Claims  of  bank  depositors.— Ordinarily  when  funds 
are  deposited  in  bank,  the  relation  of  debtor  and  creditor  im- 
mediately arises  between  the  banker  and  the  depositor,  and 
the  money  becomes  the  property  of  the  former.  He  has  the 
right  to  use  it  but  must  pay  the  debt  of  the  depositor  by  cash- 
ing his  checks.  When  the  banker  obtains  the  deposit  by  com- 
mitting a  fraud,  as  by  receiving  it  after  hopelessly  insolvent, 
the  relation  between  the  parties  is  different,  and  the  money 
does  not  become  the  property  of  the  bank  but  becomes  a  trust 
fund  in  the  banker's  hands.  In  such  case  money  and  checks 
deposited  are  entitled  to  priority  of  payment  over  the  general 
creditors,  and  an  equal  amount  may  be  obtained  from  the  re- 
ceiver of  the  bank.  Checks  and  drafts  delivered  to  a  bank  for 
collection  and  deposit  under  like  conditions,  which  had  not 
been  collected  when  the  bank  closed  its  doors,  remain  the 
property  of  the  depositor,  although  indorsed  to  the  bank  with- 
out qualification  and  their  proceeds  upon  collection  may  be 
recovered  by  him."^  In  the  case  of  drafts  purchased  of  a  bank 
under  like  condition  which  are  returned  unpaid,  the  purchaser 
has  the  right  in  equity  to  reclaim  the  amount  paid  therefor.'-'- 
A  savings  bank  would  be  entitled  to  priority  of  payment  out  of 
the  assets  of  an  insolvent  bank  created  under  a  statute  pro- 
viding that  "upon  it  becoming  insolvent,  after  paying  its  cir- 
culation, the  assets  should  be  first  applied  to  paying  deposits 
made  with  it  by  savings  banks.  "^^ 

8T  In  re  Sunseri,  3  N.  B.  N.  R.  65.  more,  75  F.  R.  771,  21  C.  C.  A.  516; 

88  In  re  Mitchell,  8  A.  B.  R.  324,  Wasson  v.  Hawkins,  59  F.  R.  233; 

116  F.  R.  87.  Lake  Erie  &  W.  R.  Co.  v.  Bank.  65 

so  In    re   Myers,    2    N.    B.    N.    R.  id.  690;   Richardson  v.  Denegre,  93 

1049.  id.  572,  35  C.  C.  A.  452. 

f'o  Wilson  V.  Penn.  Trust  Co.,  114  !>- Richardson    v.  Coffee  Co.,  102 

F.  R.  742,  8  A.  B.  R.  169.  F.  R.  785. 

»i  Richardson  v.  N.  O.  Debenture  93  in  re  Stuyvesant  Bk.,  9  N.  B. 

Co.,  102  F.  R.  780;  Bank  v.  Black-  R.  318,  F.  C.  13584. 


CG8  THE  NATIONAL  BANKRUPTCY   LAW.  Ch.  G4 

§  1048.  Claims  on  checks,  or  orders.— Whether  or  not  a 
claim  founded  on  a  check  given  by  one,  who  becomes  bank- 
rupt before  such  check  is  presented  for  payment,  is  entitled 
to  priority,  depends  on  the  construction  placed  on  the  con- 
tract evidenced  by  the  check.  In  jurisdictions  where  it  is  held 
to  be  an  equitable  assignment  of  so  much  of  the  fund  as  the 
check  calls  for,  it  will  be  entitled  to  priority.-'^  Where  prior 
to  bankruptcy  the  holder  of  a  note  deposited  it  with  an  at- 
torney and  subsequently  drew  orders  requesting  him  to  pay 
divers  sums  out  of  the  proceeds,  the  holders  of  such  orders 
have  been  held  to  be  entitled  to  priority.^^ 

§  1049.  Judgments. — The  liens  and  priorities  of  judgments 
are  to  be  determined  as  they  existed  under  the  state  law  at 
the  time  of  the  filing  of  the  petition  ;"*^  hence,  where  an  execu- 
tion has  been  properly  levied,  the  execution  creditors  are  en- 
titled to  priority  of  payment  from  the  proceeds  of  the  prop- 
erty levied  on;-'^  but  a  judgment  of  a  minor  court,  which  is 
not  a  lien  on  personal  property  until  levied  thereon,  nor  on 
real  estate  until  docketed  in  a  higher  court,  and  from  which 
when  the  petition  is  filed  an  appeal  is  pending,  is  not  entitled 
to  priority .'^^  A  judgment  or  levy  must  be  one  which  is  a  valid 
lien  under  the  bankruptcy  act  ;^  and  it  must  not  only  be  a  valid 
lien  but  must  be  properly  presented  in  the  bankruptcy  pro- 
ceedings, so  that  attaching  creditors,  who  have  not  proved 
their  claims,  cannot  move  that  they  be  given  priority  in  the 
proceeds  of  the  attached  goods  •,^  and  the  claimant  must  show 
that  he  has  done  everything  necessary  to  make  his  judgment  a 
lien.3  A  judgment  for  damages  for  detention  of  property  is 
not  entitled  to  priority,  where  the  trustees  never  had  posses- 
sion, and  were  not  responsible  for  the  detention.* 

94  4th  Nat.  Bk.  of  Chicago  v.  Bk.,  i  Sec.  67  of  the  law,  post;  Phil- 
10  N.  B.  R.  44.  lips  v.   Bowdoin,  14  N.  B.  R.  43; 

95  In  re  Smith,  16  N.  B.  R.  399,  Reed  v.  Mclntyre,  19  N.  B.  R.  45, 
F.  C.  12992.  98  F.  R.  507;  In  re  Steele,  16  N.  B. 

96  In   re  Walker,  2   N.   B.  N.  R.  R.  105.  7  Biss.  504,  F.  C.  13345. 
1014.  2  In  re  Ogles,  1  N.  B.  N.  400,  2  A. 

9T  In  re  Hughes.  11  N.  B.  R.  452,  B.  R.  514. 
F.  C.  6843;   Swope  v.  Arnold,  5  N.         3  in  re  Woods,  supra. 
B.  R.  148,  F.  C.  13702.  4  in  re  Neely,  108  F.  R.  371,  5  A. 

98  In  re  Wood,  1  N.  B.  N.  430,  95  B.  R.  836. 
F.  R.  846,  2  A.  B.  R.  695. 


Ch.  64  DEBTS    ENTITLED    TO    PRIORITY.  669 

A  large  judgment  against  a  bankrupt,  purchased  by  a 
national  bank  for  much  less  than  its  face  value  and  used  to 
hinder  and  delay  the  debtor's  creditors  is  not  entitled  to  prior- 
ity but  should  be  postponed  to  the  claims  of  the  other  cred- 
itors;-' so  where  the  judgment  creditor  failed  for  many  years 
to  make  a  levy^  or  to  record  his  lien  where  the  land  was 
located. ■'■ 

§  1050.  Mortgages.— A  valid  mortgage  has  the  same  priority 
under  the  bankruptcy  law  to  which  it  was  entitled  before  that 
law  was  passed;*^  so  of  two  mortgages  on  the  same  property 
the  senior  will  be  entitled  to  priority  of  payment  over  the 
junior.'-'  Where  a  mortgage  junior  to  a  mechanic's  lien  was 
given  in  part  to  pay  off  a  mortgage  senior  to  such  lien,  the 
mortgagee  may  be  subrogated  pro  tanto  to  the  lien  of  the 
original  mortgage.^"  The  right  to  priority  extends  only  to 
the  property  against  which  the  lien  exists;  so  that  after  sale 
of  the  property,  under  the  mortgage,  a  balance  remaining 
unpaid  is  not  entitled  to  priority  of  payment  out  of  the  balance 
of  the  estate.ii  Where  first  and  second  mortgages  exist,  the 
latter  may  be  displaced  in  favor  of  costs  incurred  in  selling 
the  property,  including  compensation  to  the  trustee.^-  When 
the  priority  to  which  a  mortgage  is  entitled  is  claimed  for  a 
lease,  or  other  contract,  on  the  ground  that  by  its  terms,  it  is 
in  the  nature  of  a  mortgage,  it  must  appear  that  the  require- 
ments of  the  registration  laws  have  been  fulfilled  as  fully  as 
if  the  instrument  were  a  mortgage.^  ^  Where  a  claim  of  prior- 
ity is  based  on  a  chattel  mortgage  withheld  from  record  for  an 
unreasonable  time,  the  validity  of  the  lien  is  to  be  interpreted 
by  state  statutes.^  ^ 

§  1051.  Waiver.— The  right  of  a  creditor  to  priority  of  pay- 
ment in  the  distribution  of  the  estate  may  be  waived  by  some 

5  In  re  Headley,  2  N.  B.  N.  R.  a  In  re  Bartenbach,  11  N.  B.  R. 
250,  97  F.  R.  765,  3  A.  B.  R.  272.  61,  F.  C.  1068. 

6  In  re  Cozart,  3  N.  B.  R.  126,  F.  lo  In  re  Drolesbaugh,  2  N.  B.  N. 
C.  3313.  R.  1079. 

7  In  re  Dunn,  11  N.  B.  R.  270,  2  n  In  re  Snedaker,  4  N.  B.  R.  43. 
Hughes,  169,  F.  C.  4172.  12  In  re  Utt  et  al.,  105  F.  R.  754. 

8  Schulze  V.  Bolting,  17  N.  B.  R.  i3  In  re  Dyke,  9  N.  B.  R.  430, 
167,  8  Biss.  174,  F.  C.  12489;  In  re  F.  C.  4227. 

Lacy,  4  N.  B.  R.  15,  F.  C.  7970.  ^*  In   re  Andrae   Co.,   117   F.  R. 

561,  9  A.  B.  R.  135. 


670  THE  NATIONAL  BANKRUPTCY   LAW.  ClI.  G4 

act  inconsistent  with  the  continuance  of  such  right;  as  where 
creditors  claiming  money  as  the  proceeds  of  collections  made 
on  their  behalf  stand  silent  while  such  money  is  paid  out  in 
dividends,  of  the  payment  of  which  they  had  notice  ■,^^'  or  where 
a  creditor,  having  a  lien  for  goods  sold  the  bankrupt,  did  not 
ask  that  the  goods  furnished  be  sold  separately,  when  all  the 
bankrupt's  property  was  sold,  although  such  creditor  had  no- 
tice of  the  sale,  and  where  there  was  no  evidence  as  to  the 
price  which  such  creditor's  goods  brought,^ ^  or  if  the  creditor 
sues  the  trustees  for  damages.^^  But  there  is  no  waiver  where 
the  original  pledgee  has  no  knowledge  that  his  stock  has  been 
repledged  by  the  bankrupt,  until  after  he  had  filed  his  claim  as 
a  preferred  creditor.^^ 

§  1052.  'c.  Disposition  of  property  on  setting  aside  com- 
'position  or  discharge.— In  the  event  of  the  confirmation  of  a 
'composition  being  set  aside,  or  a  discharge  revoked,  the  prop- 
'erty  acquired  by  the  bankrupt  in  addition  to  his  estate  at  the 
'time  the  composition  was  confirmed  or  the  adjudication  was 
'made  shall  be  applied  to  the  payment  in  full  of  the  claims  of 
'creditors  for  property  sold  to  him  on  credit,  in  good  faith, 
'while  such  composition  or  discharge  was  in  force,  and  the 
'residue,  if  any,  shall  be  applied  to  the  payment  of  the  debts 
'which  were  owing  at  the  time  of  the  adjudication.' 

§1053.  Distinction  between  ante  and  post  creditors.— Two 
classes  of  creditors  arise  where  a  confirmation  of  a  composition 
is  set  aside  or  a  discharge  revoked,  i.  e.,  those  whose  claims 
accrued  prior  and  those  subsequent  to  the  confirmation  or  dis- 
charge. The  latter  class,  acting  in  good  faith  on  the  strength 
of  the  confirmation  or  discharge,  give  new  credit  to  the  debtor, 
and  the  purpose  of  this  provision  is  to  permit  the  application 
of  the  subsequently  acquired  property,  together  with  the  estate 
at  the  time  the  composition  was  confirmed  or  the  adjudication 
was  made,  to  the  payment  in  full  of  such  claims  to  the  exclu- 
sion of  those  antedating  such  confirmation  or  discharge.  The 
residue  of  the  estate,  if  any,  after  the  payment  of  such  claims, 
should  be  applied  to  the  payment  of  the  debts  which  accrued 

15  Claflin  V.  Eason,  1  N.  B.  N.  it  In  re  Oberhoffer,  17  N.  B.  R. 
360,  2  A.  B.  R.  263.  546,  9  Ben.  485,  F.  C.  10396. 

16  In  re  Klapholz,  113  F.  R.  1002,  is  In  re  Hutchinson,  113  F.  R. 
7  A.  B.  R.  703.  202. 


Ch.  04  DEBTS    ENTITLED    TO    PRIORITY.  6?1 

prior  to  the  adjudication.  The  purpose  of  this  provision  is  self- 
evident.  It  is  only  by  placing  this  sanctity  upon  the  adjudica 
tion  that  it  will  cause  full  faith  and  credit  to  be  given  it.  It 
permits  the  transaction  of  business  with  persons  who  have 
been  discharged  or  who  have  entered  into  a  composition  with 
creditors,  without  fear  as  to  the  title  they  may  convey,  and 
without  fear  of  loss. 


CHAPTER  LXV. 


DECLARATION  AND  PAYMENT  OF  DIVIDENDS. 


11054 

(65a)   Of  equal  per  cent  on 

general  claims. 

1055. 

Dividend,  what  is. 

1056. 

What  is  not. 

1057. 

Declaration    and     pay- 

ment. 

1058. 

Who  entitled  to. 

1059. 

Who  not  entitled  to. 

1060. 

Suspension  of  payment. 

1061. 

Interest. 

1062. 

In  general. 

1063.  b.  Time   of   declaring  divi- 
dends. 

1064.  c.  Dividends  received  unaf- 

fected  by   subsequently  al- 
lowed claims. 

1065.  Proof  of  claim  after  a 

dividend. 

1066.  d.  Dividends  in  case  of  for- 
eign bankrupt. 

1067.  Rule  of  distribution. 

1068.  e.  Claimant's    right   to   col- 
lect limited. 


§  1054.  '  (Sec.  65a)  Dividends  on  unsecured  claims.— 
'Dividends  of  an  equal  per  centum  shall  be  declared  and  paid 
'on  all  allowed  claims,  except  such  as  have  priority  or  are 
*  secured.  '^ 

§  1055.  Dividend,  what  is.— A  dividend  in  bankruptcy  is  a 
parcel  of  the  fund  arising  from  the  assets  of  the  estate,  right- 
fully alloted  to  a  creditor  entitled  to  share  in  the  fund, 
whether  in  the  same  proportion  with  other  creditors,  or  in 
a  different  proportion.^ 

1  Analogous   provision  of  act  of     any  debt  proved  by  any  person  lia- 


1867.  "Sec.  27.  .  .  .  That  all 
creditors  whose  debts  are  duly 
proved  and  allowed  shall  be  en- 
titled to  share  in  the  bankrupt's 
property  and  estate  pro  rata,  with- 
out any  priority  or  preference 
whatever,  except  that  wages  due 
from  him  to  any  operative,  or 
clerk,  or  house  servant,  to  an 
amount  not  exceeding  fifty  dollars, 
for  labor  performed  within  six 
months  next  preceding  the  adju- 
dication of  bankruptcy,  shall  be 
entitled  to  priority,  and  shall  be 
first  paid  in  full:     Provided,  That 


ble,  as  bail,  surety,  guarantor,  or 
otherwise,  for  the  bankrupt,  shall 
not  be  paid  to  the  person  so  prov- 
ing the  same  until  satisfactory 
evidence  shall  be  produced  of  the 
payment  of  such  debt  by  such  per- 
son so  liable,  and  the  share  to 
which  such  debt  would  be  entitled 
may  be  paid  into  court,  or  other- 
wise held  for  the  benefit  of  the 
party  entitled  thereto,  as  the  court 
may  direct." 

2  In  re  Barber.  1  N.  B.  N.  559, 
1  A.  B.  R.  307,  97  F.  R.  547. 


672 


Ch.  65  DIVIDENDS.  673 

§1056. what  is  not.— This  section  expressly  excepts 

claims  which  have  priority  or  are  secured  from  those  on  which 
the  dividends  of  an  equal  per  centum  are  to  be  paid ;  that  is, 
leaves  them  to  be  first  paid  in  full.  The  debts  entitled  to  prior- 
ity of  payment  are  defined,''  as  are  also  the  secured  claims 
which  the  law  recognizes.^  Provision  is  also''  made  for  ascer- 
taining the  value  of  the  security  and  that  a  dividend  shall  be 
paid  only  on  the  unpaid  balance  of  the  claim,  as  on  other  un- 
secured debts."  Hence  a  dividend,  that  is  less  than  the  whole, 
is  not  declared,  or  paid,  on  a  secured  claim,^  nor  on  a  claim  en- 
titled to  priority,'*  unless  the  assets  applicable  to  debts  of  one 
class  entitled  to  equal  priority  are  not  sufficient  to  pay  them  in 
full,  but  only  upon  an  unsecured  claim.'-*  If  the  security  is  en- 
forced by  the  aid  of  the  bankruptcy  court,  whether  voluntarily 
or  involuntarily,  the  amount  paid  the  secured  creditor  would 
be  considered  a  dividend. i^'  This  is  the  prevailing  and  appar- 
ently correct  view  since  the  act  very  clearly  intends  that,  if 
the  assets  are  sufficient,  the  secured  claims  and  those  entitled 
to  priority  shall  be  paid  in  full  seriatim,  before  the  question  of 
a  "dividend"  of  equal  per  centum  can  arise  at  all.^^ 

It  is  maintained,  however,  that  this  section  does  not  define 
dividend,  but  merely  provides  that  an  equal  per  centum  except 
as  to  secured  claims  and  those  entitled  to  priority,  which  are 
elsewhere  required  to  be  paid  in  full  if  there  are  sufficient 
assets,  shall  be  paid  on  all  allowed  claims.  The  exception 
refers  to  the  equality,  not  to  the  dividend.  By  reference  to  the 
definition  of  dividend  in  Bouvier's  Law  Dictionary  and  the 
Act  of  1867,  the  conclusion  is  reached  that  dividend  refers  to 
the  portion  of  the  estate  assigned  to  a  creditor,  which  is  re- 
quired by  this  section  to  be  at  an  equal  per  centum  on  those 
claims  not  entitled  to  priority  or  secured,  although  the  term 

3  Sec.  64,  act  of  1898.  R.  800;  In  re  Muhlhauser  Co.,  9  A. 

4  Sec.  67,  act  of  1898.  B.  R.  80. 

n  Sec.  57h,  act  of  1898.  o  In  re   Ft.   "Wayne  Electric  Co., 

c  In  re  Rhoads,  2  N.  B.  N.  R.  178.  supra. 

7  In  re  Ft.  Wayne  Electric  Corp.,  lo  In  re  Barber,  1  N.  B.  N.  569, 

1  N.  B.  N.  356,  1  A.  B.  R.  706,  94  3  A.  B.  R.  307,  97  F.  R.  547;   In  re 

F.  R.  109.  Sabine.  1  N.  B.  N.  312,  1  A.  B.  R. 

sin  re  Sabine.  1  N.  B.  N.  312,  1  322;    In  re  Coffin.  1  N.  B.  N.  507, 

A.  B.  R.  322;    In  re  Fielding,  2  N.  2  A.  B.  R.  344. 

B.  N.  R.  735.  3  A.  B.  R.  135.  96  F.  n  In  re  Fielding,  supra. 


674  THE  NATIONAL  BANKRUPTCY   LAW.  Ch.  65 

has  been  held  to  include  also  the  portions  assigned  the  secured 
creditor  or  the  creditor  entitled  to  priority.^  ^ 

§1057.  Declaration  and  payment  of  dividends.— Referees 
are  required  to  declare  dividends  and  prepare  and  deliver  to 
the  trustees  dividend  sheets  showing  the  dividends  declared 
and  to  whom  payable,  and  they  must  be  paid  within  ten  days 
thereafter  ;^^  but  in  making  such  declaration  they  should  with- 
hold funds  sufficient  to  pay  all  expenses  and  priorities.  Cred- 
itors must  have  at  least  ten  days'  notice  by  mail  of  the  declara- 
tion and  time  of  payment  of  dividends/^  and  if,  after  such 
notice,  they  stand  silently  by  and  see  money  claimed  to  be 
theirs  used  to  pay  dividends,  they  will  not  be  heard  after- 
wards to  claim  it.^^  The  meeting  for  the  declaration  of  a  divi- 
dend should  be  combined  with  that  for  its  payment ;  and,  if 
there  is  to  be  only  one  dividend,  the  final  meeting  can  and 
f^hould,  in  proper  cases,  be  combined  with  such  dividend  meet- 
ings.^ ^ 

§  1058.  Who  entitled  to.— Only  those  creditors  whose  claims 
have  been  proved  and  allowed  before  the  dividend  is  declared 
can  participate  in  the  dividends  derived  from  the  bankrupt's 
estate,^ '^  and  they  will  be  permitted  to  participate  as  long  as 
there  is  anything  to  distribute  ;^'^  but  where  the  claims  have 
been  withdrawn  for  amendment  by  permission,  they  are  to  be 
taken  into  account.^^  Plaintiffs  in  a  replevin  suit  against  an 
assignee  under  a  voluntary  assignment  are  entitled  to  a  divi-" 
dend  from  the  estate  of  bankrupt  assignor  on  the  difference 
between  their  total  demand  and  value  of  goods  replevined  ;2*> 
and  where  A,  between  whom  and  bankrupt  there  were  mutual 
debts  paid,  after  the  filing  of  petition,  a  note  on  which  he  and 
bankrupt  were  each  liable  for  half,  he  cannot  set  off  such  pay- 
ment, but  should  pay  the  trustee  the  difference  on  the  mutual 
account,  and  receive  a  dividend  on  the  payment  of  half  of  the 

12  In  re  Gerson,  1  N.  B.  N.  384,  2  it  In  re  Walker,  1  N.  B.  N.  510, 
A.  B.  R.  352.  3  A.  B.  R.  35,  96  F.  R.  550. 

13  Sec.  39  (1),  47a  (9).  act  of  is  In  re  Maybin,  15  N.  B.  R.  468, 
1898.  F.  C.  9337. 

14  Sec.  58a,  act  of  1898.  lo  In  re  Scott,  1  N.  B.  N.  353,  2 

15  Claflin   V.    Eason,   1   N.   B.   N.  A.  B.  R.  324,  96  F.  R.  607. 

360,  2  A.  B.  R.  263.  20  In  re  Wilcox  et  al.,  1  N.  B.  N. 

16  In  re  Smith,  2  A.  B.   R.   648,     188,  1  A.  B.  R.  554. 
1  N.  B.  N.  404. 


Ch.  65  DIVIDENDS.  675 

note.^^  If  a  bankrupt's  estate  is  sufficient  to  pay  the  claims  of 
all  unpreferred  creditors  in  full  and  leave  a  surplus,  the  pre- 
ferred creditors  are  entitled  to  a  dividend  out  of  the  surplus 
without  surrendering  their  preference,  as  against  the  claim  of 
the  bankrupt  to  such  siu'plus.-^ 

The  holder  of  a  note  given  by  a  firm  and  also  by  an  individ- 
ual member  of  the  firm  is  entitled  to  receive  dividends  from  the 
estates  of  both,  but  not  in  the  aggregate  more  than  the  amount 
of  the  note  ;-^  so  it  has  been  held  that  the  trustee  of  a  bankrupt 
corporation,  who  has  proved  his  debt  as  a  creditor  against 
such  corporation,  is  entitled  to  a  dividend  notwithstanding 
that  he  is  liable  individually  for  such  corporation's  debts ;-^ 
and  a  creditor,  who  has  proved  a  debt  against  bankrupt's 
estate  on  an  indorsed  note  of  bankrupt's  and  has  afterwards 
received  a  portion  thereof  from  the  indorser  and  released  hini 
from  further  liability,  is  entitled  to  a  dividend  on  the  whole 
amount;-^  but,  where  the  note  was  indorsed  by  the  bankrupt 
and  the  partial  payment  made  by  the  maker,  the  creditor  is 
entitled  to  a  dividend  on  the  balance  only  r^  and  a  foreign 
creditor,  who  had  realized  on  a  judgment  and  levy  subsequent 
to  the  adjudication,  must  account  to  the  trustee  for  the  sum 
realized  and  can  only  have  a  dividend  on  the  original  debt.-'^ 
Anything  tending  to  defeat  equality  among  the  creditors  is  in 
fraud  of  the  act.^^ 

§  1059.  Who  not  entitled  to.— Creditors  who  fail  to  present 
their  claims  on  or  before  the  day  appointed  for  the  declaration 
of  a  dividend  are  not  entitled  to  a  dividend  to  the  prejudice 
of  those  who  have  had  their  claims  allowed,  but  must  look  to 
other  property  of  the  bankrupt  ;-'■'  nor  a  creditor,  who,  without 
legal  excuse,  omits  to  prove  and  file  his  claim  until  after  the 
declaration  and  order  of  payment  of  a  final  dividend,  though 
his  claim  may  be  allowed  ;"^*^  and,  if  a  creditor  include  in  his 

21  In  re  Bingham,  1  N.  B.  N.  351,     8  Ben.  265,  F.  C.  17349. 

2  A.  B.  R.  223,  94  F.  R.  796.  27  in  re  Bugbee,  9  N.  B.  R.  258, 

22  In  re  Morton,  118  F.  R.  908.  F.  C.  2115. 

s-!  Emery  v.  Bk.,  7  N.  B.  R.  217,         2s  in  re  Palmer,  14  N.  B.  R.  437, 

3  Cliff,  507,  P.  C.  4446.  2  Hughes,  177,  F.  C.  10678. 

24  Bristol  V.  Sanford,  13  N.  B.  R.  29  in  re  Hegerty,  2  N.  B.  N.   R. 

78,  12  Blatch.  341,  F.  C.  1893.  1083;   In  re  Smith,  15  N.  B.  R.  97, 

2r.  In  re  Ellerhorst  &  Co.,  5  N.  B.  F.  C.  1298. 

R.  144,  F.  C.  4381.  -io  In  re  Hegerty,  supra. 

26  In  re  Weeks,  13  N.  B.  R.  263, 


G76  THE   NATIONAL  BANKRUPTCY    LAW.  Cll.  65 

claim  valid  items,  and  also  known  illegal  items,  supporting  the 
whole  by  a  false  oath,  he  is  debarred  from  any  dividend  ;^i  and 
creditors  of  a  partnership  forced  into  insolvency  under  a  state 
law  cannot  take  dividends,  to  the  prejudice  of  creditors  whose 
claims  arose  after  the  commencement  of  such  insolvency  pro- 
ceedings, against  one  of  the  partners  who  started  a  new  busi- 
ness and  was  thrown  into  bankruptcy.''^ 

§  1060.  Suspension  of  payment.— Where  claims  have  been 
presented  and  permission  obtained  to  amend  the  proofs,  enough 
may  be  withheld  to  pay  an  equal  dividend  on  such  suspended 
claims,  but  no  lien  is  thereby  acquired  on  such  retained  funds, 
nor  is  the  referee  bound  to  apply  them  on  such  claims.^*  The 
trustee  may  withhold  a  dividend  declared  upon  the  property 
of  a  firm  until  settlement  of  a  suit  brought  by  such  trustee 
against  the  dividend  creditor  to  recover  an  amount  due  a  mem- 
ber of  said  firm;^'^  or  on  the  claim  of  a  judgment  creditor  from 
which  an  appeal  has  been  taken  before  the  bankruptcy  pro- 
ceedings until  a  decision  on  the  appeal -j^*^  or  payment  may  be 
withheld  on  a  particular  claim  where  its  declaration  was  un- 
authorized ;^^  or  where  a  dividend  is  ordered  on  a  claim  for  pro- 
fessional services  rendered  the  bankrupt,  until  those  interested 
have  an  opportunity  to  apply  to  vacate  said  order.^s  The 
declaration  and  payment  of  dividends,  when  ready,  on  proved 
and  allowed  claims,  will  not  be  delayed  for  unproved  claims, 
nor  will  the  final  settlement  and  closing  of  an  estate  be  delayed 
and  other  creditors  kept  waiting  for  their  money,  to  give  a 
negligent  creditor  further  opportunity  to  get  his  claim 
allowed.^^ 

§  1061.  Interest. — If  a  surplus  remain  after  the  payment  of 
all  claims  at  the  amount  computed  to  be  due,  creditors  may 
be  allowed  interest  from  the  date  of  adjudication  to  the  pay- 
ment of  dividends.^*^     Where  a  claim  was  sustained  on  re-ex- 

31  Marrett  v.  Atterbury,  11  N.  B.  ss  in  re  N.  Y.  Mail  S.  S.  Co.,  3 
R.  225,  3  Dill.  444,  F.  C.  9102.  N.  B.  R.  73,  F.  C.  10212. 

32  In  re  Bates,  2  N.  B.  N.  R.  208.         39  in  re  Stein,  1  N.  B.  N.  339,  1 

34  In  re  Scott.  1  N.  B.  N.  353,  2     A.  B.  R.  662,  94  F.  R.  124. 

A.  B.  R.  324,  96  F.  R.  607.  4o  in  re  Hagan,  10  N.  B.  .R.  383, 

35  Atkinson  v.  Kellogg,  10  N.  B.  6  Ben.  407,  F.  C.  5898;  In  re  Bank 
R.  535,  F.  C.  613.  of  North  Carolina,  12  N.  B.  R.  130, 

36  In  re  Sheehan,  8  N.  B.  R.  345,  F.  C.  895;  In  re  Town  et  al.,  8  N. 
F.  C.  12737.  B.  R.  40,  F.  C.  14112. 

37  In  re  Herrick  et  al.,  13  N.  B. 
R.  312,  F.  C.  6420. 


Ch.  Co  dividends.  677 

amination  after  objection  by  a  trustee  to  its  proof,  the  creditor 
was  held  entitled  to  interest  on  the  withheld  dividend.^^ 

§1062.  In  general.— Whenever  a  claim  shall  have  been 
reconsidered  and  rejected,  in  whole  or  in  part,  upon  which  u 
dividend  has  been  paid,  the  trustee  may  recover  from  the  cred- 
itor the  dividend  paid,  if  rejected  in  whole,  or  the  proportional 
part,  if  rejected  in  part.'*- 

The  distribution  of  the  assets  of  a  bankrupt  cannot  be  inter- 
fered with  by  the  process  of  a  state  court  ;^^  nor  will  a  divi- 
dend once  declared  be  disturbed  except  for  some  error  or  other 
good  cause,^^  When  but  a  single  creditor  proves  his  claim,  he 
is  entitled  to  be  paid  in  full,  and,  if  there  is  a  surplus,  the  same 
must  be  applied  to  the  payment  of  creditors  acknowledged  by 
bankrupt  to  have  valid  claims,^^  and  it  has  been  held  that  this 
is  true  though  the  claims  have  not  been  proved.*® 

§1063.  'b.  Time  of  declaring  dividends.— The  first  divi- 
*dend  shall  be  declared  within  thirty  days  after  the  adjudica- 
tion, if  the  money  of  the  estate  in  excess  of  the  amount  neces- 
'sary  to  pay  the  debts  which  have  priority  and  such  claims 
'as  have  not  been,  but  probably  will  be,  allowed  equals  five 
*per  centum  or  more  of  such  allowed  claims.  Dividends  subse- 
'quent  to  the  first  shall  be  declared  upon  like  terms  as  the 
'first  and  as  often  as  the  amount  shall  equal  ten  per  centum 
'or  more  and  upon  closing  the  estate.  Dividends  may  be  de- 
'clared  oftener  and  in  smaller  proportions  if  the  judge  shall 
'so  order:  Provided,  That  the  first  dividend  shall  not  include 
'more  than  fifty  per  centum  of  the  money  of  the  estate  in  ex- 
'eess  of  the  amount  necessary  to  pay  the  debts  which  have 
'priority  and  such  claims  as  probably  will  be  allowed:  And 
'provided  further,  That  the  final  dividend  shall  not  be  declared 
'within  three  months  after  the  first  dividend  shall  be  de- 
'clared.'47 

■*i  In  re  Kitzinger  et  al.,  19  N.  B.  *"!  Subdivision  "b"  of  this  section 

R.  307,  F.  C.  7863.  was  amended    by  the   act  of  Feb- 

42  Sec.  571,  act  of  1898.  ruary  5,   1903,  by  the  substitution 

•♦3  In  re  Bridgeman.  2   N.  B.   R  of  the  matter  in  the  text  for  the 

84,  F.  C.  1867.  following,   which   appeared   in  the 

44  In  re  Smith,  15  N.  B.  R.  97,  act  of  1898:  "The  first  dividend 
F.  C.  12989.  shall    be    declared    within    thirty 

45  In  re  Haynes,  2  N.  B.  R.  78,  days  after  the  adjudication,  if  the 
F.  C.  6269.  money   of  the   estate  in  excess  of 

46  In  re  James,  2  N.  B.  R.  78,  F.  the  amount  necessary  to  pay  the 
C.  7175.  debts  which  have  priority  and  such 


678  THE  NATIONAL  BANKRUPTCY   LAW.  Ch.  G5 

§1064.  'c.  Dividends  received  unaffected  by  subsequently 
'allowed  claims. — The  rights  of  creditors  who  have  received 
'dividends,  or  in  whose  favor  final  dividends  have  been  de- 
'clared,  shall  not  be  affected  by  the  proof  and  allowance  of 
'claims  subsequent  to  the  date  of  such  payment  or  declarations 
'of  dividends;  but  the  creditors  proving  and  securing  the  al- 
'lowance  of  such  claims  shall  be  paid  dividends  equal  in  amount 
'to  those  already  received  by  the  other  creditors  if  the  estate 
'equals  so  much  before  such  other  creditors  are  paid  any 
'further  dividends. '^^ 

§  1065.  Proof  of  claims  after  a  dividend.— The  object  of  this 
provision  is  to  give  each  creditor  who  proves  his  claim  and 
has  it  allowed  within  the  year  an  equal  proportion  of  his  claim 
with  those  who  have  previously  received  dividends,  provided 
that  at  the  time  of  the  declaration  and  payment  of  any  divi- 
dend, there  is  enough  to  pay  creditors,  who  have  come  in  since 
the  last  preceding  dividend,  an  amount  equal  to  what  the  others 
have  previously  received;  and,  if  there  is  not  enough  to  do  so, 
the  whole  is  paid  on  account  to  the  latter  creditors ;  and  this 
process  is  continued  until  each  successive  batch  of  creditors, 
who  came  in  between  dividends,  are  made  equal  with  those 
preceding  them ;  and,  only  when  this  has  been  done,  is  a  further 
dividend  paid  to  the  first  batch  of  creditors.  Since  the  final 
dividend  is  not  declared  until  the  estate  has  been  completely 
administered,  as  a  rule,  there  is  nothing  out  of  which  creditors 
whose  claims  have  been  proved  and  allowed  subsequent  to  the 
declaration  of  such  dividend  can  be  paid,  so  that,  as  a  penalty 

claims  as  have  not  been,  but  prob-  of  the  assignee]   order  a  dividend 

ably   will   be,   allowed   equals  five  of  the  estate  and  effects,  or  of  such 

per   centum   or  more   of   such   al-  part  thereof  as  it  sees  fit,  among 

lowed  claims.  Dividends  subsequent  such    of    the    creditors    as    have 

to  the  first  shall  be  declared  upon  proved  their  claims,  in  proportion 

like  terms  as  the  first  and  as  often  to  the  respective  amount  of  their 

as  the  amount  shall  equal  ten  per  said  debts." 

centum  or  more  and  upon  closing        Js  Analogous  provision  of  act  of 

the  estate.     Dividends  may  be  de-  1867.     "Sec.  28.     .     .     .     No  divi- 

clared  oftener  and  in  smaller  pro-  dend  already  declared  shall  be  dls- 

portions  if  the  judge  shall  so  or-  turbed    by   reason    of   debts   being 

der."  subsequently  proved,  but  the  cred- 

Analogous   provision   of    act    of  itors  proving  such  debts  shall  be 

1867.     "Sec.  28.     .     .     .    The  court  entitled    to    a    dividend    equal    to 

shall  thereupon  [on  the  discharge  those  already  received  by  the  other 


Ch.  65  DIVIDENDS.  679 

for  their  laches,  such  dilatory  creditors  will  receive  nothing, 
unless  further  funds  should  come  into  the  trustee's  hands.'** 

§  1066.  'd.  Dividends  in  case  of  foreign  bankrupt.— When- 
'ever  a  person  shall  have  been  adjudged  a  bankrupt  by  a  court 
'  without  the  United  States  and  also  by  a  court  of  bankruptcy, 
'creditors  residing  within  the  United  States  shall  first  be  paid 
'a  dividend  equal  to  that  received  in  the  court  without  the 
'United  States  by  other  creditors  before  creditors  who  have 
'received  a  dividend  in  such  courts  shall  be  paid  any  amounts.' 

§  1067.  Rule  of  distribution.— The  object  of  this  provision  is 
to  place  creditors  of  a  domestic  bankruptcy  proceeding  upon 
an  equal  footing  with  creditors  who  have  received  dividends 
in  a  foreign  proceeding;  but  in  the  event  there  are  no  assets 
in  the  latter,  such  creditors  would  be  entitled  to  share  equally 
with  the  domestic  creditor.  If  the  two  proceedings  are  being 
conducted  simultaneously,  and  assets  are  disclosed  in  the  for- 
eign proceeding,  a  non-resident  creditor  should  be  required  to 
resort  to  the  foreign  estate  first,  and  then,  after  the  amount  of 
his  dividend  is  ascertained,  should  be  permitted  to  share  in  the 
dividend  of  the  domestic  proceeding  after  the  creditors  in  the 
latter  have  received  a  sum  equal  to  that  received  by  the  former 
in  the  foreign  proceeding. 

§  1068.  *e.  Claimant's  right  to  collect  limited.— A  claimant 
'shall  not  be  entitled  to  collect  from  a  bankrupt  estate  any 
'greater  amount  than  shall  accrue  pursuant  to  the  provisions 
'of  this  Act.' 

creditors  before  any  further  pay-  re  Hovey,  8  F.  R.  314,  aff'g  5  F.  R. 

merit  is  made  to  the  latter."  356;    In  re  Swift,   106  F.  R.  65,  3 

^n  In   re  Hegerty,  2  N.  B.  N.  R.  N.  B.  N.  R.  271;  5  A.  B.  R.  415. 
1083;   In  re  Miller,  F.  C.  9556;   In 


CHAPTER  LXVI. 

UNCLAIMED    DIVIDENDS. 

§1069.   (66a)   Dividends  unclaimed      1071.  Return  to  bankrupt. 

for  six  months.  1072.  b.  Dividends  unclaimed  for 

1070.  Purpose.  a  year. 

§  1069.     '  (Sec.  66a)    Dividends  unclaimed  for  six  months.— 

'Dividends  which  remain  unclaimed  for  six  months  after  the 
'final  dividend  has  been  declared  shall  be  paid  by  the  trustee 
'into  the  court.' 

§  1070.  Purpose.— Instead  of  permitting  the  unclaimed  divi- 
dends to  be  indefinitely  tied  up,  as  was  the  case  under  the  Act 
of  1867,  and  perhaps  ultimately  inuring  to  the  benefit  of  the 
depository  in  which  held,  pending  a  claimant  therefor,  this 
section  provides  a  determinate  period  for  making  claim,  after 
which  such  dividends  are  to  be  distributed  to  the  creditors 
who  have  not  been  paid  in  full,  and  the  surplus  given  the  bank- 
rupt.^ 

§1071.  Return  to  bankrupt.— Under  the  Act  of  1867  it 
was  held  that  amounts  remaining  in  the  hands  of  the  assignee, 
after  discharge  of  a  bankrupt  against  whose  estate  no  debts 
were  proved  and  there  was  reasonable  cause  to  believe  none 
would  be  proved,  upon  proper  petition  would  be  paid  to  the 
bankrupt,-  which  would  probably  be  the  rule  adopted  now 
without  reference  to  the  next  subdivision. 

§  1072.  'b.  Dividends  unclaimed  for  a  year.— Dividends  re- 
'maining  unclaimed  for  one  year  shall,  under  the  direction  of 
'the  court,  be  distributed  to  the  creditors  whose  claims  have 
'been  allowed  but  not  paid  in  full,  and  after  such  claims  have 
'been  paid  in  full  the  balance  shall  be  paid  to  the  bankrupt; 
'provided,  that  in  case  unclaimed  dividends  belong  to  minors 
'such  minors  may  have  one  year  after  arriving  at  majority  to 
'claim  such  dividends.' 

1  See  In  re  Fielding,  2  N.  B.  N.  6806;  citing  In  re  James,  2  N.  B. 
R.  735,  3  A.  B.  R.  135,  96  F.  R.  800.     R.  78,  F.  C.  7175;  In  re  Haynes,  2 

2  In  re  Hoyt,  3  N.  B.  R.  13,  F.  C.     N.  B.  R.  78,  F.  C.  6269. 

680 


CHAPTER  LXVII. 

LIENS. 


Transfers    must    be    subse- 
quent to  act. 
The  four  months'  period. 
General  assignments. 
Property    reached    by    sum- 
mary proceedings. 
Pledge  or  pawn. 
Conveyances  to   relatives. 
Fraudulent  transfers. 
Conveyances  valid. 
Sales  held  valid. 
Evidence   of  fraudulent  in- 
tent. 

Notice  to  transferee, 
f.  Liens    obtained    through 
legal  proceedings. 
Comparison   of   the  acts  of 
1898  and  1867. 
Constitutionality. 
Conflict    between    subs,    "'c" 

and  "f." 
Applies  to  voluntary  and  in- 
voluntary cases. 
Attachments. 
Creditors'  suits. 
Judgment     and      execution 
liens. 

Statutory  liens. 
Four  months'  period. 
What  liens  valid. 
Enforcement  of  valid  liens. 
Filing  petition   fixes   status 
of  liens. 
Costs  and  fees. 
Practice. 

Trustee    to    give    notice   of 
discharge  of  lien. 


§  1073.     '  (Sec.   67a)      Unrecorded  liens.— Claims  which  for 
'want  of  record  or  for  other  reasons  would  not  have  been  valid 

681 


§1073. 

(67a)   Unrecorded  liens. 

1098, 

1074. 

Purpose. 

1075. 

Trustee     takes     subject     to 

1099. 

liens. 

1100. 

1076. 

Does  not  represent  lien 

claimants. 

1101. 

1077. 

What  claims  meant. 

1102. 

1078. 

Liens    invalid    for   want    of 

1103, 

record. 

1104. 

1079. 

Chattel  mortgage. 

1105. 

1080. 

Conditional  sale. 

1106. 

1081. 

Judgments. 

1107. 

1082. 

b.  Trustee  to  enforce  cred- 

itors' rights. 

1108. 

1083. 

Meaning  of 

1109. 

1084. 

Trustee      represents      judg- 

ment creditors. 

1110. 

1085. 

Proper  party  to  attack 

liens. 

1111. 

1086. 

c.  Liens    created    by    legal 
proceedings. 

1112. 

1087. 

Superseded  by  subd.  f. 

1113. 

1088. 

d.  Bona  fide  liens  for  a  pres- 

ent consideration. 

1114. 

1089. 

Comparison  of   the  acts  of 

1115. 

1898  and  1867. 

1116. 

1090. 

Liens  mortgage. 

1091. 

Chattel  mortgage. 

1117. 

1092. 

Enforcement    of    mort- 

1118. 

gagee's  rights. 

1119. 

1093. 

Landlord's. 

1120. 

1094. 

Materialman   or   me- 
chanic's. 

1121. 

1095. 

In    general   recognized. 

1122 

1096. 

Priority  of. 

1123. 

1097. 

e.    Transfers     within     four 
months  void. 

1124. 

G82  THE   NATIONAL  BANKRUPTCY   LAW.  Ch.  07 

'liens  as  against  the  claims  of  the  creditors  of  the  bankrupt 
'shall  not  be  liens  against  his  estate.'^ 

§  1074.  Purpose.— The  object  of  this  section  is  to  carry  out 
the  main  purpose  of  bankruptcy  legislation,  viz.,  the  equal  dis- 
tribution of  the  bankrupt's  property  among  his  creditors,  and 
supplements  the  provision  as  to  voidable  preferences,-  which 
should  be  consulted  in  connection  herewith.  It  provides  that 
all  liens  acquired  during  the  four  months  prior  to  the  com- 
mencement of  the  bankruptcy  proceedings  wkether  by  the  act 
of  the  bankrupt  or  through  legal  proceedings  against  him 
except  as  against  a  purchaser  in  good  faith  for  a  valuable  con- 
sideration shall  be  void  or  the  trustee  subrogated  to  the  rights 
of  the  holder  of  the  same,  as  may  be  most  for  the  interest  of 
the  estate.  All  liens  invalid  for  want  of  compliance  with  some 
prescribed  requisite,  as  record  or  the  like,  by  the  state  laws 
as  against  creditors,  shall  be  void  against  the  estate  and  the 
trustee  is  subrogated  to  the  rights  of  the  creditors  to  protect 
their  rights  against  any  lien  created  or  attempted  to  be  created 
by  the  debtor. 

The  provision  that  claims  which  for  want  of  record  or  other 
reason  are.  invalid  against  creditors  are  not  valid  against  bank- 
rupt's estate,  implies  that  claims  properly  recorded  will  be. 
It  is  this  implication  with  which  the  provision^  from  the  former 
act  corresponds.  The  provision  made  in  the  present  act  is 
new. 

§  1075.  Trustee  takes  subject  to  liens.— The  trustee  cannot 
acquire  a  better  title  than  the  bankrupt  had,  except  as  to  prop- 
erty which  has  been  transferred  contrary  to  the  provisions  of 
the  law.  He  takes  the  estate  subject  to  all  liens,  equitable  as- 
signments* and  incumbrances  other  than  such  as  are  void  for 
want  of  record  or  for  other  reasons  would  not  have  been  valid 
liens  as  against  the  claims  of  the  creditors  of  the  bankrupt  :^ 

1  Analogous  provision  of  act  of  after  deducting  the  value  of  such 

1867.     "Sec.  20.     .     .     .     When  a  property." 

creditor  has  a  mortgage  or  pledge  2  Sec.  60b,  act  of  1898. 

of  real  or  personal  property  of  the  3  Sec.  20,  act  of  1898. 

bankrupt,  or  a  lien  thereon  for  se-  4  in  re  Hanna  et  al.,  105  F.  R. 

curing    the    payment    of    a    debt  587,  5  A.  B.  R.  127. 

owing  to   him   from  the  bankrupt  s  in  re  Emslie,  2  N.  B.  N.  R.  992, 

he  shall  be  admitted  as  a  creditor  102  F.  R.  291,  4  A.  B.  R.  126;  In  re 

only  for  the  balance  of  the  debt  Bozeman,  2  A.  B.  R.  809.  1  N.  B. 


Ch.  G7  unrecorded  liens.  G83 

and  may  dispute  any  that  either  the  bankrupt  or  any  of  his 
creditors  could  have  legally  objected  to,^ 

See  also  Trustee's  title,  post  §  1148. 

§  1076.  Lien  claimants  not  represented  by  trustee.— The 
trustee  does  not  represent  lien  claimants;  nor  can  he  do  anj'- 
thing  to  preserve  or  protect  a  lien  against  the  estate  of  the 
bankrupt,  for  if  he  did,  it  would  violate  the  main  purpose  of 
the  act,  which  is  to  distribute  such  estate  equally  among  the 
creditors.' 

§  1077.  What  claims  meant.— The  words  used  are  claims 
invalid  for  "want  of  record  or  for  other  reason."  Provision  is 
made  elsewhere  for  preferences  and  transfers  in  fraud  of  cred- 
itors,^ and  besides,  the  words  "for  other  reasons"  refer  to 
something  similar  to  that  which  precedes  it ;  as  filing  or  record- 
ing a  chattel  mortgage  or  bill  of  sale,'-*  filing  of  notice  in  the 
case  of  mechanic,^"  or  labor  liens,^^  or  asserting  a  lien  within 
the  time  prescribed.^-  The  liens  meant  by  this  provision  are 
those  in  which  something  required  to  be  done  before  they  are 
complete  has  been  omitted.  After  the  proceedings  in  bank- 
ruptcy are  commenced  a  creditor  can  do  nothing  to  perfect 
a  lien.  If  it  is  not  then  perfect  the  creditor  is  prevented  from 
obtaining  it.^^  In  other  words,  it  is  only  valid  existing  liens 
which  are  preserved  by  the  act. 

N.  479;  In  re  Legg,  1  N.  B.  N.  420,  London  Pr.  &  Pub.  Co.,  2  N.  B.  N. 

2  A.  B.  R.  805.  96  F.  R.  326;  In  re  R.  774;  In  re  Legg,  1  N.  B.  N.  420, 

Booth,  2  N.  B.  N.  R.  377,  98  F.  R.  2  A.  B.  R.  805,  96  F.  R.  326;  In  re 

975,  3  A.  B.  R.  574;   In  re  Burkle,  Ohio  Coop.  Shear  Co.,  1  N.   B.  N. 

116  F.  R.  766,  8  A.  B.  R.  542.  477,   2  A.   B.  R.  775;    In  re  Leigh 

6  In  re  Leigh  Bros.,  1  N.  B.  N.  Bros.,  1  N.  B.  N.  526,  96  F.  R.  806; 

425,   2  A.  B.  R.   606,  s.  c.  1  N.  B.  In   re  Bozeman,  2  A.  B.  .R.  809,  1 

N.  526,  96  F.  R.  806;  In  re  Kindt,  N.  B.  N.  479;  In  re  McKay,  1  N.  B. 

2   N.  B.   N.   R.    269;    In  re  McNa-  N.  133,  1  A.  B.  R.  292. 

mara.   2    N.    B.   N.   R.    341;    Press  n  In  re  Beck  Provision  Co.,  2  N. 

Post  Printing  Co.  v.  London  Print-  B.  N.  R.  532;  In  re  Emslie,  2  N.  B. 

ing  and   Pub.   Co.,   2  N.  B.   N.   R.  N.  R.  992,  rev'g  2  N.  B.  N.  R.  324, 

774;  Contra,  In  re  McKay,  1  N.  B.  98  F.  R.  716,  2  N.  B.  N.  R.  171.  3 

N.  133,  1  A.  B.  R.  292;  In  re  Ohio  A.  B.  R.  282,  97  F.  R.  924;    In  re 

Coop.  Shear  Co.,  1  N.  B.  N.  477,  2  Drolesbaugh,  2  N.  B.  N.  R.  1079. 

A.  B.  R.  775.  12  In   re  Kerby  Denis  Co.,   1   N. 

-  Goldman  v.   Smith,  1  N.  B.  N.  B.  N.  337,  2  A.  B.  R.  218,  94  F.  R. 

291,  2  A.  B.  R.  104.  818,  aff'd  1  N.  B.  N.  399.  2  A.  B.  R. 

s  Sec.  60,  act  of  1898.  402,  95  F.  R.  116. 

9  Sec.  67e,  act  of  1898.  is  Goldman  v.  Smith,  1  N.  B.  N. 

10  Press    Post    Printing    Co.    v.     291,  2  A.  B.  R.  104. 


684 


THE   NATIONAI.   BANKRUPTCY    LAW. 


Cir.  07 


§  1078.  Liens  invalid  for  want  of  record,  etc.— The  language 
used  in  the  present  act  means  that  claims  which  for  want  of 
record,  or  for  other  reasons,  are  invalid  under  the  laws  of  the 
state  as  construed  by  the  state  courts,  shall  not  be  liens  against 
the  bankrupt's  estate.^ ^  Congress  evidently  intended  to  recog- 
nize all  liens  equitable  and  legal,  created  under  the  state  laws 
and  to  leave  them  as  it  found  them  and  not  to  level  them  to  a 
common  plane  ;i^  although  the  lien  must  be  complete  when 
the  bankruptcy  proceedings  are  commenced  ;^^  and,  if  the 
statutory  requisites  have  not  been  complied  with,  it  is  in- 
valid.^ ^  If  the  filing  of  suit  or  notice  is  merely  to  enforce  a 
perfected  lien,  the  limitation  within  which  such  filing  must 
be  done  is  governed  by  the  lex  fori  in  the  state  courts  and  does 
not  apply  to  the  bankruptcy  court,  which  gives  one  year  in 
which  to  file  claims.^  ^  A  personal  claim  of  indebtedness 
against  the  bankrupt's  estate  does  not  constitute  a  lien  upon 
property  of  the  estate  in  the  hands  of  one  making  such  claim.^^ 

§  1079.  Chattel  mortgage.— The  lien  depends  on  the  state 
law,  as  construed  by  the  state  courts.-"  In  the  following  states 
it  has  been  held  that  a  chattel  mortgage  is  void  as  a  lien  as 
against  other  creditors  of  a  bankrupt,  for  want  of  record: 
Colorado,2i  Michigan,22  New  York,^^  Ohio,^-*  Oregon,25  Rhode 


"Goldman  v.  Smith,  1  N.  B.  N. 
291,  2  A.  B.  R.  104,  citing  Morgan 
V.  Campbell,  2  Wall.  381. 

15  In  re  Harrison,  2  N.  B.  N.  R. 
541. 

16  In  re  Falls  City  Shirt  Mfg. 
Co.,  1  N.  B.  N.  565,  98  F.  R.  592, 
3  A.  B.  R.  437;  Fletcher  v.  Money, 
2  Story  555,  F.  C.  4864;  Ex  p.  Gen- 
eral Assignee,  F.  C.  5305. 

1-  Goldman  v.  Smith,  1  N.  B.  N. 
291,  2  A.  B.  R.  104. 

18  In  re  Sabin,  12  N.  B.  R.  142, 
F.  C.  12194;  In  re  Brunquest,  14 
N.  B.  R.  529,  7  Biss.  208,  F.  C. 
2055;  In  re  Duke,  9  N.  B.  R.  430, 
F.  C.  4227. 

msec.  57n,  act  of  1898;  In  re 
Rude,  2  N.  B.  N.  R.  498;  Goldman 
V.  Smith,  1  N.  B.  N.  291,  2  A.  B.  R. 
104;    In  re  Falls  City  Shirt  Mfg. 


Co.,  1  N.  B.  N.  565,  98  F.  R.  592,  3 
A.  B.  R.  437;  In  re  Brunquest,  14 
N.  B.  R.  529,  7  Ben.  208,  F.  C.  2055. 

20  In  re  Harrison,  2  N.  B.  N.  R. 
541;  Etherbridge  v.  Sperry,  139  U. 
S.  266. 

21  In  re  Leigh  Bros.,  1  N.  B.  N. 
425,  2  A.  B.  R.  606,  s.  c.  96  F.  R. 
806. 

22  In  re  Adams,  1  N.  B.  N.  503, 
2  A.  B.  R.  415,  97  F.  R.  188;  In  re 
Loud,  1  N.  B.  N.  502. 

23  Stephens  v.  Perrine,  143  N.  Y. 
476;  Stephens  v.  Meridian  Britan- 
nica  Co.,  160  N.  Y.  178;  Sheldon  v. 
Wickham,  161  id.  500;  In  re  Har- 
rison, 2  N.  B.  N.  R.  541. 

24  In  re  Ohio  Coop.  Shear  Co., 
1  N.  B.  N.  477,  2  A.  B.  R.  775. 

25  In  re  Booth,  2  N.  B.  N.  R.  377, 
98  F.  R.  975,  3  A.  B.  R.  574. 


Ch.  67  UNRECORDED  LIENS.  685 

Island,^**  North  Carolina,^^  South  Carolina,28  Wisconsin,^'^  Ne- 
braska,^o  California,^^  and  Missouri.32 

A  chattel  mortgage  may  under  a  state  law  be  void  for  in- 
sufficiency of  description,  •^•'  or  for  lack  of  refiling.^^  In  Georgia 
recording  is  not  essential  to  the  validity  of  a  chattel  mort- 
gage.^^ 

§  1080.  Conditional  sales.— A  sale  made  by  a  debtor  to  a 
creditor,  where  no  change  of  possession  takes  place,  but  the 
property  is  permitted  to  remain  in  the  possession  of  the  debtor 
and  to  be  sold  by  him,  is  void  as  to  other  creditors.^^  A  condi- 
tional sale  in  those  states  where  the  contract  is  not  required  to 
be  recorded,  which  contemplates  shipment  to  and  use  in  an- 
other state,  is  controlled  by  the  law  of  the  latter  state,^^  which 
if  made  invalid  against  execution  creditors  if  not  recorded,-^'' 
would  be  invalid  as  against  the  trustee  who  would  be  entitled 
to  the  property  as  against  the  vendor,  though  the  vendee 
would  not  have  been.^*^  In  those  states,  therefore,  where  a 
record  must  be  made  of  contracts  of  conditional  sale  of  per- 
sonal property,  where  the  title  thereto  is  to  remain  in  the 
vendor  until  paid  for,  such  contracts  will  be  void  as  to  sub- 
sequent purchases  in  good  faith  unless  duly  recorded.  On  the 
bankruptcy  of  the  vendee  in  such  case,  the  title  to  property 
covered  by  such  contract  passes  to  the  trustee.'*^ 

26  In  re  Wright,  107  P.  R.  428.  sg  Hadden    v.    Dooley,    92   F.    R. 

27  In  re  Tatem,  110  F.  R.  519,  6  274;  Barker  v.  Smith,  12  N.  B.  R. 
A.  B.  R.  426;  In  re  Jones,  116  F.  R,  474,  2  Wood  87,  F.  C.  986;  but  see 
431,  8  A.  B.  R.  626.  In  re  Kindt,  101  F.  R.   107,  rev'g 

28  Stroud  V.  McDaniel,  106  F.  R.  2  N.  B.  N.  R.  369. 

493,  5  A.  B.  R.  695.  3?  Hart  v.  Mfg.  Co.,  7  F.  R.  543; 

29  In  re  Andrae  Co.,  117  F.  R.  Pittsburg  L.  &  C.  Wks.  v.  Bk.,  F. 
561,  9  A.  B.  R.  135.  C.  11198;  Heryford  v.  Davis,  102  U. 

30  In  re  Perkins  Plow  Co.,  112  S.  235;  Chi.  Ry.  Equip.  Co.  v.  Bk., 
F.  R.  308,  7  A.  B.  R.  369.  136  U.  S.   268,  280;   McGourney  v. 

31  Guras  v.  Porter,  118  F.  R.  668.  Ry.  Co.,  146  U.  S.  536. 

32  In  re  Frazier,  117  F.  R.  746.  ss  in  re  Wilcox  &  Howe  Co.,  70 

33  Stroud  V.  McDaniel,  106  F.  R.  Conn.  224;  Cash  Register  Co.  v. 
498,  5  A.  B.  R.  695;  In  re  Durham,  Woodbury,  70  Conn.  321. 

114  F.  R.  750,  8  A.  B.  R.  115.  39  in  re  Legg,  1  N.  B.  N.  420,  2 

34  In  re  N.  Y.  Economical  Print-  A.  B.  R.  805,  96  F.  R.  326,  citing 
ing  Co.,  110  F.  R.  514,  6  A.  B.  R.  and  disapproving  In  re  McKay,  1 
615.  N.  B.  N.  133.  1  A.  B.  R.  292;  In  re 

35  In  re  Josephson,  116  F.  R.  404,  Rabenau,  9  A.  B.  R.  180. 

8  A.  B.  R.  423.  «  In  re  Frazier,  9  A.  B.  R.  21; 


G8G  THE   NATIONAL   BANKRUPTCY    LAW.  Cu.  G7 

§  1081.  Judgments. — In  certain  states  an  execution  placed 
in  the  sheriff's  hands,  but  never  levied,  creates  an  inchoate  lien 
although  the  judgment  was  not  recorded,  but  it  will  not  avail 
against  the  estate  in  bankruptcy^'  any  more  than  in  the  case 
of  one  who  takes  an  inchoate  security,  such  as  a  judgment 
note,  on  which  judgment  has  not  been  entered;*-  or  a  judg- 
ment docketed  on  a  holiday,  which  by  statute  is  dies  non  jurid- 
icus;-^^  or  where  goods  taken  upon  execution  have  been  relin- 
quished before  the  petition  in  bankruptcy  is  filed. ^^ 

§1082.     'b.    Trustee  to   enforce   creditors'   rights.— When- 

*ever  a  creditor  is  prevented  from  enforcing  his  rights  a.5 
'against  a  lien  created,  or  attempted  to  be  created,  by  his 
'debtor,  who  afterwards  becomes  a  bankrupt,  the  trustee  of  the 
'estate  of  such  bankrupt  shall  be  subrogated  to  and  may  en- 
'  force  such  rights  of  such  creditor  for  the  benefit  of  the  estate. ' 

§1083.  Meaning  of.— This  practically  means  that,  if  at  the 
time  the  bankruptcy  proceedings  are  connneneed,  there  are  any 
outstanding  rights  which  the  creditors  of  the  bankrupt  or  any 
one  of  them  might  enforce,  the  trustee  is  subrogated  to  sucli 
rights  and  may  enforce  them  for  the  benefit  of  the  estate.  It 
will  be  observed  that  such  rights  are  thus  preserved,  but  what 
was  previously  available  to  possibly  but  a  limited  number  of 
the  creditors,  is  by  the  act  given  for  the  benefit  of  all.  While, 
as  a  rule,  as  to  the  bankrupt's  property,  the  trustee  stands 
only  in  the  bankrupt's  shoes,  yet  he  so  far  represents  the  gen- 
eral creditors  that,  when  they  wish  to  set  aside  a  fraudulent 
conveyance,  he  can  attack  the  same  though  the  bankrupt  could 
not.45 

§  1084.  Trustee  represents  judgment  creditors.— Under  the 
former  act  there  was  at  first  much  doubt  as  to  the  power  of  a 

In  re  Garcewick,  8  A.  B.  R.  149;  4  4  Sage  v.  Wyncoop,  16  N.  B.  R. 

In  re  Howland,  109  F.  R.  869,  6  A.  363.  F.  C.  12215. 

B.  R.  495.  43  Sec.  67e,  act  of  1898;    Pattrn 

41  In  re  Hopkins,  1  N.  B.  N.  71,  v.  Carley,  8  A.  B.  R.  482;  In  re 
1  A.  B.  R.  209.  New    York    Economical    Printing 

42  Clark  V.  Iselin,  9  N.  B.  R.  19,  Co.,  110  F.  R.  514,  6  A.  B.  R.  615: 
10  Blatch.  204,  F.  C.  2825.  In   re   Leland,   9   N.    B.   R.   209.   7 

43  In  re  Worthington,  14  N.  B.  Ben.  156,  F.  C.  8230;  Bradshaw  v. 
R.  488,  F.  C.  18052;  s.  c.  16  N.  B.  R.  Klein.  1  N.  B.  R.  146,  2  Biss.  20, 
52,  7  Biss.  455,  F.  C.  18051.  F.   C.   1790. 


Ch.  67     TRUSTEE    TO    ENFORCE    CREDITORS'    RIGHTS.  G8; 

trustee  to  bring  a  judgmeut  creditor's  action,^*^  but  the  author- 
ities now  generally  recognize  the  trustee  as  so  far  a  judgment 
creditor  as  to  have  a  proper  standing  in  an  action  to  reach 
equities  beyond  the  domain  of  legal  remedies/"  which  right 
the  present  act^^  seems  to  have  settled.  The  title  to  the  bank- 
rupt's property  and  to  the  rights  of  action  to  recover  it  are 
vested  by  the  adjudication  in  the  trustee,  and  thereafter  he 
must  bring  the  action.  He  may  abide  by  the  result  of  the 
adjudication  dissolving  an  attachment  or  the  like,  or  he  may 
retain  the  benefit  of  the  attachment  if  for  the  good  of  the 
estate.^''  "Where  an  execution  creditor  seeks  to  subject  equit- 
able assets  to  his  judgment  and  there  are  no  assets  to  pay 
the  costs  of  litigation,  or  the  same  is  of  doubtful  outcome,  or 
only  one  creditor  is  interested,  it  has  been  held  proper,  on 
notice  to  all  the  creditors  that  a  single  creditor  or  class  of 
creditors  desires  to  conduct  such  litigation  through  the  trustee, 
to  order  a  suit  brought  for  the  benefit  of  creditors  so  sharing 
in  the  expense.^"  A  trustee  can  take  advantage  of  the  fact 
that  a  chattel  mortgage  is  void  for  want  of  filing,  by  simply 
taking  possession  of  the  property,  but  if  such  chattel  mort- 
gage has  been  once  filed  and  is  claimed  to  be  invalid  for  fail- 
ure to  refile,  he  must  take  proper  proceedings  to  have  such 
invalidity  established  by  a  competent  court;  since  neither  a 
creditor  at  large  nor  a  judgment  creditor  can  bring  any  action 
against  the  bankrupt,  tending  to  individually  benefit  himself.^i 
§  1085.  Trustee  proper  party  to  attack  liens.— The  trustee 
is  the  proper  person  to  attack  chattel  mortgages,  bills  of  sale, 
contracts  of  conditional  sale  and  bonds  for  the  sale  of  real 
estate  for  want  of  record  and  other  like  grounds  of  avoid- 
ance ;^2  to  recover  the  property  held  under  levy  by  the  sheriff, 

46  In  re  Collins,  12  N.  B.  R.  379,  i'->  Watschke   v.   Thompson.   7  A. 
12  Blatch.  548,  F.  C.   3007;     Cook     B.  R.  504. 

V.  Whipple,  55  N.  Y.  150.  •'^^o  in  re  McNamara,  2  N.  B.  N.  R. 

47  Southard  v.  Benner,  72  N.  Y.     341. 

424;  In  re  Metzger,  2  N.  B.  R.  114,  ci  In  re  Harrison,  2  N.  B.  N.  R. 

F.  C.  9510;   In  re  Duncan,  14  N.  B.  541. 

R.  18,  8  Ben.  365,  F.  C.  4131;  Bar-  52  in  re  Adams,  1  N.  B.  N.  503, 

ker  V.  Barker's  Ass.,   12  N.  B.  R.  2  A.  B.  R.  415,  97  F.  R.  188;  In  re 

474,  2  Woods  87,  F.  C.  986.  Loud,  1  N.  B.  N.  502;  In  re  Wright, 

4s  Sec.   70e,  act  of  1898;    Patten  1  N.  B.  N.  381,  96  F.  R.  187,  2  A.  B. 

V.  Carley,  8  A.  B.  R.  482.  R.  364;  In  re  Booth,  2  N.  B.  N.  R 

377,  98  F.  R.  975. 


G88  THE    NATIONAL    BANKRUPTCY    1>,AW.  ClI.  67 

the  proceeds  of  property  sold  on  execution  and  any  rents  col- 
lected by  him  in  a  case  where  the  liens  acquired  by  a  creditor 
by  judgment,  judgment  creditor's  bill  or  execution  are  dis- 
solved by  an  adjudication  in  bankruptcy,-'*^  or  to  recover  prop- 
erty which  was  given  as  a  voidable  preference.-''^ 

Where  a  preference  is  obtained  through  a  judgment  and 
levy  of  execution,  the  trustee  may  proceed  by  suit  in  equity  to 
set  aside  the  lien,  making  the  sheriff,  as  well  as  the  creditor, 
a  party  if  the  money  be  still  in  the  hands  of  the  sheriff.^^  In 
proceeding  to  recover  money  or  property  obtained  by  way 
of  preference,  the  act  of  the  bankrupt  complained  of,  that  the 
transfer  created  a  preference  and  that  the  creditor  had  reason- 
able cause  to  believe  a  preference  was  intended  must  be 
shown,'^^  the  burden  of  proof  being  on  the  trustee/'^  Where 
intent  is  the  question  all  the  circumstances  should  be  consid- 
ered.^^ If  a  lien  be  invalid  as  to  one  creditor  but  valid  as  to 
others,  or  only  one  may  enforce  his  rights  against  it,  the 
trustee  can  avoid  it  only  to  the  extent  of  the  claim  of  such 
creditor.^"  The  trustee  may  oppose  without  pleading,  the  peti- 
tion of  a  creditor  to  be  awarded  a  lien.^o 

See  also  Preferences,  ante,  §§  961-963. 

§1086.  'c.  Liens  created  by  legal  proceedings.— A  lien 
'created  by  or  obtained  in  or  pursuant  to  any  suit  or  proceed- 
ing at  law  or  in  equity,  including  an  attachment  upon  mesne 
'process  or  a  judgment  by  confession,  which  was  begun  against 
*a  person  within  four  months  before  the  filing  of  a  petition  in 
'bankruptcy  by  or  against  such  person  shall  be  dissolved  by 
'the  adjudication  of  such  person  to  be  a  bankrupt  if  (1)  it  ap- 
*  pears  that  said  lien  was  obtained  and  permitted  while  the  de- 
'fendant  was  insolvent  and  that  its  existence  and  enforce- 
'ment  will  work  a  preference,  or  (2)  the  party  or  parties  to  be 

53  In  re  Fellerath.  1  N.  B.  N.  292,      229,  20  Wall.  414;   In  re  Baker,  14 

2  A.  B.  R.  40,  95  F.  R.  121;   In  re      N.  B.  R.  433,  F.  C.  763. 
Kenney,  2  N.  B.  N.  R.  141,  3  A.  B.         -^t  Parsons  v.  Topliff,  14  N.  B.  R. 
R.  353,  97  F.  R.  554;  In  re  Kenney,      547. 

105  F.  R.  897,  5  A.  B.  R.  355.  ns  Little  v.  Alexander,  12  N.  B. 

54  In    re   McLam,   97   F.   R.   922,     R.  134,  21  Wall.  500. 

3  A.  B.  R.  245;  In  re  Burrus,  97  F.  59  in  re  N.  Y.  Economical  Print- 
R.  926,  3  A.  B.  R.  296.  ing  Co.,  110  F.  R.  514,  6  A.  B.  R. 

55  Warren  v.  Bk.,  7  N.  B.  R.  481.     615. 

10  Blatch,  493,  F.  C.  17202.  6"  In  re  Mulligan,  116  F.  R.  715, 

56  Mays  V.   Fritton,   11  N.   B.   R.     9  A,  B.  R.  8. 


Ch.  67  TRUSTEE    TO    ATTACK    LIENS.  689 

'benefited  thereby  had  reasonable  cause  to  believe  the  defend- 
'ant  was  insolvent  and  in  contemplation  of  bankruptcy,  or  (3) 
'that  such  lien  was  sought  and  permitted  in  fraud  of  the  pro- 
' visions  of  this  Act;  or  if  the  dissolution  of  such  lien  would 
'militate  against  the  best  interests  of  the  estate  of  such  person 
'the  same  shall  not  be  dissolved,  but  the  trustee  of  the  estate 
'of  such  person,  for  the  benefit  of  the  estate,  shall  be  subro- 
'  gated  to  the  rights  of  the  holder  of  such  lien  and  empowered 
'to  perfect  and  enforce  the  same  in  his  name  as  trustee  with 
'like  force  and  eft'ect  as  such  holder  might  have  done  had  not 
'bankruptcy  proceedings  intervened. ''^^ 

§1087.  Superseded  by  subdivision  "f."— This  subdivision 
provides  that  liens  obtained  through  judicial  proceedings  be- 
gun within  four  months  of  bankruptcy  shall  be  dissolved  by  the 
adjudication  provided  either  of  three  conditions  exists,  or  for 
the  subrogation  in  certain  circumstances  of  the  trustee  to  the 
rights  of  the  lien-holder.  Subdivision  f  provides  for  the  un- 
conditional dissolution  by  the  adjudication  of  all  liens  ob- 
tained through  legal  proceedings  within  such  four  months  with 
a  similar  reservation  for  the  benefit  of  the  state.  The  two 
subdivisions  appear  antagonistic  and  irreconcilable  and  under 
the  well  known  rule  of  construction  the  latter  subdivision 
must  prevail.^- 

«i  Analogous  provision  of  act  of  s.  c.  below,  2  A.  B.  R.  518,  95  F.  R. 
1898.  "Sec.  14.  That  as  soon  as  258,  in  which,  the  origin  of  the 
said  assignee  is  appointed  and  conflict  was  explained  by  the  fact 
qualified,  the  judge  .  .  .  shall  that  two  bankruptcy  bills  were 
.  .  .  assign  ...  all  the  es-  presented  to  Congress;  one  to  the 
tate  ...  of  the  bankrupt  .  .  .  Senate  and  one  to  the  House  of 
and  such  assignment  shall  relate  Representatives,  broadly  divergent 
back  to  the  commencement  of  the  in  spirit,  the  Senate  bill  supposed 
proceedings  in  bankruptcy,  and  to  be  in  the  interest  of  the  cred- 
thereupon,  by  operation  of  law,  itor  while  the  House  bill  favored 
the  title  to  all  such  property  and  the  debtor.  Upon  a  disagreement 
estate  .  .  .  shall  vest  in  said  between  the  two  houses  the  mat- 
assignee,  although  the  same  is  ter  was  referred  to  a  conference 
then  held  attached  on  mesne  proc-  committee  near  the  end  of  the  ses- 
ess  as  the  property  of  the  debtor,  sion,  resulting  in  the  incorporation 
and  shall  dissolve  any  such  attach-  into  the  House  bill  of  subdivision 
ment  made  within  four  months  f,  which  was  in  the  Senate  bill,  for 
next  preceding  the  commencement  the  avowed  purpose  of  strength- 
of  said  proceedings."  ening  it.     See  also  In  re  Rhoads, 

'■■2  See  In  re  Richards,  2  N.  B.  N.  2  N.  B.  N.  R.  301,  98  F.  R.  399.  3 

R.  38,  3  A.  B.  R.  145,  96  F.  R.  937;  A.  B.  R.  380;  In  re  Kemp,  2  N.  B. 

44 


690 


THE   NATIONAL   BANKRUPTCY    LAW. 


ClI.  6? 


^1088.     'd.    Bona  fide  liens  for  a  present  consideration.— 

'Liens  given  or  accepted  in  good  faith  and  not  in  contempla- 
'tion  of  or  in  fraud  upon  this  Act,  and  for  a  present  considera- 
'tion,  wliich  have  been  recorded  according  to  law,  if  record 
'thereof  was  necessary  in  order  to  impart  notice,  shall  not  bii 
'affected  by  this  Act.'^-'^ 

§  1089.  Comparison  of  Acts  of  1898  and  1867.— The  present 
provision  is  much  broader  than  that  in  the  act  of  1867,  since 
that  applied  only  to  mortgages,  while  this  applies  to  any  liens. 
No  distinction  is  made  between  the  different  kinds  of  liens, 
whether  given  by  the  laws  of  the  United  States  or  of  the  dif- 
ferent states  or  by  the  act  of  the  parties,  but  each  is  recognized 
and  respected  according  to  its  dignity.  Whenever  the  creditor 
has  the  right  to  have  a  debt  satisfied  from  the  proceeds  of 
property,  or  before  the  property  can  be  otherwise  disposed  of, 
he  has  a  lien  on  such  property  for  the  security  of  the  debt.**^ 
All  valid  liens  which  exist  on  a  bankrupt's  property  when  the 


N.  R.  565,  101  F.  R.  689,  4  A.  B.  R. 
242.  In  order  to  reconcile  the  con- 
flict between  subdivisions  "c"  and 
"f,"  various  interpretations  have 
been  given  the  former.  In  one 
case  it  was  held  to  apply  to  liens 
acquired  within  four  months  in 
proceedings  begun  prior  thereto 
and  subdivision  "c"  to  liens  ac- 
quired within  the  period,  which 
were  avoided  under  certain  condi- 
tions (In  re  Hopkins,  1  N.  B.  N. 
71,  1  A.  B.  R.  209)  ;  in  another, 
that  both  subdivisions  would  ap- 
ply in  most  cases  and  if  it  came 
within  the  terms  of  either  or  both, 
either  or  both  applied  (In  re  Fried- 
man, 1  N.  B.  N.  208,  1  A.  B.  R.  510; 
Peck  Lumber  Co.  v.  Mitchell,  1  N. 
B.  N.  262,  1  A.  B.  R.  701) ;  in  an- 
other, that  subdivision  "c"  applied 
to  liens  obtained  by  the  acquies- 
cence or  connivance  of  the  debtor, 
or  in  view  of  his  known  insolvency 
and  contemplated  bankruptcy  (In 
re  O'Connor,  2  N.  B.  N.  R.  90.  95 
F.  R.  943).     Notwithstanding  the 


conflict,  other  courts  have  held 
this  subdivision  to  be  in  full  force 
being  governed  in  such  conclusion 
by  the  desire  if  possible  to  give 
every  portion  of  the  law  effect. 
(See  In  re  Arnold,  1  N.  B.  N.  334, 
2  A.  B.  R.  180,  94  F.  R.  1001;  In 
re  Burrus,  97  F.  R.  926,  3  A.  B.  R. 
296;  In  re  Collins,  1  N.  B.  N.  290, 
2  A.  B.  R.  1;  In  re  Hammond,  98 
F.  R.  845,  3  A.  B.  R.  466;  In  re 
Rhoades,  2  N.  B.  N.  R.  176;  In  re 
Kemp,  2  N.  B.  N.  R.  565,  101  F.  R. 
689,  4  A.  B.  R.  242. 

63  Analogous  provision  of  act  of 
1867.  "Sec.  14.  .  .  .  That  no 
mortgage  of  any  vessel  or  any 
other  goods  or  chattels,  made  as 
security  for  any  debt  or  debts,  in 
good  faith  and  for  present  consid- 
eration and  otherwise  valid,  and 
duly  recorded,  pursuant  to  any 
statute  of  the  United  States,  or  of 
any  State,  shall  be  invalidated  or 
affected  hereby." 

<i*  Meeks  v.  Whatley,  10  N.  B.  R. 
498. 


Ch.  g?  bona  fide  liens.  691 

proceedings  in  bankruptcy  are  commenced  are  preserved  and 
will  be  respected  by  the  bankruptcy  court,  and  enforced  and 
allowed  to  be  paid  out  of  the  proceeds  of  the  property  on  which 
they  are  liens.^^ 

§  1090.  Mortgage  liens.— The  bankruptcy  law  does  not  pro- 
hibit a  person  from  loanin^^-  money  at  legal  rates,  or  selling 
goods  or  other  property  to  one  whom  he  has  reason  to  believe 
is  insolvent,  and  taking  security  for  the  same,  provided  it  be 
l)ona  fide  and  Avithout  intent  or  participation  in  any  intent  to 
defraud  or  defeat  the  execution  of  the  law,*'*'  Section  67  of  the 
law  contains  several  specific  provisions  under  which  a  mort- 
gage, although  valid  as  between  the  mortgagor  and  mortgagee, 
would  be  avoided  on  the  subsequent  adjudication  of  the  mort- 
gagor as  a  bankrupt.  Thus,  under  subdivision  "a,"  if  under 
the  laws  of  the  state,  such  mortgage  must  have  been  recorded 
in  order  to  have  been  a  valid  lien  as  against  the  claims  of  the 
creditors  of  the  bankrupt,  such  mortgage  will  not  be  a  lien 
against  his  trustee  unless  a  record  was  duly  made. 

Under  subdivision  "e,"  any  mortgage  or  encumbrance  on 
the  property  of  a  person  adjudged  a  bankrupt  within  four 
inonths  prior  to  the  filing  of  the  petition  either  by  or  against 
him,  with  the  intent  and  purpose  on  his  part  to  hinder,  delay 
or  defraud  his  creditors  or  any  of  them,  will  be  null  and  void 
as  against  the  creditors  of  such  debtor  except  as  to  purchases 
in  good  faith  and  for  a  present  fair  consideration,  and  such 
property  will  remain  a  part  of  the  assets  and  estate  of  the 
bankrupt  and  passes  to  his  trustee,  whose  duty  it  is  to  recover 
and  reclaim  the  same  by  legal  proceedings  or  otherwise  for  the 
benefit  of  the  creditors.  Hence,  a  mortgage  made  by  the  bank- 
rupt within  four  months  of  the  bankruptcy  proceedings  to 
secure   an  antecedent   debt,   is  void  if  given  with  intent  to 

65  In  re  Grinnell,  9  N.  B.  R.  35,  7  bell  v.  Waite,  16  N.  B.  R.  93,  9  Ben. 
Ben.  42,  F.  C.  5830.  166,  F.  C.  2374;   Clark  v.  Iselin,  9 

66  Crook  V.  Bk.,  1  N.  B.  N.  530;  N.  B.  R.  19,  10  Blatch.  204,  F.  C. 
Darby  v.  Boatman's  Sav.  Inst,  4  2825;  Gattman  v.  Honea,  12  N.  B. 
N.  B.  R.  195,  F.  C.  3571;  Barbour  R.  493,  F.  C.  5271;  In  re  Soudans 
V.  Priest,  19  N.  B.  R.  518,  103  U.  S.  Mfg.  Co.,  Stiles  v.  Dunnahoo.  113 
293;  In  re  Morrison,  10  N.  B.  R.  F.  R.  804;  In  re  Davidson,  109  F. 
106,  F.  C.  9839;  Tiffany  v.  Boat-  R.  882,  5  A.  B.  R.  528;  McDaniel 
man's  Sav.  Inst.,  9  N.  B.  R.  245,  v.  Stroud,  106  F.  R.  486.  5  A.  B.  R. 
18  Wall.  325;  Potter  V.  Coggeshall,  685;  In  re  Soudans  Mfg.  Co.. 
4  N.  B.  R.  19,  F.  C.  11322;  Camp-  Stiles  v.  Dunnahoo,  113  F.  R.  804. 


692  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  6? 

liinder,  delay  or  defraud  creditors,  or  with  the  intent  to  inter- 
fere with  the  operation  of  the  bankruptcy  law  or  to  prefer 
the  mortgagee.^^  A  mortgage  will  also  be  void  if  given  to 
secure  one  creditor  and  it  covers  all  the  property  then  avail- 
able for  the  general  creditors  ;^^  or  if  given  for  an  amount 
much  larger  than  the  debt,  the  balance  being  intended  to  pro- 
tect bankrupt  or  for  his  secret  benefit  ;'"'•'  or  where  the  debtor 
transfers  his  property  to  a  third  person  who  executes  a  mort- 
gage thereon  to  secure  a  creditor  of  the  insolvent.'*^ 

Although  a  person  may  have  been  solvent,  a  mortgage  made 
by  him  with  intent  to  hinder,  delay  or  defraud  his  creditors, 
Avill  become  null  and  void  if  bankruptcy  proceedings  are  in- 
situated  against  the  mortgagor  within  four  months  thereafter. 
If  a  mortgage  is  given  to  cover  a  pre-existing  debt  as  well  as  a 
new  advance,  it  will  be  upheld  to  the  extent  of  the  advance,'''^ 
or  if  given  to  secure  present  and  future  advances,  it  will  be 
upheld  unless  given  with  an  intent  to  hinder,  delay  or  defraud 
creditors.'^-  The  same  is  true  where  a  mortgage  is  made 
shortly  before  bankruptcy  in  pursuance  of  a  parole  agreement 
made  long  before  upon  a  valuable  consideration,'^^  but  a  gen- 
eral promise  made  at  the  time  a  debt  is  contracted  to  give 
security  if  required,  cannot  be  executed  after  the  debtor  has 
become  insolvent.^* 

Where  sureties  receive  an  indemnity  mortgage  from  their 
principal,  the  bankrupt,  to  secure  them  against  liability  in- 

67  In  re  Glicman,  1  N.  B.  N.  58;  7i  in  re  Rousseau,  2  N.  B.  N.  R. 

In  re  Jacobs,  1  N.  B.  N.  183,  1  A.  1066;  City  National  Bank  v.  Bruce, 

B.  R.  518;  In  re  Teague,  1  N.  B.  N.  109  P.  R.  69,  6  A.  B.  R.  311;  In  re 

310,  2  A.  B.  R.  168;  In  re  Stendts,  Davidson,  supra;   In  re  Sanderlin, 

1  N.  B.  N.  509;  In  re  Tine,  1  N.  B.  109    F.    R.    857,    6    A.    B.    R.    384; 

N.  402,  95  F.  R.  425,  2  A.  B.  R.  493;  Steadman  v.  Bank  of  Monroe,  117 

In  re  Durham,  114  F.  R.  750,  8  A.  F.  R.  237. 

B.  R.  115;  In  re  Eagan  State  Bank  t2  Ex  p.  Ames,  7  N.  B.  R.  230,  F. 

V.  Rice,  119  F.  R.  107;   In  re  Bar-  C.  332. 

rett,  6  A.  B.  R.  48.  'S  Sabin  v.  Camp,   98  F.  R.  974, 

esin    re  McLane,   97   F.  R.   922,  2  N.  B.  N.  R.  375,  3  A.  B.  R.  578; 

3  A.  B.  R.  245;    In   re  Steininger  Burdick   v.   Jackson,    15   N.   B.   R. 

Mercantile    Co.,    107    F.    R.    669,    6  318;  Post  v.  Corbin,  5  N.  B.  R.  11; 

A.  B.  R.  68;  In  re  Schuller,  108  F.  In  re  Wood,  5  N.  B.  R.  421,  F.  C. 

R.  591,  6  A.  B.  R.  278.  17937;    but  see  Graham   v.   Stark, 

69  In  re  Hugill,  100  F.  R.  616,  3  3  N.  B.  R.  92,  F.  C.  5676. 

A.  B.  R.  686.  T4  Lloyd  v.  Strobridge.  16  N.  B. 

TO  Gibson  v.  Dabil,   14   N.  B.   R.  R.  197.  F.  C.  8435;   Ex  p.  Ames,  7 

165,  5  Biss.  198,  F.  C.  5394.  N.  B.  R.  8435,  F.  C.  323. 


Oh.  67  BONA    FIDE    LIENS.  (i9o 

curred  in  liis  behalf  during  a  fixed  period  and  to  a  limited 
amount,  such  security  is  not  confined  to  the  existing  debts  or 
mere  renewals,  but  extends  to  new  debts  within  the  amount 
limited  for  which  they  become  liable  within  the  fixed  period.""' 
The  validity  of  a  mortgage  given  by  a  partnership  is  not  af- 
fected by  bankruptcy  proceedings  within  four  months  there- 
after against  one  of  the  partners  alone."'' 

After  the  filing  of  a  petition  in  bankruptcy  either  by  or 
against  the  bankrupt,  he  is  prohibited  absolutely  from  giving 
a  mortgage  or  any  security  on  property  to  which  he  had  title 
at  the  time  of  filing  the  petition  and  the  same  will  be  sum- 
marily set  aside  as  void,^'  though  there  is  nothing  to  prevent 
him  giving  the  mortgage  if  on  property  acquired  by  him  sub- 
sequent to  the  filing  of  the  petition  for  a  debt  either  due  prior 
thereto  or  incurred  subsequently. 

A  mortgage  executed  in  blank  and  in  which  the  blanks  are 
subsequently  filled  takes  effect  from  the  latter  date,  and  if 
within  four  months  and  for  an  antecedent  debt  will  be  void.'''^ 

§1091.  Chattel  mortgages.— A  chattel  mortgage  made  in 
good  faith  to  secure  a  present  advance  either  in  money  or 
property  is  valid  though  made  within  four  months  of  the 
bankruptcy;  but,  if  made  within  that  time  with  intent  to 
hinder,  delay  or  defraud  creditors  and  not  for  such  present 
advance,  or  if  for  any  reason  void  under  the  state  law  as  to 
creditors,  as  for  want  of  filing,  it  is  avoided  by  the  bankruptcy. 
If  it  shows  on  its  face  that  it  was  given  in  part  to  secure  a 
pre-existing  debt,  and  in  part  a  new  advance  of  money  made 
at  the  same  time  with  the  mortgage,  in  the  absence  of  actual 
fraud  it  is  good  as  to  the  new  advance/^  though  the  mort- 
gagee knew  the  mortgagor  was  financially  embarrassed.^^  The 
endorsement  by  the  debtor  upon  the  back  of  an  otherwise 
valid  chattel  mortgage  given  by  him,  that  such  mortgage 
should  cover  property  acquired  after  its  execution,  made  with 

73  Courier  Journal  Job  Printing  7s  in  re  Barrett,  6  A.  B.  R.  48. 

Co.  V.  Brewing  Co.,  101  F.  R.  699,  79  in  re  Wolf,  98  F.  R.  84,  3  A. 

4  A.  B.  R.  183;  Curry  v.  McCauley,  B.  R.  555;  In  re  Barman,  14  N.  B. 

20  F.  R.  583.  R.  125.  F.  C.  999;   In  re  Stowe,  6 

76McNair  v.  Mclntyre,  113  F.  R.  N.  B.   R.  429,   F.   C.   13513;    In  re 

113,  7  A.  B.  R.  638;  In  re  Sander-  Hull.  115  F.  R.  858. 

lin,  109  F.  R.  857,  6  A.  B.  R.  384.  «')  In  re  Rousseau,  2  N.  B.  N.  R. 

77  In  re  Sims,  16  N.  B.  R.  251,  F.  1066. 
C.  12888. 


(J!)l  THE   NATIONAL   BANKRUPTCY   LAW.  Cu.  GT 

the  purpose  of  delaying  creditors,  is  void.**^  Where  one  buys 
l)roperty  subject  to  a  chattel  mortgage  thereon  and  assumes 
its  payment,  the  trustee  cannot  repudiate  such  mortgage.'^- 

A  chattel  mortgage  of  a  stock  of  goods  which  permits  the 
mortgagor  to  retain  possession  and  dispose  of  them  in  the 
ordinary  course  of  trade,  is  fraudulent  as  to  other  creditors, 
but  will  be  held  to  be  good  as  against  the  bankrupt  himself.^^ 
Such  permission  does  not  invalidate  the  mortgage  as  to  other 
property  to  which  such  permission  does  not  apply.**^  A  chattel 
mortgage  void  as  against  creditors  under  a  state  law^-"^  under 
which  the  mortgagee  had  taken  possession,  having  reasonable 
cause  to  believe  the  debtor  insolvent,  is  void  as  to  the  trustee/'"^ 
If  on  all  the  debtor's  personalty  given  to  secure  a  much  larger 
sum  than  is  due  to  protect  the  property  from  creditors,  wliieli 
the  mortgagee  with  knowledge  of  the  facts  files  with  an 
aflSdavit  that  the  whole  amount  is  due,  it  is  void,^^  as  is  one 
made  for  a  present  consideration  though  not  recorded  until 
within  four  months  of  the  bankruptcy.*^^ 

§1092.  Enforcement  of  mortgagee's  rights.— Where  there 
is  no  reason  to  question  the  validity  of  a  mortgage,  the  court 
of  bankruptcy  will  entertain  the  summary  petition  of  the 
mortgagee  for  the  sale  of  the  property,^'-*  and  upon  request'"^ 
may  authorize  its  foreclosure  in  the  usual  way,  making  the 

81  Whithead  v.  Pillsbury,   13  N.  ss  Thornhill  v.  Link,  8  N.  B.  R. 

B.  R.  241,  F.  C.  17572.  521,   F.    C.   13993;     Bdmondson   v. 

«2  In  re  Standard  Laundry  Co.,  Hyde,  7  N.  B.  R.  1,  2  Sawy.  205,  F. 

112  F.  R.  126,  7  A.  B.  R.  254.  C.  6244. 

83  In  re  Leigh  Bros.,  1  N.  B.  N.  se  Harvey  v.  Crane,  5  N.  B.  R. 
526,  96  F.  R.  806,  aff'g  1  N.  B.  N.  218,  2  Biss.  496,  F.  C.  6178;  In  re 
425,  2    A.  B.   R.   606;    In   re  Ohio  Griffiths,  3  N.  B.  R.  179. 

Coop.  Shear  Co.,  1  N.  B.  N.  477,  2         st  in   re   Hugill,   2   N.   B.   N.   R. 

A.  B.  R.  775;   In  re  Foster,  18  N.     433,  100  F.  R.  616,  aff'g  2  N.  B.  N. 

B.  R.  64,  F.  C.  4964;  Bk.  v.  Hunt,     R.  429. 

4  N.  B.  R.  198;  Kane  v.  Rice,  10  N.  88  in  re  Barman,  14  N.  B.  R.  125, 

B.   R.    469,   F.   C.    7609;    Robinson  F.  C.  999. 

V.  Elliott,  11  N.  B.  R.  553,  22  Wall.  89  In  re  Sacchi,  6  N.  B.  R.  497,  43 

513;  Smith  v.  Ely,  10  N.  B.  R.  553,  How.  Pr.  252,  F.  C.  12200. 

F.  C.  1344;  In  re  Gurney,  15  N.  B.  ao  in  re  Davis,  2  N.  B.  R.  125,  F. 

R.  373,  7  Biss.  414,  F.  C.  5873;  but  C.  3618;    In  re  Sabin,  9  N.  B.  R. 

see  Harvey  v.  Crane,  5  N.  B.  R.  383,   F.  C.  12193;    Smith  v.  Kehr, 

218,  2  Biss.  496,  F.  C.  6178;    In  re  7   N.    B.    R.   97,   2    Dill.   50.   F.   C. 

Hull,  115  F.  R.  858.  13071;    Lockett  v.  Hodge,  9  N.  B. 

84  In  re  Soudan  Mfg.  Co.,  113  F.  R.  167,  F.  C.  8444. 
R.  804,  8  A.  B.  R.  45. 


Ch.  Gt  BONA    FIDE    LIENS.  695 

trustee  a  party,  or  take  upon  itself  the  duty  of  ascertaining 
and  liquidating  the  lien  by  its  sale  and  applying  the  proceeds 
in  payment,  after  first  deducting  the  costs  of  court,  and  the 
care  and  preservation  of  the  property,  and  of  the  sale  and 
taxes.^^  It  may  sell  the  property  free  of  encumbrances,  re- 
mitting the  lien-holders  to  the  proceeds  on  the  application  of 
subsequent  encumbrancers  or  other  parties  having  a  right  in 
the  equity  of  redemption  p'-  but  in  such  case  the  right  of  a 
mortgagee  not  a  party  to  the  proceedings  is  not  affected.^-' 
The  creditor  may  sell  the  property  according  to  the  terms  of 
his  contract  where  there  is  no  claim  that  such  power  will  be 
exercised  in  a  fraudulent  or  oppressive  manner.^^  It  has  been 
held  that  a  petition  for  an  order  that  the  trustee  make  sale  of 
simply  the  right  of  redemption  will  not  be  considered.^^ 

It  has  been  held  that  a  creditor  having  a  mortgage  on  the 
bankrupt's  homestead  may  be  required  to  exhaust  that  remedy 
before  he  can  enforce  his  other  remedies  against  the  bank- 
rupt's estate.^6  The  filing  of  a  petition  in  bankruptcy  by  the 
defendant  in  a  state  court  in  a  proceeding  to  foreclose  a  lien 
on  realty,  created  more  than  four  months  before  the  filing  of 
the  petition,  does  not  affect  the  right  of  the  plaintiff  to  pro- 
ceed with  the  foreclosure,  unless  he  proves  his  demand  in  bank- 
ruptcy.^"^ If  the  mortgagee  has  relied  upon  his  security  and 
not  proved  his  claim  and  the  property  has  not  been  disposed 
of  as  above  stated,  he  may  enforce  his  lien  by  appropriate 
proceedings  in  the  state  court  after  the  discharge  of  the  bank- 
rupt.*^^  The  taking  possession  of  mortgaged  property  by  the 
mortgagee  and  omission  to  sell  within  a  reasonable  time 
operates  as  a  satisfaction  of  the  debt  to  the  extent  of  the 
value  of  the  property  when  the  mortgagee  took  possession.'-*^ 

§  1093.  Landlord's  lien.— Whether  or  not  the  landlord  has 
a  lien  for  the  rent  and,  if  so,  to  what  extent,  is  to  be  deter- 

91  In  re  Sink,  2  N.  B.  N.  R.  645;  as  Ferguson  v.  Peckham,  6  N.  B. 
In  re  Ellerhorst,  7  N.  B.  R.  49,  2     R.  569,  F.  C.  4741. 

Sawy.  218,  F.  C.  4380;  In  re  Frick,  as  in  re  Sautoff,  14  N.  B.  R.  364, 

1  N.  B.  N.   214,  1  A.  B.  R.  719.  7  Biss.  167,  F.  C.  12379. 

92  Sutherland  v.  Lake  Sup.  Ship  9t  Reed  v.  Equitable  Trust  Co.. 
Canal,  R.  R.  and  Iron  Co.,  9  N.  B.  8  A.  B.  R.  242. 

R.  298,  F.  C.  13643.  as  Wicks  v.  Perkins,  13  N.  B.  R. 

93  Ray  V.  Brigham,   12  N.  B.  R.     208.  1  Woods,  383.  F.  C.  17615. 
145.  99  In  re  Haake.  7  N.  B.  R.  61,  2 

84  In  re  Brown,  104  F.  R.  762.         Sawy.  381,  F.  C.  5883. 


696  THE    NATIONAL   BANKRUPTCY    LAW.  Cil.  6t 

mined  by  the  lex  loci  and  the  bankruptcy  court  will  recognize 
and  enforce  such  lien.^  If  at  the  time  the  petition-  is  filed 
the  landlord  has  no  lien  on  a  bankrupt  tenant's  ^oods  as 
against  the  bankrupt,  he  has  none  su])se(iueiitly  af^ainst  the 
trustee;-'  nor  would  the  levying  of  a  distress  warrant  give  the 
landlord  a  lien  on  the  property  as  against  the  trustee.'* 

§  1094.  Lien  of  materialman  or  mechanic— A  nuiterialman 
or  mechanic's  lien  is  onl^^  equivalent  to  the  additional  value 
which  the  creditor  has  by  his  skill  given  the  debtor's  prop- 
erty, and  does  not  diminish  the  assets  applicable  to  the  pay- 
ment of  his  pre-existing  debt,  but  stands  on  the  same  footing 
as  mortgages,  pledges,  or  any  other  security  given  on  a  new 
and  full  consideration,  and  are  not  preferences  of  antecedent 
debts.  Being  created  by  state  statute  and  not  the  Federal 
law,  the  requirement  to  their  validity  varies  with  the  provision 
of  the  several  state  laws  with  reference  thereto,  and  if  valid 
in  accordance  with  such  laws,  will  be  so  recognized  by  the 
court  of  bankruptcy,  provided  they  are  not  in  controventiou 
to  the  bankruptcy  law.^ 

A  number  of  situations  may  arise  in  bankruptcy  proceedings 
as  regards  the  lien  of  a  mechanic  or  materialman.  (1)  The 
mechanic  or  materialman  may  become  bankrupt,  or  (2)  the 
owner  of  the  property  on  which  the  lien  is  filed  may  become 
bankrupt,  or  (3)  the  contractor  employing  the  mechanic  and 

1  In  re  Jefferson.  1  N.  B.  N.  288,  would     accordingly    be    respected 

2  A.  B.  R.  206,  93  F.  R.  948;   In  re  (In  re  Trim  v.  Wagner.  5  N.  B.  R. 

Gerson,  1  N.  B.  N.  315,  2  A.  B.  R.  23;    2    Hughes,    355,    F.    C.    14174; 

170;    In   re  Goldstein,   1  N.   B.   N.  Bowne,  12  N.  B.  R.  529,  F.  C.  1741; 

422,  2  A.  B.  R.  603;  In  re  Cronson,  Barne's   Appeal,   13   N.  B.  R.   543, 

1  N.  B.  N.   474;    In  re  Shilladay,  91    U.   S.   521;    Trim  v.   Wagner,  5 

1  N.  B.  N.  475;    In  re  Ruppel,   2  N.  B.  R.   23.  2  Hughes.  355.  F.  C. 

N.  B.  N.  88,  3  A.  B.  R.  233.  97  F.  14174;     Longstreth   v.   Pennock,   7 

R.  778;   In  re  Arnstein  &  Bonn.  2  N.    B.    R.    449,    F.   C.   8488);      but 

N.    B.    N.    R.    106;    but  see    In    re  would  not  attach  to  the  goods  of  a 

Sunseri,  3  N.  B.  N.  R.  65.  bankrupt   found   on   the   premises 

•■i  Under  the  act  of  1867,  it  was  Bailey  v.   Loeb,   11  N.   B.   R.   271, 

held  that  the   law  made   no   pro-  2  Woods,  578.  F.  C.  739. 

vision    for  a    landlord's   lien,   but  ^  In   re   Butler,  6  N.  B.  R.  501, 

that  in  its   administration  it  was  F.   C.  2236. 

the  court's  duty  to  recognize  and  4  Morgan  v.  Campbell.   11  N.  B. 

enforce    any    lien    that    he    might  R.  529;   Contra,  In  re  Appold,  1  N. 

have  by  virtue  of  the  State  law  (In  B.  R.  178,  F.  C.  490. 

re  McConnell,   9  N.  B.   R.  387.  F.  ■<  In  re  Coe  Powers  Co.,  109  F.  R. 

C.  6712) ;  and  that  a  lien  for  rent  550,  6  A.  B.  R.  1. 


Ch.  6?  BONA    FIDE    LIENS.  (^97 

erecting  the  building  for  the  owner  may  become  bankrupt. 
These  three  situations  may  arise  under  two  conditions  con- 
nected with  bankruptcy  proceedings,  that  is,  the  notice  of 
the  lien  may  be  filed  within  four  months  of  the  filing  of  the 
petition  in  bankruptcy,  or  it  may  be  filed  after  the  filing  of 
such  petition.  If  the  lien  be  filed  after  the  filing  of  the  peti- 
tion in  bankruptcy  by  or  against  the  owner  of  the  property, 
it  is  clear  that  such  lien  is  not  eifective  for  the  reason  that 
whatever  is  due  in  such  case  to  the  contractor,  the  material- 
man or  the  mechanic  passes  to  the  trustee  by  virtue  of  the 
adjudication  in  bankruptcy,  as  of  the  date  of  filing  the  peti- 
tion. The  title  of  the  trustee  can  in  no  wise  be  afilected  by 
proceedings  instituted  thereafter.  The  property  of  the  bank- 
rupt being  then  in  custodia  legis,  no  lien  of  any  character 
whatsoever  can  attach.*'  The  same  rule  would  apply  on  the 
bankruptcy  of  the  contractor,  and  whatever  may  be  due  under 
his  contract  passes  to  his  trustee  for  the  benefit  of  his  estate. 
A  more  difficult  question  arises  where  the  petition  in  bank- 
ruptcy is  filed  within  four  months  of  the  filing  of  the  lien  of 
the  laborer  or  materialman.  The  mere  rendition  of  service  or 
the  furnishing  of  material  does  not  create  the  lien  but  it  is 
the  step  taken  by  the  laborer  or  materialman  in  the  filing  of 
the  notice  of  the  lien  or  the  like  as  required  by  the  state  law 
that  originates  the  lien.  If  the  lien  of  a  mechanic  or  material- 
man is  controlled  by  this  section  of  the  statute,  it  must  be  by 
virtue  of  subdivisions  "e"  or  "f. "  The  former  relates  to 
incumbrances  created  by  the  act  of  the  bankrupt  within  four 
months  prior  to  the  filing  of  the  petition  when  intended  to 
defraud  creditors.  The  latter  relates  to  liens  obtained  through 
legal  proceedings  against  an  insolvent  debtor  within  four 
months  of  the  filing  of  a  petition  in  bankruptcy.  This  section 
also  preserves  all  liens  given  or  accepted  for  a  present  con- 
sideration. It  is  obvious  that  a  mechanic  or  a  materialman's 
lien  is  not  included  within  the  scope  of  subdivision  "e"  be- 
cause it  is  not  an  incumbrance  created  by  the  debtor,  but  is 
created  by  the  statute  or  by  the  act  of  the  lienor  in  filing  the 
statutory  notice.  Neither  is  it  included  within  the  scope  oP 
subdivision  "f"  because  the  filing  of  such  a  lien  is  not  a  legal 

6  In  re  Roeber,  9  A.  B.  R.  303;  ton,  7  A.  B.  R.  92;  but  see  In  re 
Lazzari  v.  Havens,  39  Misc.  255,  Georgia  Handle  Co..  109  F.  R.  632, 
79  N.  Y.  Supp.  375;  see  In  re  Hus-     6  A.  B.  R.  472. 


G*J8  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  G7 

proceeding,  but  is  a  proceeding  of  the  same  kind  as  the  filing 
oi'  a  chattel  mortgage  or  recording  of  a  deed.  The  lien  arises 
from  the  date  of  filing  of  the  notice  or  the  talcing  of  such  stex>s 
as  are  required  by  the  state  law  to  make  it  effective,  and  is  in 
effect  a  contemporaneous  lien  upon  a  present  consideration 
and  valid,  although  filed  within  the  four  months. 

A  lien  may  be  waived  or  be  avoided,  however,  by  the  omis- 
sion of  any  of  the  things  directed  by  the  state  statute  to  be 
done  or  to  be  included  in  the  notice  which  must  be  filed,'^  or  if 
not  filed  within  the  time  required  by  the  statute,  or  by  such 
delay  in  demanding  payment  as  will  amount  to  a  waiver  of  the 
lien.s  Neither  would  there  be  any  right  to  a  lien  where  the 
building  contract  expressly  provided  that  there  shall  be  no  lien 
or  right  of  lien  thereunder,  and  such  contract  has  been 
recorded  in  compliance  with  the  provisions  of  a  state  law.^ 

§  1095.  Liens  in  general  recognized.— Any  lien  valid  under 
the  state  laws  and  not  in  contravention  of  the  bankruptcy 
law  will  be  recognized  in  the  bankruptcy  proceedings.^*^ 
Where  a  creditor  has  a  general  lien,  and  the  debtor,  on  receiv- 
ing an  advance  or  other  accommodation  from  the  creditor, 
deposits  with  him  a  particular  security,  specially  intended  or 
appropriated,  or  even  pledged,  to  meet  such  advance  or  cover 
such  accommodation,  the  security  is  subject  not  only  to  a  par- 
ticular lien  for  the  advance  or  liability,  but  also  to  the  cred- 
itor's general  lien.^^     A  creditor  claiming  a  lien  or  equity  in 

7  In  re  Emslie,  2  N.  B.  N.  R.  992,  »  Ludowici    Roofing  Tile   Co.   v. 

102  F.  R.  291,  4  A.  B.  R.  126,  revg  Penna  Inst,  116  F.  R.  661,  8  A.  B. 

2  N.  B.  N.  R.  324,  98  F.  R.  716,  3  R.  739. 

A.  B.  R.  516,  2  N.  B.  N.  R.  171,  3  lo  Gardner  v.   Cook.   7  N.   B.  R. 

A.  B.  R.  282,  97  F.  R.  929;    In  re  346,   F.  C.  5226;    In  re  Bigelow,  1 

Drolesbaugh,  2  N.  B.  N.  R.  1079;  N.   B.    R.    202,    2   Ben.    469,    F.    C. 

In  re  Beck  Provision  Co.,  2  N.  B.  1395;  In  re  Roseberry,  16  N.  B.  R. 

N.  R.  532;   In  re  Kerby-Denis  Co.,  340,  8  Biss.  112,  F.  C.  12052;  In  re 

1  N.  B.  N.  399,  2  A.  B.  R.  402.  95  Burt  &  Towne,  13  N.  B.  R.  137,  12 

F.  R.  116,  aff'g  1  N.  B.  N.  337,  2  Blatch.     252,     F.     C.     2209;     The 

A.  B.  R.  218,  94  F.  R.  818;    In  re  "Home."    18    N.    B.    R.    557.    F.   C. 

Dey,  9  Blatch.  285,  F.  C.  3871;   In  6657;   Ex  p.  Tremont  Nail  Co..  16 

re  Coulter.  5  N.  B.  R.  64,  2  Sawy.  N.   B.  R.   448,   F.   C.   14168;    In   re 

42,   F.  C.    3276;    Sabin   v.   Connor,  Coan  Carriage  Mfg.  Co.,  12   N.  B. 

F.   C.   12197;    In   re  Cook,  3   Biss.  R.  203,  6  Biss.  315,  F.  C.  2915;   In 

116,  F.  C.  3151.  re   Mitchell.   8   N.  B.  R.  47,   F.  C. 

«  See  In  re  Lewensohn,  2  N.  B.  9657. 

N.  R.  871.  100  F.  R.  776,  4  A.  B.  R.  n  Sparhawk  v.  Drexel,  12  N.  B. 

79;  The  Kimball,  3  Wall.  37,  43.  R.  450,  F.  C.  13204;  In  re  Peebles, 


Oh.  G7  BONA   FIDE    LIENS.  699 

bankrupt's  property  may  at  once  appear  in  the  court  of  bank- 
I'uptcy  and  be  heard  without  first  having  his  lien  established 
in  another  tribunal.^-  After  discharge,  a  creditor  holding  a 
valid  lien,  who  has  not  proved  his  debt  in  bankruptcy,  may 
enforce  it  against  the  property  of  the  bankrupt  in  the  state 
court.^^    See  Liquidation,  post,  §  1197. 

A  sale  by  a  creditor  of  property  of  a  debtor,  in  his  posses- 
sion and  on  which  he  has  a  valid  lien  will  not  be  disturbed  by 
the  fact  that  the  debtor  was  insolvent  and  that  the  creditor 
knew  that  bankruptcy  was  imminent,  provided  there  was  no 
fraud  and  the  property  was  sold  at  a  fair  price.^^  Homestead 
waiver  notes  held  by  creditors  of  a  bankrupt  do  not  constitute 
liens  on  the  property  surrendered  by  him,^^  though  it  is  in 
the  nature  of  an  incumbrance.  A  state  law  giving  the  vendor 
of  property  otherwise  exempt,  the  right  to  subject  it  to  the 
payment  of  his  debt  due  for  the  purchase  money,  gives  no  lien 
thereon.^*'  If  the  property  of  a  bankrupt  is  subject  to  valid 
liens  which  exceed  in  value  the  estate  encumbered  by  them, 
there  is  no  necessity  for  the  exercise  of  the  powers  of  the  bank- 
ruptcy court.^'^ 

§  1096.  Priority  of  liens.— If  liens  have  been  acquired  bona 
fide  and  are  recognized  by  the  state  law,  they  have  the  same 
priorities  and  dignity  as  though  no  proceedings  in  bankruptcy 
had  taken  place,^^  provided  the  bankruptcy  act  has  not  pro- 
vided differently  on  the  same  subject.^^  A  prior  lien  gives  a 
prior  claim,  and  it  may  be  ascertained  and  liquidated.-*^  If 
there  are  two  mortgages,  and  the  proceeds  of  a  sale  in  bank- 
ruptcy are  sufficient  to  pay  off  the  first  as  well  as  costs  and 

13  N.  B.  R.  149,  2  Hughes  394,  F.  it  McKean  v.  Rackey,  3  McLean, 

C.  10902.  235,  F.  C.  8891;  In  re  Dillard,  9  N. 

1^  In  re  Byrne,  2  N.  B.  N.  R.  246,  B.  R.  8,  2  Hughes,  190,  F.  C.  3912; 

3  A.  B.  R.  268,  97  F.  R.  762.  see  also  In  re  Lambert,  2  N.  B.  R. 

i»  Evans  v.  Rounsaville,  8  A.  B.  138,   F.   C.   8026;    Mattock  v.   Far- 

R.  236;   Stoddart  v.  Locke,  9  N.  B.  rington,   2  Hask.   331,   F.  C.    9298. 

R.   71;    Reed  v.  Bullington,  11   N.  i«  Sec.    64b,   act   of  1898;    In   re 

B.  R.  408.  West  Norfolk  Lumber  Co.,  112  F. 

1^  In  re  Roseberry,  16  N.  B.  R.  R.  759,  7  A.  B.  R.  648. 

840,  8  Biss.  112,  F.  C.  12052.  i9  In  re  Union  Planing  Mill  Co., 

15  In  re  Schuller,  108  F.  R.  591,  2  N.  B.  N.  R.  384. 

6  A.  B.  R.  278;   In  re  Moran,  105         20  in  re  Winn,  1  N.  B.  R.  131,  F. 

F.  R.  801,  5  A.  B.  R.  472.  C.  17876;   In  re  Scott,  3  N.  B.  R. 

16  In  re  Wilkes,  112  F.  R.  975,  7  181,  F.  C.  12517;  In  re  Lacy.  4  N. 
A.  B.  R.  574.  B.  R.  15,  F.  C.  7970. 


700  THE   NATIONAL   BANKRUPTCY    LAW.  Oh.  G7 

expenses,  the  senior  mortgajjee  is  entitled  to  be  paid  in  full 
the  same  as  he  would  in  case  of  a  sale  by  way  of  foreclosure.^^' 
See  also  cases  under  subdivision  "f"  of  this  section. 
§  1097.  'e.  Transfers  within  four  months  void— bona  fide 
purchasers. — That  all  conveyances,  transfers,  assignments,  or 
incumbrances  of  his  property,  or  any  part  thereof,  made  or 
given  by  a  person  adjudged  a  bankrupt  under  the  provisions 
of  this  act  subsequent  to  the  passage  of  this  act  and  within 
four  months  prior  to  the  filing  of  the  petition,  with  the  intent 
and  purpose  on  his  part  to  hinder,  delay,  or  defraud  his 
creditors,  or  any  of  them,  shall  be  null  and  void  as  against  the 
creditors  of  such  debtor,  except  as  to  purchasers  in  good  faith 
and  for  a  present  fair  consideration;  and  all  property  of  the 
debtor  conveyed,  transferred,  assigned,  or  incumbered  as 
aforesaid  shall,  if  he  be  adjudged  a  bankrupt,  and  the  same 
is  not  exempt  from  execution  and  liability  for  debts  by  the 
law  of  his  domicile,  be  and  remain  a  part  of  the  assets  and 
estate  of  the  bankrupt  and  shall  pass  to  his  said  trustee,  whose 
duty  it  shall  be  to  recover  and  reclaim  the  same  by  legal  pro- 
ceedings or  otherwise  for  the  benefit  of  the  creditors.  And  all 
conveyances,  transfers,  or  incumbrances  of  his  property  made 
by  a  debtor  at  any  time  within  four  months  prior  to  the 
filing  of  the  petition  against  him,  and  while  insolvent,  which 
are  held  null  and  void  as  against  the  creditors  of  such  debtor 
by  the  laws  of  the  state,  territory,  or  district  in  which  such 
property  is  situate,  shall  be  deemed  null  and  void  under  this 
act  against  the  creditors  of  such  debtor  if  he  be  adjudged 
a  bankrupt,  and  such  property  shall  pass  to  the  assignee  and 
be  by  him  reclaimed  and  recovered  for  the  benefit  of  the 
creditors  of  the  bankrupt.  For  the  purpose  of  such  recovery 
any  court  of  bankruptcy  as  hereinbefore  defined,  and  any 
state  court  which  would  have  had  jurisdiction  if  bankruptcy 
had  not  intervened,  shall  have  concurrent  jurisdiction. '22 

21  In  re  Bartenbach,  11  N.  B.  R.  ruptcy  as  hereinbefore  defined,  and 
61.  F.  C.  1068;  In  re  Ship  "Edith,"  any  State  court  which  would  have 
6  N.  B.  R.  449,  5  Ben.  432,  F.  C.  had  jurisdiction  if  bankruptcy 
4282.  had  not  intervened,  shall  have  con- 

22  By    the    act    of    February    5,  current  jurisdiction." 

1903.  this  subdivision  was  amended  Analogous    provision   of   act   of 

by  the  insertion  at  the  end  there-  1867.     "Sec.    14.     .     .     .     That   as 

«f  the  words  "For  the  purpose  of  soon  as  said  assignee  is  appointed 

such  recovery  any  court  of  bank-  and  qualified,  the  judge,  or,  where 


Ch.  G- 


LIENS— TRANSFERS— INCUMBRANCES. 


701 


§  1098.  Transfers  must  be  subsequent  to  act.— It  should  be 
observed  that  the  conveyances,  transfers,  assignments  or 
incumbrances  avoided  by  this  subdivision  must  be  subsequent 
to  the  passage  of  the  bankruptcy  law;-^  and  hence  if  made 
prior  to  its  enactment  with  intent  to  prefer,  but  in  the  absence 
of  such  knowledge  on  the  part  of  the  creditor  they  are  not  void 
under  the  bankruptcy  law  nor  at  common  law.  If  they  are  not 
contrary  to  the  state  statutes  or  are  not  annulled  by  proceed- 
ings taken  under  a  state  law  within  the  time  limited  thereby, 
the  property  cannot  be  recovered  from  the  creditor  by  the 
debtor's  trustee.^'*  It  by  no  means  follows  that,  because  a 
bona  fide  debt  was  created  before  the  passage  of  the  act,  a 
mortgage  or  lien  of  any  kind  could  be  given  after  its  passage 
to  secure  such  debt,  so  as  to  avoid  the  effect  of  bankruptcy 
proceedings.^^ 


there  is  no  opposing  interest,  the 
register,  shall,  by  an  instrument 
under  his  hand,  assign  and  con- 
vey to  the  assignee  all  the  estate, 
real  and  personal,  of  the  bankrupt, 
with  all  his  deeds,  books  and  pa- 
pers relating  thereto,  and  such 
assignment  shall  relate  back  to 
the  commencement  of  said  pro- 
ceedings in  bankruptcy,  and  there- 
upon, by  operation  of  law,  the  title 
of  all  such  property  and  estate, 
both  real  and  personal,  shall  vest 
in  said  assignee,  although  the 
same  is  then  attached  on  mesne 
process  as  the  property  of  the 
debtor,  and  shall  dissolve  any  such 
attachment  made  within  four 
months  next  preceding  the  com- 
mencement of  said  proceedings. 
.  .  .  And  all  the  property  con- 
veyed by  the  bankrupt  in  fraud  of 
his  creditors  .  .  .  shall,  in 
virtue  of  the  adjudication  of  bank- 
ruptcy and  the  appointment  of  his 
assignee,  be  at  once  vested  in  such 
assignee." 

The  act  of  1867  provided  that  all 
property  conveyed  by  the  bankrupt 
in   fraud  of  his  creditors  should. 


in  virtue  of  the  adjudication  of 
bankruptcy  and  the  appointment 
of  an  assignee,  vest  at  once  in  such 
assignee.  It  will  be  observed  there- 
fore that  the  present  act  includes 
all  the  former  act  did  and  in  ad- 
dition makes  null  and  void  trans- 
fers made  subsequent  to  the  pas- 
sage of  the  act  and  within  four 
months  of  the  filing  of  the  peti- 
tion with  intent  to  defraud  cred- 
itors and  all  transfers  made  with- 
in such  four  months  and  while 
insolvent  which  are  held  null  and 
void  by  the  laws  of  the  locality  in 
which  the  property  transferred  is 
situated.  Thus  there  are  three 
classes.  Those  that  the  trustee  as 
representative  of  the  creditors  is 
entitled  to  have  set  aside  and 
which  are  identical  with  those  re- 
ferred to  in  the  former  act  and  the 
two  additional  classes  just  named. 

2.*  In  re  Brown,  1  N.  B.  N.  240,  91 
F.  R.  358;  In  re  Meyers,  1  N.  B. 
N.  293,  1  A.  B.  R.  347. 

2-»  In  re  Terrill,  100  F.  R.  778,  4 
A.  B.  R.  145. 

-•"•  In  re  Sievers.  91  F.  R.  366,  369, 
1  N.  B.  N.  68,  1  A.  B.  R.  117. 


703  THE    NATIONAL    BANKRUPTCY    LAW.  Ch.  G7 

§1099.  The  four  months'  period.— This  subdivision  covers 
frauds  upon  the  act,  whether  actual  or  constructive,  com- 
mitted within  four  months  prior  to  the  filing  of  the  petition. 
It  may  be  construed  as  the  enactment  of  a  federal  statute  of 
fraudulent  conveyances  with  respect  to  proceedings  in  bank- 
ruptcy properly  so  called,  that  is,  proceedings  in  the  bank- 
ruptcy court.^**  But  the  trustee  is  not  restricted  to  the  four 
months'  period  in  the  case  of  property  transferred  in  fraud 
of  creditors  whose  claims  existed  at  the  time  of  the  transfer, 
but  he  is  subrogated  to  the  rights  of  such  creditors^^  and  may 
institute  proceedings  to  have  the  same  set  aside  at  any  time 
within  the  period  fixed  by  the  statute  of  limitations  of  thtj 
state  in  which  the  property  is  situated.^^  The  distinction  is 
between  those  transfers  made  wrongful  and  void  by  this  sub- 
division if  within  four  months,  but  which  are  not  forbidden 
by  the  state  laws  or  at  common  law,  and  those  generally  fraud- 
ulent as  to  creditors,  irrespective  of  a  bankruptcy  law.  Thus 
he  cannot  impeach  the  title  of  one  who  purchased  property  of 
the  bankrupt,  on  the  ground  that  it  enabled  the  latter  to  pay 
some  of  his  creditors  in  preference  to  others,  the  entire  trans- 
action occurring  prior  to  the  four  months'  period ;2'>  or  a  trans- 
fer made  on  the  payment  of  a  bona  fide  debt,  though  intended 
as  a  preference,  provided  the  transfer  was  recorded  more  than 
four  months,  or  if  not,  that  there  had  been  continuous,  notori- 
ous or  exclusive  possession  for  that  period.^^ 

Such  provisions  as  that  of  the  Civil  Code  of  Louisiana  ' '  that 
a  mortgage  given  and  inscribed  wnthin  three  months  previous 
to  the  failure  of  the  debtor,  shall  be  null  and  void,  as  presumed 
to  be  in  fraud  of  creditors,  unless  the  person  to  whom  the 
mortgage  is  given  shall  prove  that  he  paid,  in  obtaining  it, 
a  real  and  effective  value  at  the  moment  of  the  contract,"  is 
in  effect  incorporated  in  the  bankruptcy  law,  and  such  mort- 
gages are  void  under  it,  as  well  as  under  the  state  statute.--'^ 

§  1100.  General  assignments.— A  voluntary  general  assign- 
ment for  the  benefit  of  creditors,  with  or  without  preferences, 

2fi  In  re  Adams,  1  N.  B.  N.  167,  1  4  A.  B.  R.  148,  rev'g  2  N.  B.  N.  R. 

A.  B.  R.  94.  369. 

27  In  re  Adams,  supra.  •'^o  In   re  Woodward.   1    N.  B.  N. 

2s  In  re  Grabs,  1  N.  B.  N.  164,  1  352,  2  A.  B.  R.  233. 

A.  B.  R.   465;    In  re  Taylor,  1  N.  ai  in  re  Jacobs,  1  N.  B.  N.  183,  1 

B.  N.  480.  95  F.  R.  956.  A.  B.  R.  518. 
20  In    re    Kindt.    101    F.    R.    107, 


Ch.  67  LIENS— GENERAL    ASSIGNMENTS.  703 

made  within  the  prescribed,  four  months,  is  constructively 
fraudulent  and  void,  though  innocent  as  a  matter  of  fact.  Its 
purpose  is  to  "hinder,  delay  and  defraud"  creditors,  within 
the  meaning  of  this  subdivision,  because  its  necessary  effect 
is  to  defeat  the  operation  of  the  bankruptcy  act,  by  depriving 
creditors  of  the  choice  of  a  trustee,  of  the  summary  jurisdic- 
tion of  the  bankruptcy  court  and  of  the  ample  control  which 
the  law  intended  to  give  them  over  the  estate  of  their  insolvent 
debtor.32  Such  assignment  is  voidable,  not  void,  and  will  re- 
main valid  unless  invalidated  by  subsequent  bankruptcy  pro- 
ceedings, differing  in  this  from  proceedings  under  the  state 
insolvency  laws  which  are  void.^^  In  this  case  the  assignee 
takes  no  title  against  the  creditors,*'^  but  is  a  mere  naked  bailee 
for  them  without  a  shred  of  title  or  lawful  authority  to  the 
possession  of  the  bankrupt's  estate,^^  the  acts  of  the  creditors 
under  such  an  assignment  being  void.^*^ 

The  application  of  a  corporation  for  voluntary  dissolution 
and  the  appointment  of  a  temporary  receiver  is  not  the  equiva- 
lent of  a  general  assignment  and  upon  that  ground  will  not  be 
avoided  by  bankruptcy  proceedings;^'^  but  a  general  assign- 

32  Lea  Bros.  v.  Geo.  M.  West  Co.,  101  U.  S.  496;  In  re  Andrae  &  Co., 
174  U.  S.  590,  1  N.  B.  N.  409,  2  A.      117  F.  R.  561,  9  A.  B.  R.  135. 

B.  R.  463;  Davis  v.  Bohle.  1  N.  B.  34  in  re  Bruss-Ritter  Co.,  1  N.  B. 

N.   216,    1   A.    B.   R.   412,   92  F.   R.  N.  39,  1  A.  B.  R.  58,  90  F.  R.  651; 

325,  aff'g  In  re  Sievers,  1  N.  B.  N.  Lea  v.   Geo.    M.  West  Co.,   supra; 

68,  1  A.  B.  R.  117,  91  F.  R.  366;  In  In  re  Hathorn,  F.  C.  6214;    In  re 

re  Abraham.  1  N.  B.  N.  281,  2  A.  B.  Bininger,  Id.  1420;   In  re  Wallace, 

R.  266,   93   F.  R.  767;    In  re   Gut-  Id.     17094;      In     re     Washington 

willig,  1  N.  B.  N.  40,  1  A.  B.  R.  78,  Marine  Ins.  Co.,   Id.  17246;    In  re 

90  F.  R.  475,  aff'd  1  N.  B.  N.  554,  Merchant's     Ins.     Co.,     Id.     9441; 

1  A.  B.  R.  388,  92  F.  R.  337;  In  re  Thornhill   v.  Bk.,  Id.  13992;    Mfg. 

Smith,  1  N.  B.  N.  356,  2  A.  B.  R.  Co.  v.  Hamilton  (Mass.),  51  N.  B. 

9,  92  F.  R.  135;  Barnes  v.  Rattew,  529. 

F.  C.  1019;   Globe  Ins.  Co.  v.   Ins.  ^o  in  re  Smith,  1  N.  B.  N.  536,  2 

Co.,   14   N.   B.   R.   311,   F.   C.   5486;  A.  B.  R.  9,  92  F.  R.  135. 

In  re  Biesenthal,  15  N.  B.  R.  228,  3  36  Jn  re  Gutwillig,  91  F.  R.  475, 

F.  C.  76;   In  re  Galvin,  2  N.  B.  N.  1  N.  B.  N.  40,  1  A.  B.  R.  78. 

R.  146;   In  re  Burt,  1  Dillon.  440,  y^  in  re   Harper,   2  N.   B.  N.   R. 

F.    C.    2210;    Hobson   v.    Markson,  605,  100  F.  R.  266,  3  A.  B.  R.  804; 

F.    C.    6555;     In    re   Smith,    F.    C.  In    re    Empire    Metallic    Bedstead 

12974;   In  re  Goldschmidt,  3  N.  B.  Co.,   2   N.   B.    N.   R.   304,   98  F.   R. 

R.   164;    Boese  v.  King,  108  U.  S.  981,  aff'g  1  N.  B.  N.  386,  2  A.  B.  R. 

385.  329,  95  F.  R.  957,  rev'g  s.  c.  1  N. 

33  Patty  Joiner  Co.  v.  Cummins,  B.  N.  301,  1  A.  B.  R.  136. 
4  A.  B.  R.  269;  Mayer  v.  Hellman, 


704  THE   NATIONAL   BANKRUPTCY    LAW.  Cu.  67 

nient  made  by  a  corporation  is  equally  with  one  made  by  an 
individual  avoided  by  bankruptcy  proceedings.^s 

§  1101.  Property  reached  by  summary  proceedings.— Trans- 
fers under  tliis  provision  avoided  by  the  law,  may  be  reached 
by  summary  proceedings  in  the  bankruptcy  court,  or  the 
trustee  may  resort  to  the  state  court  which  would  have  hatl 
jurisdiction  had  bankruptcy  not  intervened.  Under  the  act 
of  1898  resort  must  have  been  to  the  state  court,  but  since 
the  amendment  of  1903,  making  the  jurisdiction  of  the  bank- 
ruptcy and  state  courts  concurrent  over  actions  of  this  char- 
acter, the  decisions  prior  thereto  are  now  of  but  little  value. 

§  1102.  Pledge  or  pawn. — This  being  a  bailment  of  personal 
property  as  security  for  some  debt  or  engagement  in  which 
delivery  of  possession  is  generally  essential,  it  may  cover  not 
only  goods  and  chattels  and  money,  but  negotiable  paper, 
choses  in  action,  patent  rights,  bonds,  policies  of  insurance, 
and  other  things  of  like  nature.  If  made  wathin  or  more  than 
four  months  prior  to  bankruptcy^^  in  fraud  of  creditors,'*^ 
upon  suit  of  the  trustee  it  will  be  set  aside.  If  made  within 
four  months  for  a  present  fair  consideration  and  not  with 
intent  to  give  the  pledgee  or  one  creditor  an  advantage  over 
another  or  in  fraud  of  the  law,  it  will  be  preserved  and  the 
trustee  may  either  redeem  the  pledge  or  suffer  its  disposition 
and  reclaim  for  the  benefit  of  the  estate  the  amount  obtained 
therefor  in  excess  of  the  pledgee's  claim,  which  may  include 
reasonable  expenses  incurred  in  keeping  and  caring  for  the 
pledged  property.*^  The  right  of  a  pledgee  to  dispose  of  the 
property  pledged  will  be  stayed  from  the  filing  of  the  petition 
in  bankruptcy  against  or  by  the  pledgor,  and  until  consent  is 
obtained  of  the  court  of  bankruptcy  or  the  trustee  signifies 
his  purpose  to  abandon  any  claim  thereto.^-  "Where  there  has 
been  a  valid  pledge  of  goods,  the  money  paid  to  redeem  them 
cannot  be  recovered.^^  A  pledge  of  property  to  secure  notes 
executed  within  four  months  of  the  bankruptcy  is  not  a  pref- 

38  Lea  V.  Geo.  M.  West  Co.,  174  4o  See  in  re  Woodward,  1  N.  E. 
U.  S.  590,  1  N.  B.  N.  409,  2  A.  B.     N.  352,  2  A.  B.  R.  233. 

R.  463,  aff'g  1  N.  B.  N.  79,  1  A.  B.         4i  67  F.  R.  837. 

R.  261,  91  F.  R.  237.  42  in  re  Grinnell,  9  N.  B.  R.  29. 

39  See  in  re  Webb,  2  N.  B.  N.  R.     7  Ben.  42,  F.  C.  5830. 

289,  98  F.  R.  404,  3  A.  B.  R.  386.  ^^  Jenkins  v.  Mayer,  3  N.  B.  N. 

R.  189,  2  Biss.  303,  F.  C.  7272. 


Ch.  67  LIENS— MORTGAGES— PLEDGES.  705 

erence,  such  notes  being  renewals  of  notes  given  prior  to  the 
four  months  and  secured  by  a  pledge  of  the  same  property 
and,  under  the  lex  loci  contractus,  each  original  pledge  being 
valid.^-* 

The  present  law  differs  from  the  Act  of  1867  in  that  it 
makes  a  distinction  between  the  liens  created  by  the  pledge 
of  property  and  those  created  by  mortgage.^^"  Hence  a  pledge 
of  insurance  policies  by  a  solvent  corporation  to  certain  stock- 
holders as  collateral  security  for  loans,  are  valid,  although 
the  policies  expire  and  are  renewed  during  the  insolvency  of 
the  corporation  and  within  four  months  of  its  bankruptcy  ;^*^ 
or  securities  delivered  by  an  insolvent  bank  to  a  creditor  as 
collateral  for  a  loan,  though  they  must  be  surrendered  to  the 
trustee,  who  may  reduce  them  to  money  when  the  court  of 
bankruptcy  will  determine  the  right  of  the  creditor  to  prior- 
ity.47 

§1103.  Conveyances  to  relatives.— A  husband  out  of  debt 
may  settle  upon  his  wife  or  children  such  portion  of  his  estate 
as  he  pleases,  if  done  in  good  faith,  and  not  to  defraud  subse- 
quent creditors;'**  but  when  largely  indebted  he  cannot  make 
a  voluntary  donation,  or  even  a  voluntary  conveyance,  to  them, 
to  the  prejudice  of  his  creditors.^^  A  conveyance  by  a  hus- 
band, in  embarrassed  circumstances,  of  his  real  estate  to 
trustees  for  the  use  of  his  wife,  in  consideration  of  property 
and  money  of  hers  which  he  had  converted  to  his  own  use, 
the  wife  to  have  no  power  of  disposition  over  the  property 
during  her  life,  and  not  by  will  without  the  consent,  reserved 

44  Chattanooga  Nat.  Bk.  v.  Rome  call  loans,  leave  of  court  was  not 
Iron  Co.,  102  F.  R.  755,  4  A.  B.  R.  necessary  on  the  pledgor's  bank- 
441.  ruptcy,   to   sell   the    pledged   stock 

45  Under  the  act  of  1867  the  and  pay  the  surplus  into  court  (In 
rights  of  a  pledgee  were  not  im-  re  Grinnell,  9  N.  B.  R.  137,  P.  C. 
paired    or    affected    by    any    pro-  5829). 

vision  of  the  bankrupt  law  (Yeat-  46  in  re  Little  River  Lumber  Co., 

man  v.  Sav.  Inst.,  17  N.  B.  R.  187;  1  N.  B.  N.  307,  92  P.  R.  585,  1  A.  B. 

95  U.  S.  764);   nor  could  proceed-  R.  483. 

ings   in   bankruptcy   deprive   cred-  47  in  re  Cobb,  1  N.  B.  N.  557,  96 

itors   of    their    just    possession    of  P.  R.  821,  3  A.  B.  R.  129. 

property    held    as    security    for   a  4?  in  re  Jones,  9  N.  B.  R.  556,  6 

debt  without  discharging  the  debt  Biss.  68,  P.  C.  7444;    Sedgwick  v. 

(Davis  v.  R.   R.  Co.,  12  N.  B.  R.  Place,  5  N.  B.  R.  168.  5  Ben.  184, 

253,    1    Woods,    661,    P.    C.    3648)  P.  C.  12620. 

Where  stock  was  pledged  to  secure  49  Kehr  v.  Smith,  10  N.  B.  R.  49, 

45 


706  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  67 

to  the  grantor  and  trustees,  is  void."^*^  If  one  commences  a 
settlement  on  his  wife  with  an  honest  intent,  as  by  buying  a 
lot,  but  continues  the  same  project  with  a  fraudulent  intent, 
as  by  building  a  house  and  furnishing  it,  the  whole  transaction 
will  be  set  aside,^^  If  a  debtor  mortgages  his  stock  in  trade 
to  a  relative  who  immediately  forecloses,  the  property  being 
bid  in  by  a  stranger,  who  transfers  his  bid  to  a  friend  of  the 
debtor,  and  he  ostensibly  sells  the  property  to  debtor's  wife, 
the  transfer  to  the  wife  will  be  held  to  be  merely  colorable 
and  void.^-  A  loan  by  an  insolvent  father  to  his  son,  who 
makes  a  gift  of  the  amount  of  the  loan  to  his  mother,  by  the 
purchase  of  a  house  in  her  name,  is  a  fraud  upon  the  father's 
creditors  ;^3  and  so  is  a  conveyance  by  a  father  to  his  sons, 
in  consideration  of  his  support.^^ 

§  1104.  Fraudulent  transfers  or  conveyances.— The  term 
"transfer"  includes  the  sale  and  every  other  and  different 
mode  of  disposing  of  or  parting  with  property,  or  the  posses- 
sion of  property,  absolutely  or  conditionally,  as  a  payment, 
pledge,  mortgage,  gift  or  security.^^  A  fraudulent  transfer  or 
conveyance  as  used  in  the  law,  is  a  transfer  of  title  in  fraud 
of  creditors,  the  transferor  usually  retaining  the  beneficial 
interest.-'^^  When  such  transfers  are  made  to  defeat  the  opera- 
tion of  the  law  they  are  absolutely  void  so  far  as  they  in 
any  manner  stand  in  the  way  of  enforcing  its  provisions, 
where  proceedings  are  instituted  within  the  prescribed  time; 
although  they  may  be  valid  between  grantor  and  grantee.^^ 

The  present  law  is  more  prohibitive  than  the  Act  of  1867, 
for  no  reasonable  belief  of  insolvency  or  fraud  on  the  law  by 

20  Wall.  31;   In  re  Welsh,  1  N.  B.  53  in  re  Aldred,  3  N.  B.  R.  61,  F. 

N.  533,  100  F.  R.  65,  3  A.  B.  R.  93:  C.  4328. 

Pratt  V.  Curtis,  6  N.  B.  R.  139,  F.  s*  in  re  Johann,  4  N.  B.  R.  143,  2 

C.  11375;   In  re  Grabs,  1  N.  B.  N.  Biss.  139,  F.  C.  7331;  but  see  In  re 

164,    1  A.  B.   R.    4657;    Antrim   v.  Cornwell,  6  N.  B.  R.  305,  F.  C.  3250; 

Kelly,  4  N.  B.  R.  189,  F.  C.  404;  In  Adam  v.  Riley,  122  U.  S.  382. 

re  Antisdel,  18  N.  B.  R.  289,  F.  C.  ss  See.  1  (25),  act  of  1898. 

490;  In  re  Skinner,  97  F.  R.  190,  3  se  in  re  Musto,  2  N.  B.  N.  R.  577. 

A.  B.  R.  163.  57  Stevenson   v.   McLaren,   14    N. 

soFisber  v.  Henderson,  8  N.  B.  B.  R.  403;  In  re  O'Bannon,  2  N.  B. 

R.  175,  F.  C.  4820.  R.  6,  F.  C.  10394;   In  re  Tomes,  19 

51  Sedgwick  V.  Place.  10  N.  B.  R.  N.  B.  R.  36,  F.  C.  1457;  In  re 
28,  F.  C.  12621.  Byrne,  1  N.  B.  R.  122,  F.  C.  2270. 

52  In  re  Smith,  100  F.  R.  795,  1 
N.  B.  N.  533,  3  A.  B.  R.  95. 


Ch.  67  LIENS— CONVEYANCES.  707 

the  person  receiving  the  preferences  is  necessary  to  avoid  it. 
The  purpose  and  intent  of  the  bankrupt  alone  governs,  and 
if  contrary  to  the  act,  is  sufficient  to  defeat  the  transfer  except 
as  to  purchasers  in  good  faith  and  for  a  present  fair  considera- 
tion.^^ Thus  where  a  debtor  conveys  property  to  his  wife 
without  consideration  and  with  intent  to  defraud,  it  should 
be  set  aside  ;^^  or  if  by  an  insolvent  to  one  creditor  of  property 
sufficient  to  pay  his  debt  in  full,  and  that  there  is  an  excess 
which  the  creditor  pays  in  cash  is  immaterial  f^  or  of  his  stock 
in  trade  to  a  creditor  in  consideration,  inter  alia,  of  the  pay- 
ment of  an  overdraft  of  insolvent  for  which  the  creditor  had 
verbally  become  responsible  ;^i  or  to  insolvent's  brother-in- 
law  for  a  consideration  accepted  as  equal  dollar  for  dollar 
but  including  the  payment  of  two  notes  indorsed  by  the  father- 
in-law,  being  a  preference  of  the  latter  ;^2  or  by  securities  by 
an  insolvent  bank  as  collateral  for  a  loan  consisting  in  part 
of  the  lender's  deposit  ;^2  or  of  stock  to  an  indorser  to  secure 
his  indorsement  on  certain  acceptances  used  to  secure  a  cred- 
itor;^* or  of  a  claim  against  the  debtor  for  a  cash  discount  on 
an  account  for  goods  previously  sold;^^  or  where  one  buys 
commercial  paper  and  within  four  months  of  the  bankruptcy 
takes  mortgage  security  therefor  ;66  or  a  lease  by  an  insolvent 
to  a  creditor  as  part  of  a  scheme  to  give  such  creditor  an 
advantage  over  others.^'^ 

A  conveyance  would  be  void  if  of  the  whole  of  a  debtor's 
property  ;68  or  of  the  whole  with  a  colorable  exception,  made 

58  In  re  McLam,  3  A.  B.  R.  245,  es  in  re  Cobb,  1  N.  B.  N.  557,  3 

97  F.  R.  922,  1  N.  B.  N.  402.  A.  B.  R.  129,  96  F.  R.  821. 

sy  In  re  Skinner,  97  F.  R.  190,  3  g*  Crooks  v.  Bk.,  3  A.  B.  R.  238, 

A.  B.  R.  163.  rev'g  1  N.  B.  N.  530. 

«o  Johnson  v.  Wald,   1  N.  B.  N.  es  in  re  Eggert,  2  N.  B.  N.  R.  390, 

325,  2  A.  B.  R.  84,  93  F.  R.  640.  98  F.  R.  843,  3  A.  B.  R.  541. 

61  Goldman  v.  Smith,  1  N.  B.  N.  ee  in  re  Glassburner,  2  N.  B.  N. 
160,  1  A.  B.  R.  266,  93  F.  R.  182.  R.  634. 

62  In  re  Taylor,  1  N.  B.  N.  412;  e?  carter  v.  Hobbs,  1  N.  B.  N. 
citing  Bartholow  v.  Bean,  10  N.  B.  529,  2  A.  B.  R.  224,  94  F.  R.  108,  3. 
R.  241,  18  Wall.  635;  Ahl  v.  c.  1  N.  B.  N.  191.  1  A.  B.  R.  215.  92 
Thorne,  3  B.  R.  118;  Scammon  v.  F.  R.  594;  see  Robinson  v.  White, 
Cole,  3  B.  R.  393,  5  N.  B.  R.  257;  1  N.  B.  N.  513,  97  F.  R.  33,  3  A.  B. 
Graham    v.    Stark,    3    B.    R.    357;  R.  88. 

Cookingham  v.  Morgan.  5  N.  B.  R.  ««  Norton  v.  Billings,  4  F.  R.  623; 
16;  Bean  v.  Laflin,  10  N.  B.  R.  333.     Keating  v.  Keefer,  5  N.  B.  R.  133, 

F.  C.  7635. 


708  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  67 

as  a  security  for  a  pre-existing'  debt  ;"'*  or  a  conveyance  by  one 
partner  of  his  interest  to  the  other,  with  intent  to  hinder  and 
defeat  creditors,'^^^  though  the  mere  fact  of  such  transfer 
would  not  necessarily  imply  such  an  intent,'^^  and  if  the  suc- 
ceeding partner  sells  in  good  faith  to  a  third  person  the  firm's 
entire  property  it  is  not  a  preference,  the  third  person  not 
being  a  creditor.'''^  If  a  dissolution  of  partnership  is  made 
within  four  months  before  the  firm  is  adjudged  bankrupt,  it 
will  be  treated  as  a  void  transfer,  and  the  property  in  the 
hands  of  both  partners  as  firm  property .'^^ 

A  conveyance  absolute  on  its  face  in  which  grantor  secretly 
reserves  the  right  to  possess  and  occupy  for  a  limited  period 
under  a  parol  agreement  as  part  of  the  consideration  is  void  ;'^^ 
or  a  sale  of  personalty  in  fraud  of  creditors,  there  being  no 
change  of  possession  -^^  or  a  bill  of  sale  given  as  security  for  a 
loan  to  be  used  with  the  lender's  knowledge  in  spesulating  in 
differences  in  the  profits  of  which  he  was  to  share,  and  which 
was  not  recorded  and  no  possession  taken  under  it;'^^  or  a 
sale  by  an  insolvent  owner  to  a  broker  of  goods  placed  with 
him  for  sale  on  commission  -^"^  or  a  conveyance  prior  to  the 
four  months'  period  but  recorded  within  the  period,  the  local 
law  making  such  conveyance  effective  from  the  time  of  record 
as  to  subsequent  purchasers  and  all  creditors;"^  or  a  deed  not 
at  first  fraudulent  but  which  becomes  so  by  being  concealed  -^^ 
or  a  deed  of  trust  directing  the  trustee  to  sell  the  property 
and  pay  the  debts  according  to  the  state  law,  as  it  takes  from 
the  creditors  the  right  to  have  the  estate  settled  in  accordance 
with  the  bankruptcy  law;^^  or  a  conveyance  to  one  creditor  of 

69  Rison  V.  Knapp,  4  N.  B.  R.  114,  'i  Lukins  v.  Aird,  2  N.  B.  N.  R. 
1  Dill.  186,  F.  C.  11861.  27,  24  Wall.  78. 

70  In  re  Rosenbaum,  1  N.  B.  N.  75  in  re  Taylor,  1  N.  B.  N.  480. 
541;  Burrill  v.  Lawry,  18  N.  B.  R.  95  F.  R.  956. 

367,  F.  C.  2199;  In  re  Rudnick,  2  N.  ^e  Harden  v.  Phillips,  3  N.  B:  N. 

B.  N.   R.  975,  102   F.   R.   750,   4  A.  R.  46,  4  A.  B.  R.  566. 

B.  R.  531;    In  re  Jones,  100  F.  R.  "7  Avery  v.  Hackley,  11  N.  B.  R. 

781,  2  N.  B.  N.  R.  193,  4  A.  B.  R.  241,  20  Wall.  407. 

141.  78Thornliill  v.  Link.  8  N.  B.  R. 

71  In  re  Munn,  7  N.  B.  R.  468,  3  521,  F.  C.  13993. 

Eiss.  442,  F.  C.  9925.  79  Barker  v.  Smith,  12  N.  B.  R. 

72  In  re  Rudnick,  2  N.  B.  N.  R.     474,  2  Woods  87,  F.  C.  986. 

975,  4  A.  B.  R.  531,  102  F.  R.  750.  so  Rumsey  &  Sikemier  Co.  v.  Nov- 

73  In  re  Head,  114  F.  R.  489,  7  A.  elty  Mach.  Co.,  2  N.  B.  N.  R.  128, 
B.  R.  556.  99  F.  R.  699,  3  A.  B.  R.  704. 


Ch.  67  LIENS.  709 

what  would  otherwise  under  the  provisions  of  the  act  go  to 
all;'^^  or  where  a  banker  sells  a  sight  draft  and  next  day 
gives  the  holder  collateral  security  for  it;^^  or  a  voluntary 
conveyance  as  to  subsequent  creditors,  although  there  are  no 
existing  debts  if  it  be  shown  by  facts  and  circumstances  that 
it  was  made  with  an  actual  intent  to  defraud  them.^^ 

§  1105.  Conveyances  valid.— The  law  does  not  prevent  an 
insolvent  from  dealing  with  his  property  prior  to  the  institu- 
tion of  bankruptcy  proceedings,  provided  it  is  without  any 
purpose  to  delay  or  defraud  his  creditors  or  to  give  a  prefer- 
ence, and  the  value  of  the  estate  is  not  impaired.^^  Thus  in 
case  of  a  conveyance  for  a  present  fair  consideration,  or  a 
grant  or  conveyance  to  take  effect  upon  property  when  it  is 
brought  into  existence  and  comes  to  the  grantor  in  fulfillment 
of  an  express  agreement  which  is  founded  on  good  and  valu- 
able consideration  has  been  held  valid,^^  as  also  a  conveyance 
wiiere  the  creditor  has  a  lien  of  greater  amount  than  the  value 
of  the  property.^^  A  conveyance,  though  fraudulent,  is  not 
made  in  contemplation  of  bankruptcy,  where  there  are  no 
other  creditors  and  the  debt  is  well  secured.^^ 

§  1106.  Sales  held  valid.— Sales  of  property  in  good  faith 
for  a  present  fair  price,  cannot  be  impeached  for  fraud  ;^s  or  a 
sale  merely  on  the  ground  of  inadequacy  of  price  ■,^^  or  a  sale 
of  a  portion  of  debtor's  property  made  in  good  faith  to  raise 
money  to  discharge  a  debt,  or  to  pay  the  costs  of  contemplated 
bankruptcy  proceedings;^^  or  if  there  be  no  fraudulent  inten- 
tion, the  bankrupt's  continuance,  though  insolvent,  to  sell  at 
retail,  and  endeavor  to  effect,  if  possible,  a  compromise  with 
his  creditors.'^! 

81  In  re  McLam,  1  N.  B.  N.  402,  st  in  re  Johann,  4  N.  B.  R.  143,  2 
97  P.  R.  922,  3  A.  B.  R.  245.  Biss.  139,  F.  C.  7331. 

82  Merchant's  Nat.  Bk.  v.  Cook,  88  in  re  Strenz,  8  F.  R.  311; 
3  6  N.  B.  R.  391.  95  U.  S.  342.  Sedgwick  v.  Wormser,  7  N.  B.  R. 

83  Smith  V.  Kehr,  7  N.  B.  R.  97,  186,  F.  C.  12636. 

2  Dill.  50,  F.  C.  13071;   Beecher  v.  so  in   re  Shaw,  19  N.  B.  R.  512, 

Clark,  10  N.  B.  R.  385,  F.  C.  1223.  F.  C.  12716. 

84  Clark  V.  Iselin,  11  N.  B.  R.  oo  Tiffany  v.  Lucas,  8  N.  B.  R.  49, 
337,  21  Wall.  360.  15  Wall.  410;  In  re  Keefer.  4  N.  E. 

85  Barnard  v.  N.  &  W.  R.  R.,  14  R.  126,  F.  C.  7636. 

N.  B.  R.  469.  4  Cliff.  351,  F.  C.  1007.         fi  In  re  Hunger.  4  N.  B.  R.  90.  F. 

sC'Catlin  V.  Hoffman.  9  N.  B.  R.     C.  9923. 
342,  2  Sawy.  486.  F.  C.  2521. 


no  THE    NATIONAL   BANKRUPTCY    LAW.  ('Jl.  67 

§  1107.  Evidence  of  fraudulent  intent.— in  an  action  to  set 
aside  a  conveyance  by  an  insolvent  debtor,  on  the  ground  ol" 
fraud,  such  fraud  must  be  proved,  not  assumed,'*-  though  cases 
may  arise  where  the  intent  will  be  inferred  from  the  circum- 
stances of  the  transaction.'^^  A  sale  or  conveyance  by  a  bank- 
rupt out  of  the  usual  and  ordinary  course  of  business  is  pre- 
sumptively fraudulent,  but  this  presumption  may  be 
rebutted^^  by  evidence  aliunde  to  be  produced  by  the  vendee.*^^ 
In  determining  whether  a  given  transaction  is  made  in  the 
ordinary  and  usual  course  of  business  of  a  party,  the  question 
is  not  whether  such  transactions  are  usual  in  the  general  con- 
duct of  business  throughout  the  community,  but  whether  they 
are  according  to  the  usual  course  of  business  of  the  particular 
person  whose  conveyance  is  the  subject  of  investigation.^^ 

§  1108.  Notice  to  transferee.— The  filing  of  a  petition  pray- 
ing an  adjudication  in  bankruptcy  is  notice  to  all  the  world 
and  all  persons  dealing  with  the  one  so  charged  do  so  at  their 
peril.  Hence  a  transferee  or  a  purchaser  of  negotiable  paper, 
after  such  filing,  is  not  a  bona  fide  holder  without  notice;'''^ 
as  to  be  such  he  must  be  without  notice  of  the  rights  and 
equities  sought  to  be  enforced  at  the  time  of  payment  of  the 
consideration.'^^  To  constitute  a  bona  fide  purchaser  for 
value,  he  must  not  only  show  that  he  had  no  notice,  but  he 
must  have  paid  a  consideration  at  the  time  of  the  transfer 
either  in  money  or  other  property,  or  by  a  surrender  of  exist- 
ing debts  or  securities,  which  would  exclude  a  second  pur- 
chaser knowing  of  bankrupt's  failure  and  that  seller  held 
under  mortgage  from  bankrupt.^^ 

92  Campbell  V.  Waite,  16  N.  B.  R.  B.  R.  57,  F.  C.  12889;  Webb  v. 
93,  9  Ben.  166,  F.  C.  2374;  Crump  Sachs,  15  N.  B.  R.  168,  4  Sawy. 
V.  Chapman,  15  N.  B.  R.  571,  1  158,  F.  C.  17325;  In  re  Deane,  2  N. 
Hughes,  183,  F.  C.  3455.  B.  R.   29,  F.  C.  3700;    Walbrun  v. 

93  Gattman  v.  Honea,  12  N.  B.  R.  Babbitt,  2  N.  B.  R.  1,  16  Wall.  577; 
493,  F.  C.  5271.  In  re  Langley,  1  N.  B.  R.  155. 

91  Sedgwick  v.  Place,  5  N.  B.  R.  9c  Rison  v.  Knapp,  4  N.  B.  R.  114, 

168,  5  Ben.  184,  F.  C.  12620.  F.  C.  11861. 

95  Norton  v.  Billings,  4  F.  R.  623;  97  in  re  Lake,  6  N.  B.  R.  542,  3 

Babbitt  v.  Walbrun,  4  N.  B.  R.  30,  Biss.    304,    F.    C.    7992;    Catlin   v. 

1    Dill.    19.    F.    C.    694;    Rison    v.  Hoffman,  9  N.  B.  R.  342,  2  Sawy. 

Knapp,  4  N.  B.  R.  114,  F.  C.  11861;  486,  F.  C.  2521. 

Collins  V.  Bell,  3  N.  B.  R.  46,  F.  C.  "s  Marsh  v.  Armstrong.  11  N.  B. 

3010;   U.  S.  V.  Baker,  13  N.  B.  R.  R.  125. 

88,  F.  C.  14584;   In  re  Sims,  19  N.  i'u  Rison  v.  Knapp,  4  N.  B.  R.  114, 

F.  C.  11861. 


Ch.  07  LIENS    THROUGH    LEGAL    PROCEEDINGS.  711 

§  1109.  'f.  Liens  obtained  through  legal  proceedings.— 
'That  all  levies,  judgments,  attachments,  or  other  liens,  ob- 
'tained  through  legal  proceedings  against  a  person  who  is 
'insolvent,  at  any  time  within  four  months  prior  to  the  filing 
*of  a  petition  in  bankruptcy  against  him,  shall  be  deemed 
'null  and  void  in  case  he  is  adjudged  a  bankrupt,  and  the 
'property  affected  by  the  levy,  judgment,  attachment,  or  other 
'lien  shall  be  deemed  wholly  discharged  and  released  from  the 
'same,  and  shall  pass  to  the  trustee  as  a  part  of  the  estate  of 
'the  bankrupt,  unless  the  court  shall,  on  due  notice,  order  that 
'the  right  under  such  levy,  judgment,  attachment,  or  other 
'lien  shall  be  preserved  for  the  benefit  of  the  estate;  and  there- 
'upon  the  same  may  pass  to  and  shall  be  preserved  by  the 
'trustee  for  the  benefit  of  the  estate  as  aforesaid.  And  the 
'court  may  order  such  conveyance  as  shall  be  necessary  to 
'carry  the  purposes  of  this  section  into  eft'ect:  Provided, 
'That  nothing  herein  contained  shall  have  the  effect  to  destroy 
'or  impair  the  title  obtained  by  such  levy,  judgment,  attach- 
'ment,  or  other  lien,  of  a  bona  fide  purchaser  for  value  who 
'shall  have  acquired  the  same  without  notice  or  reasonable 
'cause  for  inquiry. '^ 

§  1110.  Comparison  of  the  Acts  of  1867  and  1898.— The  pro- 
vision in  the  Act  of  1867  dissolved  any  attachment  on  mesne 
process  provided  it  was  made  within  four  months  of  the  bank- 
ruptcy proceedings.  The  provision  of  the  present  act  dissolves 
any  "lien"  (a  broader  term)  obtained  through  legal  proceed- 
ings against  a  person  who  is  insolvent,^  at  any  time  within 
four  months  prior  to  the  filing  of  a  petition  in  bankruptcy. 

§  1111.  Constitutionality.— The  fact  that  in  voluntary  pro- 
ceeding liens  acquired  prior  to  the  passage  of  the  act  are 
affected  by  it  does  not  render  it  unconstitutional  since  it  does 
not  impair  the  obligation  of  existing  contracts,  and  hence  is 

1  Analogous  provision  of  act  of  the  title  to  all  such  property  and 

1867.     "Sec.  14.     That  as  soon  as  estate    .     .     .     shall    vest   in   the 

said    assignee    is    appointed    and  said   assignee,   although  the  same 

qualified,  the  judge    .     .     .     shall  is    then   held    attached    on    mesne 

.  .  assign  ...  all  the  es-  process  as  the  property  of  the 
tate  ...  of  the  bankrupt  .  .  .  debtor,  and  shall  dissolve  any  such 
and  such  assignment  shall  relate  attachment  made  within  four 
back  to  the  commencement  of  the  months  next  preceding  the  corn- 
proceedings  in  bankruptcy,  and  mencement  of  said  proceedings." 
thereupon,    by    operation    of    law,         2  Sec.  1  (15),  act  of  1898. 


712  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  G1 

not  open  to  constitutional  objection  on  that  f,n'Ound,  but  sim- 
ply affects  the  remedy  to  enforce  such  contracts.  The  differ- 
ence between  the  obligation  of  a  contract  and  the  remedy 
given  by  the  legislature  to  enforce  that  obligation,  exists  in 
the  nature  of  things.  Without  impairing  the  obligation  of  the 
contract,  the  remedy  may  certainly  be  modified  as  the  wisdom 
of  the  nation  shall  direct.-^  Irrespective  of  this,  the  inhibition 
to  the  impairment  of  contracts  applies  merely  to  the  states 
and  not  to  the  Federal  government,  and  although  in  this  case 
a  contract  was  impaired  it  would  not  be  unconstitutional."* 

§  1112.  Conflict  between  subdivisions  "c"  and  "f."— While 
statutes  should,  if  possible,  be  construed  so  as  to  give  every 
part  effect,  it  is  sometimes  impossible  to  harmonize  them,  as 
appears  to  be  the  case  here.  It  is  quite  clear  that  Congress 
either  inadvertently  left  subdivision  "c"  in  the  bill  after  add- 
ing subdivision  "f,"  or  intended  to  strengthen  the  act  by  the 
broader  and  more  drastic  provisions  of  the  latter  clause.  Sub- 
division "c"  provides  that  liens  of  a  certain  character  shall 
be  void  under  certain  conditions,  while  subdivision  "f"  pro- 
vides that  all  the  liens  embraced  by  subdivision  "c"  shall  be 
void  without  reference  to  any  conditions  save  the  insolvency 
of  the  debtor  and  their  being  obtained  within  four  months. 
Subdivision  "f"  is  the  latest  expression  of  the  legislative  will 
and  is  in  harmony  with  the  general  purpose  of  the  act  to  avoid 
preferences  obtained  after  insolvency  and  an  express  inhibition 
against,  and  a  declaration  of  the  unlawful  character  of,  liens 
which  subdivision  "c,"  if  it  sustains,  does  so  by  implication 
only.  Subdivision  "f"  is  therefore  the  law  governing  liens 
obtained  within  four  months  prior  to  the  filing  of  a  petition  in 
bankruptcy  through  legal  proceedings  against  an  insolvent 
debtor.^ 

3  In  re  Rhoads,  2  N.  B.  N.  R.  Pitzgibbon,  195,  followed  in  Town- 
301,  98  F.  R.  399,  3  A.  B.  R.  380;  send  v.  Brown,  4  Zabrlskie,  88,  and 
citing  Sturgis  v.  Crowninshield,  4  Puffendorf's  Rules,  p.  132,  Potter's 
Wheaton,  368.  See  Metcalf  v.  Dwarris  on  Statutes;  see  also  In  re 
Barker,  187  U.  S.  165,  9  A.  B.  R.  36.     Richards,  2  N.  B.  N.  R.  38,  3  A.  B. 

4  In  re  Jordan,  8  N.  B.  R.  180,  F.  R.  145,  96  F.  R.  937;  s.  c.  2  A.  B.  R. 
C.  7514;  In  re  Smith,  14  N.  B.  R.  518,  95  F.  R.  258;  In  re  Peck  Lum- 
295,  F.  C.  12996;  In  re  Everett,  9  ber  Co.,  1  N.  B.  N.  262,  1  A.  B.  R. 
N.  B.  R.  90,  F.  C.  4579.  701;   In  re  Moyer,  1  N.  B.  N.  270, 

5  In  re  Rhoads,  2  N.  B.  N.  R.  301,     1  A.  B.  R.  577,  93  F.  R.  188;  In  re 
98  F.  R.  399,  3  A.  B.  R.  380;  s.  c.  2     Francis  Valentine  Co..  1  N.  B.  N. 
N.  B.  N.  R.  176;  citing  The  Attor-     529,  2  A.  B.  R.  522,  94  F.  R.  793. 
ney  General  v.  Chelsea  Water  Wks., 


Ch.  67  LIENS    THROUGH    LEGAL    PROCEEDINGS.  713 

§  1113.  Applies  to  voluntary  and  involuntary  cases.— The 
language,  "filing  of  a  petition  in  bankruptcy  against  him," 
taken  literally  means  an  involuntary  proceeding;  but  "a  per- 
son against  whom  a  petition  has  been  filed"  is  defined^  to 
include  "a  person  who  has  filed  a  voluntary  petition,"  and 
therefore  justifies  the  position  that  this  subdivision  applies  to 
voluntary  as  well  as  involuntary  proceedings.  It  is  only  in  this 
way  that  a  harmonious  design  can  be  evolved  from  the  law. 
To  restrict  its  application  to  involuntary  proceedings  would 
defeat  the  manifest  purpose  to  secure  equality  in  the  treatment 
of  creditors  and  to  avoid  all  transactions  within  a  limited  time, 
which  are  in  fraud  of  creditors.  By  a  race  of  dilligence  be- 
tween debtor  and  creditor,  the  former  might  anticipate  the 
action  of  the  latter  and,  by  voluntary  bankruptcy  legalize 
fraudulent  transactions  which  the  act  would  avoid  upon  in- 
voluntary proceedings.  This  could  never  have  been  intended 
and  should  be  so  interpreted  only  if  the  language  were  so  clear 
and  precise,  as  would  admit  of  no  other  construction.'^ 

§  1114.  Attachments.— Under  both  the  present  and  the 
former  acts  attachments  sued  out  and  levied  upon  the  prop- 
erty of  an  insolvent  within  four  months  of  the  filing  of  a  peti- 
tion in  bankruptcy,  whether  voluntary  or  involuntary,^  are 
dissolved  by  the  adjudication  thereon,^  though  the  suit  may 

6  Sec.  1  (1),  act  of  1898.  R.  90,  95  F.  R.  943;   In  re  DeLue. 

1  In  re  Lesser,  2  N.  B.  N.  R.  599,  1  N.  B.  N.  555,  1  A.  B.  R.  387,  91 

100  F.  R.  433,  3  A.  B.  R.  815;    In  F.  R.  510;    In  re  Collins,  1  N.  B. 

re  Rhoads,  2  N.  B.  N.  R.  301,  98  F.  N.  290,  2  A.  B.  R.  1;  In  re  Easley, 

R.  399,  3  A.  B.  R.  380;  s.  c.  1  N.  B.  1  N.  B.  N.  230,  1  A.  B.  R.  715,  93 

N.  176;   In  re  Richards,  2  N.  B.  N.  F.  R.  419;    In  re  Brown,  91  F.  R. 

R.  38,  3  A.  B.  R.  145,  96  F.  R.  935;  358,  1  A.  B.  R.  107;  In  re  Benedict, 

s.  c.  2  A.  B.  R.  518,  95  F.  R.  258;  In  8  A.  B.  R.  463;   Brown  v.  Case,  6 

re  Specht,  2  N.  B.  N.  R.  238;  In  re  A.  B.  R.  744. 

Higgins,   2  N.  B.  N.  R.  115,   3  A.  s  in  re  McCartney,  109  F.  R.  621, 

B.    R.    364,    97    F.   R.    775;    In    re  6  A.  B.  R.  367;    In  re  Richards,  3 

Vaughan,  2  N.  B.  N.  R.  101.  3  A.  A.  B.  R.  145,  96  F.  R.  935,  37  C.  C. 

B.  R.  362,  97  F.  R.  560;  In  re  Fel-  A.  634. 

lerath,  1  N.  B.  N.  292,  2  A.  B.  R.  o  Bear  v.  Chase,  99  F.  R.  920.  3 

40,  95  F.  R.  121;   In  re  Friedman,  A.  B.  R.  746;     In   re   Francis-Val- 

1   N.   B.   N.    208,  1   A.   B.   R.   510;  entine  Co.,  1  N.  B.  N.  529,  2  A.  B. 

Peck  V.   Mitchell,  1   N.  B.  N.   262,  R.  522,  94  F.  R.  793,  aff'g  1  N.  B. 

1  A.  B.  R.  701;  In  re  Hopkins,  1  N.  N.   532,   2  A.   B.   R.   188.  93  F.  R. 

B.   N.   71,   1    A.   B.   R.   209;    In   r-?  953;    In   re  Kemp.  2  N.   B.  N.  R. 

Dobson.  98  F.  R.  86.  3  A.  B.  R.  420;  565,  101  F.  R.  689,  4  A.  B.  R.  242; 

Contra.  In  re  O'Connor,  2  N.  B.  N.  In  re  Arnold,  1  N.  B.  N.  334,  2  A. 


714 


THE   NATIONAL   BANKRUPTCY    LAW. 


Cn.  07 


have  been  pending  several  years ;^'^  and  the  money  attached 
should  pass  to  the  trustee  for  the  benefit  of  the  estate.^ ^  This 
applies  as  well  to  a  landlord's  distress  w^arrant.^^  A  lien  is 
not  invalidated  under  this  section,  that  is  obtained  by  the 
levy  of  an  attachment  more  than  four  months  prior  to  the 
bankruptcy  proceedings,  though  dependent  for  enforcement 
on  a  judgment  obtained  within  four  months.'^  It  has  been 
held  that  this  provision  avoiding  liens  does  not  apply  to  liens 
upon  property  upon  which  the  court  does  not  undertake  to 
administer  and  over  which  it  has  no  jurisdiction,  as  in  the  case 
of  property  set  apart  as  exempt.^"* 

§1115.  Creditors'  suits.— A  creditor  who  files  a  bill  to 
reach  equitable  assets  or  set  aside  a  fraudulent  conveyance  or 
the  like  thereby  acquires  an  equitable  lien,^^  which  although 
contingent  in  the  sense  that  it  may  possibly  be  defeated  by  the 
event  of  the  suit,  yet  so  long  as  it  exists  it  is  a  specific  lien  or 
charge  on  the  assets,  and  if  filed  more  than  four  months  before 
the  filing  of  the  petition  in  bankruptcy,  would  not  be  defeated 
by  the  adjudication,  although  the  judgment  or  decree  in  en- 
forcement of  such  lien  is  rendered  within  the  four  months.^^ 


B.  R.  180,  94  F.  R.  1001;  In  re 
Burns,  3  A.  B.  R.  296,  97  F.  R.  926; 
In   re  Hammond,  98  F.  R.   845,   3 

A.  B.  R.  466;  Duffleld  v.  Horton,  16 
N.  B.  R.  59,  19  N.  B.  R.  13;  Ben- 
nington V.  Lowenstein,  1  N.  B.  R. 
157,  F.  C.  10938;  Appleton  v.  Ste- 
vers,  10  N.  B.  R.  515;  In  re  Ellis, 
1  N.  B.  R.  154,  F.  C.  4400;  Kaiser 
V.  Richardson,  14  N.  B.  R.  391; 
Miller  v.  Bowles,  10  N.  B.  R.  515, 
58  N.  Y.  263;  Bk.  v.  Overstreet.  13 
N.  B.  R.  154;  King  v.  Loudon,  14 
N.  B.  R.  383;  In  re  Kanpisch 
Creamery  Co.,  107  F.  R.  93,  5   A. 

B.  R.  790;  see  Metcalf  v.  Barker. 
187  U.  S.  165,  9  A.  B.  R.  36,  44; 
Hart  V.  Schuylkill  Plush  &  Silk 
Co.,  8  A.  B.  R.  479;  In  re  Beals,  8 
A.  B.  R.  639;  Watschke  v.  Thomp- 
son, 7  A.  B.  R.  504. 

10  In  re  Higgins,   2  N.  B.  N.  R. 
115,  3  A.  B.  R.  364.  97  F.  R.  775. 

11  Peck   V.  Mitchell,   1   N.   B.   N. 
262,  1  A.  B.  R.  701,  citing  and  crit- 


icising. In  re  Delue,  1  N.  B.  N.  555, 

1  A.  B.  R.  387,  91  F.  R.  510. 

12  In  re  Dougherty  Co.,  109  F.  R. 
480,  6  A.  B.  R.  457. 

i-i  In  re  Beaver  Coal  Co.,  110  F. 
R.  630,  6  A.  B.  R.  404;  In  re  Beaver 
Coal  Co.,  113  F.  R.  889,  7  A.  B.  R. 
542;   In  re  Blair,  108  F.  R.  529,  6 

A.  B.  R.  206;  Contra,  In  re  Lesser, 
108  F.  R.  201,  5  A.  B.  R.  326,  and 
In  re  Johnson,  108  F.  R.  373,  6  A. 

B.  R.  202. 

1*  Powers  Dry  Goods  Co.  v.  Nel- 
son, 7  A.  B.  R.  506;  In  re  Little, 
110  F.  R.  621,  6  A.  B.  R.  681. 

i"'  Metcalf  V.  Barker,  187  U.  S. 
165,  9  A.  B.  R.  36;  Miller  v.  Sherry, 

2  Wall.  237 ;  Freedman's  Trust  Co. 
V.  Earle,  110  U.  S.  710. 

16  Metcalf  V.  Barker,  supra; 
contra.  In  re  Lesser,  3  N.  B.  N.  R. 
599,  100  F.  R.  433,  3  A.  B.  R.  815; 
In  re  Fellerath,  1  N.  B.  N.  292,  2 
A.  B.  R.  40,  95  F.  R.  121. 


Ch.  67  LIENS    THROUGH    LEGAL    PROCEEDINGS.  715 

If,  however,  in  such  suit  a  state  court  acquired  jurisdic- 
tion of  the  subject  matter  and  the  property  was  in  its 
actual  possession,  or  that  of  its  receiver  more  than  four 
months  before  the  adjudication  in  bankruptcy,  the  bank- 
rupt act  does  not  interfere  with  the  state  court's  jurisdiction, 
possession  or  control  of  the  property,  without  regard  to 
whether  the  receiver  had  taken  actual  possession,  or  not,  but 
the  latter  will  be  permitted  to  dispose  of  the  same  under  its 
own  decrees.^  ^  When  property  fraudulently  conveyed  before 
the  passage  of  the  bankruptcy  act  is  in  the  hands  of  a  receiver 
and  beyond  the  reach  of  the  bankruptcy  court,  but  the  fraudu- 
lent grantee  subsequently  voluntarily  restores  title  to  the 
grantor  and  the  latter  is  afterwards  adjudged  bankrupt,  the 
possession  and  administration  of  the  property  belong  to  the 
court  of  bankruptcy.^  ^  Where  state  laws  confer  on  contract 
creditors  the  right  to  enforce  their  claims  as  against  fraudu- 
lent transfers,  no  resort  to  legal  remedies  is  necessary  to 
establish  such  creditors'  interests.^^ 

§  1116.  Judgment  and  execution  liens.— Congress  made 
facts,  not  intentions,  the  test  of  the  validity  of  execution  liens 
attaching  within  four  months  of  the  adjudication  in  bank- 
ruptcy. These  facts  are  the  date  of  the  lien  and  the  then 
insolvency  of  the  debtor.  Execution  liens  attaching  to  an 
insolvent's  propertj^  within  four  months  of  his  bankruptcy  are 
overthrown  and  made  ineffectual  for  any  purpose,  unless  pre- 
served for  the  benefit  of  the  estate,  and  the  sheriff's  lien  inci- 
dent thereto,  also  falls.^*'  It  is  immaterial  when  the  suit  was 
begun  or  the  judgment  entered,  or  that  the  debt  on  which  the 
judgment  rests  was  valid,  due  when  the  action  was  commenced, 
or  not  released  by  a  discharge,-^  and  that  the  judgment  was 
entered  and  levy  made  without  collusion,  or  that  the  judgment 
was  entered  upon  a  judgment  note  given  more  than  four 
months  prior  to  the  bankruptcy  proceedings,  or  even  prior  to 
the  passage  of  the  act.     The  court  will  not  consider  the  facts 

17  Metcalf  V.   Barker,   187   U.   S.  In  re  Kavanaugh,  2  N.  B.  N.  R.  528. 

165,  9  A.  B.  R.  36;  Peck  v.  Jenness,  99  P.  R.  928,  3  A.  B.  R.  835. 

7  How.  612;   Pickens  v.  Dent,  106  is  in  re  Brown,  1  N.  B.  N.  240,  1 

F.  R.  653,  5  A.  B.  R.  644;  Frazier  A.  B.  R.  107,  91  F.  R.  358. 

V.  Southern  L.  &  T.  Co.,  99  F.  R.  i9  In  re  Andrae,  117  F.  R.  561,  9 

707,  3  A.  B.  R.  710;  Eyster  v.  Gaff,  A.  B.  R.  135. 

91  U.  S.  521;   See  also  Johnson  v.  20  in  re  Jennings.  8  A.  B.  R.  358. 

Rogers,  15  N.  B.  R.  1,  F.  C.  7408;  21  in  re  Benedict,  8  A.  B.  R.  463. 


716  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  6? 

leading  up  to  the  creation  of  the  lien  complained  of,  but  only 
the  lien  itself  even  though  such  facts  took  place  more  than  four 
months  before  the  bankruptcy  and  therefore  would  not  them- 
selves subject  the  debtor  to  proceedings  in  bankruptcy.--  The 
provisions  of  this  subdivision  have  no  application  to  judgments 
entered  after  the  proceeding  in  bankruptcy  has  begun.^s  If 
a  sale  has  been  made  upon  such  an  execution,  the  proceeds 
belong  to  the  trustee  when  appointedj^"*  and  if  he  brings  suit 
for  the  same  he  must  allege  that  the  execution  debtor  was 
insolvent  when  the  execution  was  made.^^ 

Subdivision  "f"  applies  to  the  lien  created  by  a  levy,  or  a 
judgment,  or  an  attachment,  or  otherwise,  that  is  invalidated, 
and  where  the  lien  is  obtained  more  than  four  months  prior  to 
the  filing  of  the  petition,  it  is  not  only  not  to  be  deemed  null 
and  void  on  adjudication,  but  its  validity  is  recognized.  When 
it  is  obtained  within  four  months,  the  property  is  discharged 
therefrom,  but  not  otherwise.  A  judgment  or  decree  in  en- 
forcement of  an  otherwise  valid  pre-existing  lien  is  not  the 
judgment  denounced  by  the  statute.  The  judgment  liens  in- 
tended are  such  judgments  as  of  themselves  create  liens.^^ 
It  is  not  the  judgment,  that  is,  the  determination  of  the  contro- 
versy, but  the  judgment  lien  and  proceedings  tending  to 
enforce  the  judgment  which  are  annulled,  and,  if  such  a  judg- 
ment is  offered  for  proof,  it  can  be  attacked  only  on  the  ground 
of  fraud,  collusion  or  want  of  jurisdiction.^"     The  act  in  deal- 

22  In   re  Rhoads,   2  N.   B.   N.  R.  guson,  95  F.  R.  429,  2  A.  B.  R.  586; 

301,  98  F.  R.  399,  s.  c.  2  N.  B.  N.  R.  Levor  v.  Seiter,  5  A.  B.  R.  576. 
176;  In  re  Richards,  2  N.  B.  N.  R.         23  in    re     Engle,     supra;     citing 

38.  3  A.   B.  R.  145,  96  F.  R.  937,  Kinmouth   v.   Braentigam,   46  Atl. 

s.  c.  2  A.  B.  R.  518,  95  F.  R.  258;  769. 

In  re  Richards,  1  N.  B.  N.  487,  2  A.        24  in  re  Kenney,  105  F.  R.  897.  5 

B.    R.    506,    94    F.   R.    633;    In    re  A.  B.  R.  355. 

Spacht,  2  N.  B.  N.  R.   238;    In  re         25  Simpson  v.  Van  Etten.  108  F. 

Vaughan,  2  N.  B.  N.  R.  101,  3  A.  R.  199.  6  A.  B.  R.  204. 
B.  R.  362.  97  F.  R.  560;  In  re  Nel-         26  Metcalf  v.   Barker,   187   U.    S. 

son,  1  N.  B.  N.  567,  1  A.  B.  R.  63,  165,  9  A.  B.  R.  36;   In  re  Blair,  108 

98  F.  R.   76;    In   re  Whalen,  1  N.  F.   R.  529,   6  A.  B.  R.   206;    In  re 

B.  N.  228;  In  re  Huffman,  1  N.  B.  Beaver  Coal  Co.,  110  F.  R.  630,  6 

N.  215,  1  A.  B.  R.  587;  In  re  Myers,  A.  B.  R.  404;   In  re  Pease,  4  A.  B. 

1  N.  B.  N.  207,  1  A.  B.  R.  1;  In  re  R.  547;    Doyle  v.   Heath,   22  R.    I. 

Wilson,  101  F.  R.  571,  4  A.  B.  R.  213,  4  A.  B.  R.  705;  Taylor  v.  Tay- 

260;  In  re  Engle,  105  F.  R.  893,  5  lor,  59  N.  J.  Eq.  86,  4  A.  B.  R.  211; 

A.  B.  R.  372;  In  re  Darwin,  117  F.  In  re  Kavanaugh.  2  N.  B.  N.  R.  528. 

R.  407.  8  A.  B.  R.  703;   In  re  Fer-  99  F.  R.  928.  3  A.  B.  R.  833. 

2-  In  re  Pease.  2  N.  B.  N.  R.  657, 


Ch.67 


LIENS    THROUGH    LEGAL    PROCEEDINGS. 


717 


ing  with  the  property  owned  by  the  bankrupt  at  the  time  the 
petition  is  filed  annuls  judgment  liens  affecting  it,  but  if  the 
bankrupt  fails  to  obtain  a  discharge,  there  seems  no  good 
reason  why  the  judgment,  which  may  have  been  entered  long 
before  bankruptcy  proceedings,  should  not  be  valid  as  to 
after  acquired  property.  To  require  the  creditor  to  resort  to 
his  original  cause  of  action  would  merely  put  him  to  additional 
cost  and  trouble  without  any  compensating  benefit  to  any 
one.^"*  This  provision  does  not  apply  to  a  case  where  money 
collected  upon  an  execution  issued  upon  a  judgment  obtained 
within  four  months,  is  paid  over  to  the  judgment  creditor 
before  filing  the  petition.-'-*  If  a  judgment  creditor  waives  his 
execution  as  an  unlawful  preference  and  files  his  claim  in 
bankruptcy,  he  cannot  thereafter  assert  his  preference.^*' 

§1117.  Statutory  liens.— The  expression  "liens  obtained 
through  legal  proceedings"  is  restricted  to  suits  or  proceed- 
ings at  law  or  in  equity.  A  legal  proceeding  is  any  proceeding 
in  a  court  of  justice  by  which  a  party  pursues  a  remedy  which 
the  law  affords  him,  and  embraces  any  of  the  formal  steps  or 
measures  employed  in  the  prosecution  or  defense  of  a  suit.^^ 

4  A.  B.  R.  547;  Contra,  St.  Cyr  v. 
Diagnault,  103  F.  R.  854. 
2s  In  general  it  was  held  under 


the  Act  of  1867  that  the  law  did 
not  affect  the  lien  of  a  judgment 
or  execution  (Haworth  v.  Travis, 
11  N.  B.  R.  145;  In  re  Gold  Moun- 
tain Min.  Co.,  15  N.  B.  R.  545;  3 
Sawy.  601,  F.  C.  5515;  In  re 
Wimm,  1  N.  B.  R.  131,  F.  C. 
17876)  ;  and  consequently  the  de- 
cisions under  that  act  on  this 
point  do  not  now  apply.  But  some 
of  the  decisions  being  on  general 
principles  do;  as  that  where  a 
creditor  advanced  money  to  pay 
M  valid  execution  and  took  judg- 
ment for  his  own  claim  and  such 
advance  it  was  good  as  to  the  ad- 
vance (Lathrop  v.  Drake,  13  N.  B. 
R.  472,  91  U.  S.  516)  ;  that  a  judg- 
ment recovered  after  an  assign- 
ment for  the  benefit  of  creditors 
created  no  lien  though  such  as- 
signment was  afterwards  set 
aside    by   assignee  in   bankruptcy 


(Belden  v.  Smith,  16  N.  B.  R.  302, 
F.  C.  1242)  ;  that  in  an  action  by 
lien-holders  a  judgment,  limited  to 
the  property  subject  to  the  lien, 
could  be  rendered  notwithstanding 
the  bankruptcy  proceedings  (Reed 
v.  Bullington,  11  N.  B.  R.  408); 
that  a  judgment  creditor  whose 
judgment  was  a  valid  lien  on  such 
property  could  enforce  his  claim 
against  it  though  the  bankrupt 
had  sold  it  before  the  commence- 
ment of  the  proceedings  in  bank- 
ruptcy (Phillips  v.  Bowdoin,  14  N. 
B.  R.  43)  ;  or  although  he  had  lev- 
ied on  personalty  but  subsequent- 
ly abandoned  such  levy  permitting 
the  personalty  to  return  to  defend- 
ant (Winship  v.  Phillips,  14  N.  B. 
R.  50). 

20  Levor  v.  Seiter,  8  A.  B.  R.  459. 

•io  In  re  Bolinger,  108  F.  R.  374, 
6  A.  B.  R.  171. 

^1  See  In  re  Drolesbaugh,  2  N.  B. 
N.  R.  1079. 


718  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  G7 

§1118.  Four  months'  period.— The  four  months  run  from 
the  date  of  that  step  in  the  proceedings  which  creates  the  lien. 
In  the  case  of  a  judgment  creditor's  bill,  the  filing  of  the  same 
and  service  of  process  creates  a  lien  in  equity  on  the  judgment 
debtor's  equitable  assets,^^  and  while  it  may  be  defeated,  so 
long  as  it  exists,  it  is  a  charge  or  specific  lien  on  the  assets. 
Hence  the  four  months'  period  begins  to  run  from  the  filing  of 
the  bill  and  not  from  the  date  of  the  judgment  or  decree  in 
enforcement  of  what  is  an  otherwise  valid  pre-existing  lien.-^'^ 
The  computation  is  made  by  counting  back  the  four  months 
from  the  date  of  the  filing  of  the  petition,  which  latter  date 
is  excluded.^"' 

Every  one  obtaining  a  lien  through  legal  proceedings  does  so 
subject  to  the  contingency  that  he  may  lose  the  advantage  he 
would  otherwise  have  by  the  institution  of  bankruptcy  pro- 
ceedings within  four  months  thereafter  and  adjudication 
therein.^^  Liens  obtained  through  legal  proceedings  more  than 
four  months  before  the  filing  of  the  petition  in  bankruptcy  are 
not  affected.^^ 

§  1119.  What  liens  valid.— When  not  prohibited  by  the 
bankruptcy  act,  liens  and  preferences  are  entitled  to  the  same 
protection  from  the  bankruptcy  courts  as  other  legal  rights;-''^ 
and  whatever  is  treated  as  a  valid  levy  and  a  valid  and  sub- 
sisting lien  by  the  state  laws  and  courts  will  be  so  treated  by 
the  bankruptcy  courts  provided  it  is  not  in  conflict  with  the 
provisions  of  the  bankruptcy  act^^  and  vice  versa.-"^^  A  judg- 
ment obtained  against  an  insolvent  debtor  without  fraud  or  col- 
lusion would  be  as  conclusive  evidence  of  the  claim  and  its 
amount  as  if  given  against  a  solvent  debtor.^*^ 

§  1120.     Enforcement   of  valid   liens.— As   already   pointed 

32  Miller  v.  Sherry,  2  Wall.  237;  R.  542;    In  re  Ferguson,  95  F.  R. 

Freedmen's  Savings  &  Trust  Co.  v.  429;    Hatch  v.   Seely,   13  N.  B.  R. 

Earle,  110  U.  S.  74.  380;    Batchelder  v.  Putnam,  13  N. 

3H  Metcalf   V.   Barker,   187   U.    S.  B.  R.  404;   Smith  v.  Meisenheimer, 

165,  9  A.  B.  R.  36.  1  N.  B.  N.  19,  47  S.  W.  Rep.  1087. 

34  Jones  V.    Stevens,   5   A.  B.  R.         37  Barron  v.  Morris,  14  N.  B.  R. 

571.  371,  F.  C.  1055. 

3''  In  re  Kenney,  2  N.  B.  N.  R.         38  Armstrong  v.  Rickey,  2  N.  B. 

140,  3  A.  B.  R.  353,  97  F.  R.  554;  R.  150,  F.  C.  546. 
Corner  v.  Miller,  1  N.  B.  R.  98.  39  in  re  Cozart,  3  N.  B.  R.  126,  F. 

36  In  re  Lesser,  2  N.  B.  N.  R.  599,  C.  3313. 
100  F.  R.  433 ;   In  re  Dunavant,  1         40  Catlin  v.  Hoffman,  9  N.  B.  R. 

N.  B.  N.  542,  3  A.  B.  R.  41,  96  F.  342,  2  Sawy.  486,  F.  C.  252L 


Ch.  67  LIENS   THROUGH   LEGAL   PROCEEDINGS.  719 

out,  valid  existing  liens  may  be  enforced  after  the  filing  of 
the  petition  in  bankruptcy.  This  does  not  give  one  creditor 
an  advantage  over  another  nor  diminish  the  estate,  except  as 
always  occurs  in  the  recognition  of  different  degrees  among 
creditors.  Where  a  creditor  has  secured  a  valid  existing  lien 
before  the  four  months'  period,  the  bankruptcy  court  may 
authorize  him  to  proceed  to  have  the  same  satisfied  if  con- 
vinced that  full  value  Avill  be  obtained  for  the  proi)erty  on 
which  his  lien  exists,  or  may  direct  the  redemption  of  the 
property  as  seems  most  for  the  interest  of  the  estate.*! 

See  Sale  of  Incumbered  Property,  post  §§  1194,  1195. 

§1121.  Filing  petition  fixes  status  of  liens.— The  bank- 
ruptcy act  in  providing  for  the  dissolution  of  liens,  only 
operates  on  those  created  within  four  months  and  existing  at 
the  time  the  bankruptcy  proceedings  are  commenced  ;^2  jjg 
none  can  be  acquired  subsequent  to  the  filing  of  the  petition,'^^ 
a  levy  then  made  will  give  the  petitioning  creditors  no  greater 
or  different  rights  from  the  creditors  at  large."*^ 

§  1122.  Costs  and  fees. — As  the  costs  and  disbursements  in 
a  lien  proceeding  which  is  rendered  void  by  the  bankruptcy 
proceedings  are  an  incident  of  the  lien  and  fall  with  it,^^  the 
trustee  is  not  called  upon  to  pay  them;  nor  can  the  officer  in 
possession  of  such  property  retain  it  until  his  fees  are  paid, 
but  he  should  have  them  taxed  in  the  proper  court  as  the 
basis  for  his  claim  against  the  estate  in  bankruptcy.^^  Where 
a  judgment  creditor,  who  has  set  aside  a  fraudulent  convey- 
ance, loses  his  prior  right  to  the  fund  by  the  adjudication  of 
the  debtor  a  bankrupt  within  four  months  of  the  decree,  the 

.   41  In   re    Hufnagel,   12   N.   B.   R.  N.   B.  N.  529,  532,  2  A.  B.  R.  522, 

554,  F.  C.  6837.  94  F.  R.  793;  In  re  Young,  1  N.  B. 

42  Shelley  v.  Elliston,  18  N.  B.  N.  428,  2  A.  B.  R.  673,  96  F.  R. 
R.  375,  F.  C.  12750.  606;   In  re  Stevens,  5  N.  B.  R.  298. 

43  McLean  v.  Rackey,  3  McLean  2  Biss.  373,  F.  C.  13392.  The  rule 
235,  F.  C.  8891;  Slcard  v.  R.  R.  Co.,  under  the  former  act  that  costs 
15  Blatch.  525,  F.  C.  12831;  In  re  were  payable  out  of  the  estate  If 
Tifft,  19  N.  B.  R.  201,  F.  C.  14034;  the  lien  proceedings  were  used  in 
Stuart  V.  nines,  6  N.  B.  R.  416;  aid  of  the  bankruptcy  proceedings 
Winters  v.  Clayton,  18  N.  B.  R.  and  for  the  benefit  of  creditors  or 
533.  if     incurred     at     debtor's     request 

44  In  re  Lawrence,  18  N.  B.  R.  would  probably  be  adopted  by  the 
516,  F.  C.  8133.  court  now.     (In  re  Irons.  18  N.  B. 

45  In  re  Jennings,  8  A.  B.  R.  358.  R.  95,  F.  C.  7067;  In  re  Preston.  G 

46  In  re  Francis-Valentine  Co..  1  N.  B.  R.  545,  F.  C.  11394.) 


720  THE   NATIONAL   BANKRUPTCY    LAW.  Cn.  67 

state  court  can  make  a  reasonable  allowance  for  costs  and 
expenses  before  directing  its  receiver  to  turn  over  the  property 
to  the  trustee.'*^  This,  in  effect,  pays  out  of  the  estate,  where 
an  attachment  is  dissolved,  so  much  of  the  costs  as  was 
incurred  prior  to  the  filing  of  the  petition.^s 

§  1123.  Practice.— A  suit  being  brought  in  a  state  court 
within  four  months  of  the  filing  of  the  petition  and  all  pro- 
ceedings therein  being  null  and  void,  the  bankruptcy  court 
*  has  power  to  restrain  all  parties,  including  the  officers  of  the 
state  court,  from  interfering  with  the  bankrupt's  property, 
and  whenever  because  of  such  interference  the  law  cannot  be 
properly  administered,  it  should  not  hesitate  to  exercise  its 
authority.  It  may  restrain  the  prosecution  of  a  replevin  or 
attachment  suit,  or  stay  proceedings  supplementary  to  execu- 
tion, or  permit  such  proceedings  to  continue,  in  which  case 
upon  the  appointment  therein  of  a  receiver,  the  creditor  ac- 
quires no  lien  upon  or  specific  interest  in  the  bankrupt's 
property,  since  the  entire  estate  being  under  the  control  of 
the  bankruptcy  court  when  such  receiver  was  appointed,  he 
takes  no  title  that  could  relate  back  to  the  commencement  of 
the  supplementary  proceedings.*^  The  court  may  receive  from 
one  indebted  to  the  bankrupt,  the  amount  of  such  debt,  though 
garnisheed  within  four  months  of  the  bankruptcy  proceedings, 
and  judgment  entered,  and  make  an  order  protecting  the 
garnishee.^*^ 

§  1124.  Trustee  to  give  notice  of  discharge  of  lien.— Al- 
though by  the  express  provision  of  the  statute  an  attachment 
is  made  null  and  void  and  the  property  affected  thereby  is 
deemed  wholly  discharged  and  released  from  the  same  by  the 
adjudication  in  bankruptcy  within  four  months,  the  proper 
practice  is  for  the  trustee  to  apply  to  the  state  court  for  an 
order  formally  discharging  the  attachment  and  releasing  the 

47  In  re  Lesser,  2  N.  B.  N.  R.  599,  ler,  153  N.  Y.  172;  Olney  v.  Tanner, 
3  A.  B.  R.  815,  100  F.  R.  433.  10  F.   R.    101,    113,   aff'd  18   F.   R. 

48  In  re  Allen,  3  A.  B.  R.  38.  G36;  Kitchen  v.  Lowery,  127  N.  Y. 

49  Booth  V.  Nickerson,  1  N.  B.  N.  53;  In  re  Agins,  1  N.  B.  N.  133, 
476,  2  A.  B.  R.  770,  96  F.  R.  943;  180,  184;  Bear  v.  Chase,  99  F.  R. 
In  re  Kletchka,  1  N.  B.  N.  160,  1  A.  920,  3  A.  B.  R.  746;  In  re  O'Con- 
B.  R.  479,  citing  Johnson  v.  Rog-  nor,  2  N.  B.  N.  R.  90,  95  F.  R.  943. 
ers,  15  N.  B.  R.  1,  10.  F.  C.  7408;  so  in  re  McCartney,  109  F.  R.  64, 
In  re  Pitts,  9  F.  R.  542;  Becker  v.  6  A.  B.  R.  367. 

Torrance,  31  N.  Y.  631;  Bk.  v.  Shu- 


Ch.  67  LIENS  THROUGH  LEGAL  PROCEEDINGS.  721 

property  of  the  bankrupt  from  this  levy.  An  order  thus 
obtained  would  be  authority  for  the  sheriff  to  release  the  levy 
which  might  otherwise  be  valid  but  for  the  adjudication.  It 
is  the  duty  of  the  court,  upon  these  facts  being  called  to  its 
attention,  to  vacate  the  attachment  and  remove  the  lien.^^  A 
similar  application  should  be  made  by  the  trustee  in  the  case 
of  any  other  lien  which  it  may  be  necessary  to  have  released. 

51  Hardt   v.    Schuylkill    Plush    &     Silk  Co.,  74  N.  Y.  Supp.   549.   8   A. 
B.  R.  479. 


46 


CHAPTER  LXVIII. 

SET-OFFS    AND    COUNTERCLAIMS. 

§1125.    (68a)   When  set-off  allowed.       1132.  Property    in    possession    as 

1126.  Mutual    debts    and    mutual  collateral. 

credits.  1133.  By  a  married  woman. 

1127.  Between  estate  and  creditor.  1134.  Waiver  of  set-off. 

1128.  Must  be  in  the  same  right.  1135.  b.  When  set-off  not  allowed. 

1129.  Need  not  be  of  same  nature.  1136.  A  set-off  must  be  provable. 

1130.  Joint  and  separate  debts.  1137.  Must   not   be    purchased    in 

1131.  Between  banker  and  depos-  view  of  bankruptcy. 
iter.  1138.  Statute  of  limitations. 

1139.  Taxable  costs. 

§  1125.  *  (Sec.  68a)  When  set-off  allowed.— In  all  cases  of 
'mutual  debts  or  mutual  credits  between  the  estate  of  a 
'bankrupt  and  a  creditor  the  account  shall  be  stated  and  one 
''lebt  shall  be  set  ofif  against  the  other,  and  the  balance  only 
'shall  be  allowed  or  paid.'^ 

§1126.  Mutual  debts  and  mutual  credits.— "Debt,"  as 
used  in  this  section,  obviously  refers  to  such  claim  or  demand 
as  is  provable  in  bankruptcy,  while  "mutual  debts"  are  claims 
or  demands  of  that  nature,  due  and  owing  by  the  bankrupt 
to  the  creditor  on  the  one  hand  and  by  the  creditor  to  the 
bankrupt  on  the  other.  It  is  not  believed  the  language  of 
the  act  in  reference  to  "mutual  debts"  was  intended  to  qualify 
or  restrict  the  general  meaning  of  the  expression,  with  its 
attendant  incidents  and  legal  requirements.  It  obviously  does 
not  refer  to  a  debt  due  by  one  to  another  and  payment  on 
account  of  such  debt,-  for  in  the  absence  of  the  statute,  a 
trustee  in  bankruptcy  may  show,  in  opposition  to  the  allow- 
ance of  a  claim,  that  it  has  been  paid,  or  that  payment  has 
been  made  on  account,  which  reduces  its  amount.  In  such 
a  case,  it  is  the  balance  merely  which  is  the  debt.     But  where 

1  Analogous  provisions  of  act  of  shall   be  allowed   or  paid,   but  no 

1867.     "Sec.   20.     .     .     .     That,  in  set-off  shall  be  allowed  of  a  claim 

all   cases  of   mutual  debts  or  mu-  in  its  nature  not  provable  against 

tual    credits   between   the  parties,  the  estate." 

ihe  account  between  them  shall  be        2  in  re  Ryan,  105  F.  R.  760,  5  A. 

seated,  and  one  debt  set  off  against  B.  R.  396. 
the   other,   and   the  balance   only 

722 


Ch.  68  SET-OFF.  '  723 

the  creditor  owes  a  debt  to  the  bankrupt,  and  the  bankrupt 
owes  such  creditor  a  debt  on  account  of  some  different,  inde- 
p(^ndent  matter,  not  arising  out  of  the  same  transaction,  such 
debts  are  "mutual  debts"  within  the  act  and  may  be  set  olf 
one  against  the  other,  and  "the  balance  only  shall  be  allowed 
or  paid."^ 

What  is  meant  by  "mutual  credits"  is  not  clear,  however, 
unless  it  means  substantially  the  same  as  "mutual  debts," 
when  the  credit  must  ultimately  terminate  in  a  debt,  because 
mutual  credits  necessarily  imply  mutual  debts  to  the  extent 
of  such  mutual  credits,  for  a  credit  cannot  exist  in  favor  of 
one  against  another  unless  such  other  owes  the  creditor  the 
amount  of  the  credit.^  It  obviously  cannot  mean  merely  a 
payment  on  account,  whether  such  payment  be  in  cash,  or  its 
equivalent,  for  the  balance  only  is  the  debt.  Moreover,  if  it 
did  mean  a  payment  on  account,  it  would  follow  in  all  cases 
wherein  the  trustee  seeks  to  recover  back  preferences,  con- 
sisting of  payments  received  in  violation  of  the  act,  that  the 
recipient  could  set  off  the  amount  of  the  original  debt  due 
from  the  bankrupt  and,  in  that  manner,  in  every  case,  defeat 
the  recovery  of  the  preference.^ 

So  that,  while  in  the  first  clause  of  this  section  "mutual 
credits"  are  referred  to,  in  the  next  clause  they  are  treated 
as  if  "mutual  debts"  and  "mutual  credits"  meant  the  same 
thing,  the  law  providing  "and  one  debt  may  be  set  off  against 
the  other,"  without  repeating  in  that  connection  the  word 
"credits."  But  the  set  oft'  is  allowable  only  in  cases  of 
"debt,"  that  is  to  say,  where  the  amount  due  from  the  one 
to  the  other  is  a  specific  liquidated  sum  of  money,  and  not, 
for  instance,  an  unliquidated  claim  for  damages  arising  out 
of  a  breach  of  contract.^ 

In  this  connection  an  interesting  discussion  of  this  question 
appears  in  the  leading  English  case  of  Rose  v.  Hart,'^  wherein 
the  court  said:  "Something  more  is  certainly  meant  here  by 
mutual  credits  than  the  words  mutual  debts  import;  and  yet, 
upon  the  final  settlement,  it  is  enacted  merely  that  one  debt 

3  In  re  Christensen,    101    F.    R.        4  Libby    v.    Hopkins,    104    U.    S. 

802,  2  N.  B.  N.  R..  4  A.  B.  R.  202;  303. 

In   re   Thompson.    2   N.   B.   N.   R.        ^  in  re  Christensen,  supra. 
1016;   Contra,  In  re  Ryan,  2  N.  B.        o  Bell  v.  Carey,  8  C.  B.  87. 
N.  R.  693.  7  8  Taunt.  499. 


724  THE    NATIONAL   BANKRUPTCY    LAW.  ClI.  68 

shall  be  set  oft'  against  another.  We  think  this  shows  that  the 
i('j,nslature  meant  such  credits  only  as  must  in  their  nature 
terminate  in  debts,  as  where  a  debt  is  due  from  one  party, 
and  credit  given  by  him  on  the  other  for  a  sum  of  money 
payable  at  a  future  day,  and  which  will  then  become  a  debt, 
or  where  there  is  a  debt  on  one  side,  and  a  delivery  of  prop- 
erty with  directions  to  turn  it  into  money  on  the  other;  in 
such  case  the  credit  given  by  the  delivery  of  the  property  must 
in  its  nature  terminate  in  a  debt,  the  balance  will  be  taken  on 
the  two  debts,  and  the  words  of  the  statute  will  in  all  respects 
be  complied  with :  but  where  there  is  a  mere  'deposit  of  prop- 
erty, without  any  authority  to  turn  it  into  money,  no  debt  can 
ever  arise  out  of  it,  and,  therefore,  it  is  not  a  credit  within 
the  meaning  of  the  statute." 

§  1127.  Between  estate  and  creditor.— The  set-ofts  are  of 
mutual  debts  or  mutual  credits  between  the  estate  of  a  bank- 
rupt and  the  creditor,  and  would  include  a  liability  that  has 
accrued  to  a  trustee  as  such  which  had  not  accrued  to  the 
bankrupt,  when  the  claim  and  liability  are  mutual.^  Where 
no  trustee  has  been  appointed  and  a  composition  is  made,  the 
bankrupt  has  the  same  right  of  set-off  as  the  trustee  would 
have  had  if  one  had  been  appointed.^ 

§  1128.  Must  be  in  the  same  right.— The  debts  and  credits 
must  be  due  in  the  same  capacity  ;i'^  thus  a  debt  due  an 
executor  as  such  cannot  be  set  off  against  a  debt  due  from 
him  personall}^  nor  the  claim  of  a  stockholder  against  a 
corporation  against  his  unpaid  stock  subscription  ;^i  nor  can 
a  bank  collect  money  due  bankrupt  and  set  it  off  against  a 
claim  against  him;^^  b^^t  a  creditor  may  set  off  against  a  debt 
due  him  by  a  bankrupt  the  value  of  goods  delivered  by  the 
latter,  to  one  of  the  creditor's  workmen  on  the  latter 's  credit.^^ 

8  In  re  Crystal  Spring  Bottling  ers,  18  N.  B.  R.  178  F.  C.  17636; 
Co.,  104  F.  R.  265,  4  A.  B.  R.  55;  Jenkins  v.  Armour,  14  N.  B.  R. 
Moran  v.  Bogart,  14  N.  B.  R.  293.  276,     6     Biss.     312,     F.     C.     7260; 

9  Ex  parte  Howard  Nat.  Bk.,  16  Scammon  v.  Kimbell,  13  N.  B.  R 
N.  B.  R.  420,  2  Lowell,  487,  F.  C.  445,  92  U.  S.  362;  Sanger  v.  Up- 
6764.  ton,  91  U.  S.  56;  Morgan  v.  Allen, 

10  Wright  V.   Rogers,  3   McLean,     103  U.  S.  498. 

229.  F.  C.  18090.  12  Traders  Bk.  v.  Campbell,  6  N. 

11  In    re  Goodman   Shoe   Co.,   96     B.  R.  353,  14  Wall.  87. 

F.  R.  949,   3   A.  B.   R.    200;    Saw-         i-?  Rice  v.  Grafton  Mills.  13  N.  B. 
yer  v.    Hoag,   9   N.   B.   R.    145.   17     R.  209. 
Wall.    610;    Wilbur   v.    Stockhold- 


Ch.  68  SET-OFF.  725 

because  in  that  case  it  is  the  debt  of  the  person  to  whom  the 
credit  was  extended. 

§  1129.  Need  not  be  of  same  nature.— The  debts  and  credits 
may  be  of  different  kinds,  as  money  or  securities  deposited  in 
a  bank  may  be  set  off  against  notes  or  a  protested  draft  due 
the  bank  by  the  debtor  ;!•*  or  the  amount  due  for  personal 
services  may  be  set  off  against  a  mortgage  ;i'^  or  money  on 
hand  by  an  employe  against  salary  due  where  he  was  in  the 
habit  of  receiving  and  paying  out  money  for  his  employer  ;^*^ 
or  the  claim  of  the  trustee  in  bankruptcy  against  a  common 
law  assignee.^"^ 

§  1130.  Joint  and  separate  debts.— The  Supreme  Court^^  in 
citing  with  approval  Justice  Story  in  his  treatise  on  Equity 
Jurisprudence,  said:  "Courts  of  equity,  following  the  law, 
will  not  allow  a  set-off  of  a  joint  debt  against  a  separate  debt, 
or  conversely,  of  a  separate  debt  against  a  joint  debt;  or,  to 
state  the  proposition  more  generally,  they  will  not  allow  a 
set-off  of  debts  accruing  in  different  rights.  But  special  cir- 
cumstances may  occur  creating  an  equity,  which  will  justify 
even  such  an  interposition.  Thus,  for  example,  if  a  joint 
creditor  fraudulently  conducts  himself  in  relation  to  the 
separate  property  of  one  of  the  debtors,  and  misapplies  it,  so 
that  the  latter  is  drawn  in  to  act  differently  from  what  he 
would  if  he  knew  the  facts,  that  will  constitute,  in  a  case  of 
bankruptcy,  a  sufficient  equity  for  a  set-off  of  the  separate 
debt  created  by  such  misapplication  against  the  joint  debt. 
So,  if  one  of  the  joint  debtors  is  only  a  surety  for  the  other, 
he  may,  in  equity,  set  off  the  separate  debt  due  to  his  principal 
from  the  creditor;  for  in  such  a  case  the  joint  debt  is  nothing 
more  than  a  security  for  the  separate  debt  of  the  principal, 
and,  upon  equitable  considerations,  a  creditor  who  has  a  joint 
security  for  a  separate  debt,  cannot  resort  to  that  security 
without  allowing  what  he  has  received  on  the  separate  account 

14  In   re   Kalter,  2    N.   B.   N.    R.         I'Von  Sachs  v.  Kretz.  19  N.  B. 

264;  Ex  parte  Howard  Nat.  Bk.,  IG  R.  63. 

N.  B.  R.  420,  2  Lowell,  487,  F.  C.         ifi  Ex  p.  Pollard,  17  N.  B.  R.  228, 

6764;   City  of  Harrlsburg  v.  Sher-  2  Lowell  411,  F.  C.  11252. 
lock,  16  N.  B.  R.  62;  In  re  Petrie,         ivcatlin   v.   Foster.    3   N.    B.    R. 

7  N.  B.  R.   332.  5  Ben.  110,  F.  C  134,  1  Sawy.  37.  F.  C.  2519. 
11040;    In  re  Peebles,  13  N.  B.  R.         is  Gray  v.  Rolo,  18  Wall.  629. 
149,  2  Hughes,  394,  F.  C.  10902. 


1(26  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  G8 

for  which  the  other  was  a  security.  Indeed,  it  may  be  gen- 
erally stated  that  a  joint  debt  may,  in  equity,  be  set  off 
against  a  separate  debt,  where  there  is  a  clear  series  of 
transactions,  establishing  that  there  was  a  joint  credit  given 
on  account  of  the  separate  debt."^'-* 

Where  a  bankrupt  and  another  have  accounts  one  against 
the  other,  and  both  are  on  a  note  held  by  a  bank  which  is 
paid  in  full  after  the  filing  of  a  petition  by  that  other,  he  can 
set  off  against  the  amount  due  from  him  to  the  bankrupt  the 
amount  due  from  bankrupt  on  the  account,  but  not  bankrupt's 
share  of  the  note.^o 

§  1131.  Between  banker  and  depositor.— The  general  rule 
of  set-oft'  applies  between  a  banker  and  his  customers,  so  that 
in  case  of  mutual  debts  and  credits,  whether  matured  or  not, 
they  may  be  set  off  by  the  banker  as  against  the  liabilities  of 
a  bank  depositor.-^ 

§  1132.  Property  in  possession  as  collateral,  etc.— The 
courts  of  the  United  States  have  generally  followed  the  liberal 
construction  of  the  English  courts  in  the  matter  of  mutual 
credits  in  bankruptcy  and  insolvency.--  The  result  of  them 
is,  that  the  creditor  who,  at  the  time  of  the  bankruptcy,  has 
in  his  hands  goods  or  chattels  of  the  bankrupt  as  collateral 
security  with  a  power  of  sale,  or  choses  in  action,  with  a  power 
of  collection,  may  sell  the  goods  or  collect  the  claims  and  set 
them  oft'  against  the  debt  the  bankrupt  owes  him ;  and  this 
is  true,  although  the  power  to  sell  or  collect  would  have  been 
revocable  by  the  bankrupt  before  his  bankruptcy.  Or,  in 
other  words,  the  very  fact  of  bankruptcy,  in  such  cases,  gives 
what  is  in  the  nature  of  a  lien  which  did  not  exist  before.-^ 

19  See  In  re  Crystal  Spring  Bot-  R.  593;  In  re  Elsasser,  7  A.  B.  R. 
tling  Co.,  104  F.  R.  265,  4  A.  B.  R.     215. 

55.  22  Rose  V.  Hart,  2  Smith,  Lead. 

20  In  re  Bingham,  94  F.  R.  796,  1  Cases;  McLaren  v.  Pennington, 
N.  B.  N.  351,  2  A.  B.  R.  223.  Paige,  102;   Receivers,  etc.,  v.  Pat- 

21  In  re  Little,  110  F.  R.  621,  6  erson  Gas  L.  Co.,  23  N.  J.  283; 
A.  B.  R.  681;  In  re  Stege,  116  F.  R.  Aldrich  v.  Campbell,  70  Mass.  284; 
342,  8  A.  B.  R.  515;  In  re  Kalter,  Clarke  v.  Hawkins,  5  R.  I.  219; 
2  N.  B.  N.  R.  264;  Traders  Bk.  v.  Medomac  Bank  v.  Curtis,  24  Me. 
Campbell,  14  Wall.  87,  6  N.  B.  R.  36;  Phelps  v.  Rice,  51  Mass.  128; 
353;  In  re  Farnsworth,  14  N.  B.  R.  Myers  v."  Davis,  22  N.  Y.  489; 
148;  In  re  Madison,  9  N.  B.  R.  184;  Morrison's  Assig.  v.  Bright.  20  Mo. 
Libby  v.  Hopkins.  104  U.  S.  303;  298. 

In  re  Meyer,  107  F.  R.  86,  5  A.  B.         23  Rose  v.  Hart,  8  Taunt.  499;  In 


Ch.  G8  set-off.  727 

When  shares  of  stock  are  conveyed  as  collateral  security, 
the  law  implies  a  promise  to  return  them  on  the  payment  of 
the  debt.  In  cases  where  there  has  been  either  an  express  or 
implied  promise  by  the  agent  or  other  person  having  the 
property,  that  he  will  faithfully  account  for  it  and  pay  over 
its  proceeds,  such  promise  would  not  prevent  a  set-off  in  bank- 
ruptcy. The  weight  of  authority  is  that  a  promise  of  this  sort 
does  not  bar  a  set-off,  either  under  the  ordinary  statutes,  or 
under  the  law,  unless  the  property  has  been  entrusted  to  the 
agent  for  a  particular  purpose  inconsistent  with  such  an 
application  of  the  surplus,  so  that  this  would  be  a  fraud  or 
breach   of  promise.^'* 

§  1133.  By  a  married  woman.— There  is  no  reason  why  the 
claim  of  a  married  woman  may  not  be  used  as  a  set-off  as 
well  as  that  of  any  individual.  Hence,  if  under  the  law  of 
the  state  she  is  authorized  to  enter  into  contracts,  any  claim 
that  she  may  have  against  the  debtor,  if  provable,  may  be 
used  as  a  set-off.  This  is  true  although  the  debt  may  have 
been  contracted  during  coverture  without  her  having  complied 
with  the  requirements  of  the  statute.^^  But  neither  reasonable 
gifts  from  the  husband  nor  an  insurance  policy  on  bankrupt's 
life  for  the  benefit  of  his  wife  and  children  can  be  set  off 
against  a  claim  of  a  wife  for  money  which  she  had  received 
and  deposited  with  her  husband  for  safe  keeping.^^ 

§  1134.  Waiver  of  set-off.— Where,  by  reason  of  the  silence 
or  the  conduct  of  the  party  claiming  a  right  of  set-off,  the 
debtor  or  other  creditors  have  taken  such  action  as  would 
make  the  enforcement  of  the  set-oft'  inequitable;-^  or  the 
creditor  deliberately  proves  his  full  claim  without  setting  off 
the  amount  due  from  the  bankrupt,-^  the  right  will  be  lost. 
In  the  absence  of  fraud,  however,  where  either  through  igno- 
rance or  mistake,  proof  has  been  made  for  the  full  claim,  the 
court  will  permit  the  creditor  either  to  amend  or  withdraw 

re  Dow,  14  N.  B.   R.  307,  2   Law.  2.-,  in  re  Slichter,  2  N.  B.  R.  107, 

472,  F.  C.  17573;  In  re  McKay.  13  F.  C.  12943. 

F.   R.  443;    In   re  Tacoma  Shoe  &  2.;  in  re  Bigelow,  2  N.  B.  R.  170, 

Leather  Co.,  3  N.  B.  N.  R.  9.  2  Ben.  198,  F.  C.  1398. 

24  Marks  v.  Barber,  1  Wash.  178;  27  Higgs  v.  Tea  Co.,  L.  R.  4.  Ex. 

Eland  v.  Karr,  1  East.  175;  Mayer  387. 

V.  Nias,  8  Moore,  275;  Cornforth  v.  ss  Hunt  v.  Holmes,   16  N.   B.  R. 

Rivett,   2   M.  &  S.   510;    Groom  v.  101,  F.   C.   6890;    Brown  v.  Bk.,   6 

West,  8  A.  &  E.  758.  Bush  (Ky.)  198. 


728  THE   NATIONAL.   BANKRUPTCY    LAW.  Ch.  G8 

his  proof.-^  And  this  has  been  permitted,  notwithstanding 
the  fact  that  through  the  mistake  of  the  cashier  of  a  bank 
the  amount  on  deposit  was  transferred  to  the  account  of 
bankrupt's  trustee,  without  deducting  the  value  of  bankrupt's 
note;^^  the  rights  of  the  parties  not  otherwise  being  affected, 
and  no  other  steps  being  taken. 

§  1135.  'b.  Where  set-off  not  allowed.— A  set-off  or  counter- 
'  claim  shall  not  be  allowed  in  favor  of  any  debtor  of  the 
'bankrupt  which  (1)  is  not  provable  against  the  estate;  or 
*  (2)  was  purchased  by  or  transferred  to  him  after  the  filing 
*of  the  petition,  ok  within  four  months  before  such  filing,  with 
*a  view  to  such  use  and  with  knowledge  or  notice  that  such 
'bankrupt  was  insolvent,  or  had  committed  an  act  of  bank- 
'ruptcy.'^i 

§  1136.  A  set-off  must  be  provable.— In  order  that  a  claim 
may  be  used  as  a  set-off  it  must  be  one  that  is  provable  in 
bankruptcy .2-  A  surety  paying  his  principal's  debt  either 
before  or  after  his  bankruptcy,  may  set  off  the  amoimt  so 
paid  against  his  debt  to  the  bankrupt,  provided  the  debt  was 
provable,33  and  it  has  been  held  that  a  debt  due  before  the 
adjudication  and  one  not  due  until  afterwards,  but  both  being 
due  at  the  time  of  the  attempted  set-off',  may  be  set  off  against 
each  other,34  Unliquidated  damages,  when  liquidated  as  di- 
rected by  the  court,^^  may  be  used  as  a  set-oft';  or  the  holder 
of  an  insurance  policy  may  set  off  the  amount  due  thereon 
against  the  claim  for  the  company's  money  deposited  with 
him.36  ii  i^as  been  frequently  held  that  if  a  creditor  has 
received  a  preference  on  account,  he  cannot  use  the  balance 
of  his  claim  as  a  set-off.^^ 

29  Bemis  v.  Smith.  10  Met.  194.  33  in  re  Dillon,  100  F.  R.  627,  4 

30  Union  Nat.  Bk.  v.  McKey,  2  N.     A.  B.  R.  63. 

B.  N.  R.  913;    Standard  Oil  Co.  v.         s*  in  re  City  Bk.,  6  N.  B.  R.  71. 

Hawkins,  74  F.  R.  395.  F.  C.  2742;  Marks  v.  Barker,  F.  C. 

31  Analagous  provisions  of  Act  of  9096;   Catlin  v.  Foster,  3  N.  B.  R. 
1867.     "Sec.   20.     .     .     .     That  no  134,  1  Sawy.  37,  F.  C.  2519;  Drake 
set-off  shall  be  allowed  in  favor  of  v.  Rollo,  3  Biss.  273,  F.  C.  4066. 
any  debtor  to  the  bankrupt  of  a        35  Sec.  63b,  act  of  1898. 

claim  purchased  by  or  transferred  se  Scammon  v.  Kimball,  13  N.  B. 

to  him  after  the  filing  of  the  peti-  R.  445,  92  U.  S.  362. 

tion."  37  In  re  Dillon,  supra;  see  section 

32  In  re  Bingham,  94  F.  R.  796,  1  57g,  act  of  1898,  ante. 
N.  B.  N.  351,  2  A.  B.  R.  223;  Mor- 
gan V.  Wordell,  8  A.  B.  R.  167. 


Ch.  68  SET-OFF.  729 

§  1137.  Must  not  be  purchased  in  view  of  bankruptcy.— 
The  Act  of  1867  forbade  the  allowance  of  set-oft's  only  in  case 
of  the  purchase  or  transfer  of  a  claim  after  the  petition  was 
filed.  The  present  act  forbids  the  allowance  of  a  set-off  or 
counter-claim  if  purchased  or  transferred  after  the  filing  of 
the  petition,  or  within  four  months  before  such  filing,  with  a 
view  to  such  use  and  with  knowledge  of  bankrupt's  insolvency 
or  commission  of  an  act  of  bankruptcy  ;3^  but  there  seems  to 
be  no  prohibition  against  such  use  of  claims  purchased  more 
than  four  months  before  the  bankruptcy,  whether  with  or 
without  knowledge  or  notice  of  bankrupt's  insolvency.^^ 

Creditors  cannot  purchase  worthless  claims,  or  such  as  are 
worth  but  a  percentage  of  their  face  value,  and  use  them  as 
set-offs  or  counter-claims  to  pay  what  they  owe  the  estate; 
nor  can  a  debtor  to  bankrupt's  estate  set  off  against  his  debt 
bankrupt's  notes  bought  on  speculation  as  to  probable  divi- 
dends ;^^  nor  a  protested  draft  after  the  commencement  of  the 
bankruptcy  proceedings  ;^i  nor  claims  bought  up  by  the  debtor 
to  set  off  against  bankrupt's  deposit.^- 

§  1138.  Statute  of  limitations.— A  claim  barred  by  the 
statute  of  limitations  of  the  state  in  which  the  petition  is  filed, 
or  by  the  limitation  prescribed  by  the  bankrupt  act,  is  not 
provable  and  hence  cannot  be  used  as  a  set-off.  See  What 
Debts  may  be  Proved,  §  995. 

§1139.  Taxable  costs.— Taxable  costs  being  provable,^^ 
under  the  present  act  may  be  allowed  as  set-offs. 

38  In  re  Tacoma  Shoe  &  Leather  4i  Bashore  v.  Rhoads,  16  N.  B. 
Co.,  3  N.  B.  N.  R.  9.  R.  72. 

39  Hovey  v.  Home  Ins.  Co.,  10  N.  ^2  in  re  Perkins,  8  N.  B.  R.  56,  5 
B.  R.  224,  F.  C.  6743.  Biss.  254,  F.  C.  10982. 

40  Hunt  V.  Holmes,  16  N.  B.  R.  43  Sec.  63a,  act  of  1898. 
101,  F.  C.  6890. 


CHAPTER  LXIX. 

POSSESSION    OF    PROPERTY. 

§1140.   (69a)   Provisional  Seizure       1143.  Affidavit  in  support  of  peti- 

of  Property.  tion. 

1141.  Purpose.  1144.  Property  subject  to  seizure. 

1142.  Petition.  1145.  Liability  for  unlawful  seiz- 

ure. 

§  1140.     '  (Sec.  69a)     Provisional    seizure    of   property.— A 

*  judge  may,  upon  satisfactory  proof,  by  affidavit,  that  a  bank- 
'rupt  against  whom  an  involuntary  petition  has  been  filed  and 
'is  pending  has  committed  an  act  of  bankruptcy,  or  has  neg- 
'lected  or  is  neglecting,  or  is  about  to  so  neglect  his  property 
'that  it  has  thereby  deteriorated  or  is  thereby  deteriorating 
'or  is  about  thereby  to  deteriorate  in  value,  issue  a  warrant 
'to  the  marshal  to  seize  and  hold  it  subject  to  further  orders. 
'Before  such  warrant  is  issued  the  petitioners  applying  there- 
'for  shall  enter  into  a  bond  in  such  an  amount  as  the  judge 
'shall  fix,  with  such  sureties  as  he  shall  approve,  conditioned 
'to  indemnify  such  bankrupt  for  such  damages  as  he  shall 
'sustain  in  the  event  such  seizure  shall  prove  to  have  been 
'wrongfully  obtained.  Such  property  shall  be  released,  if  such 
'bankrupt  shall  give  bond  in  a  sum  which  shall  be  fixed  by 
'the  judge,  with  such  sureties  as  he  shall  approve,  conditioned 
'to  turn  over  such  property,  or  pay  the  value  thereof  in  money 
'to  the  trustee,  in  the  event  he  is  adjudged  a  bankrupt 
'pursuant  to  such  petition. '^ 

§  1141.  Purpose.— The  purpose  of  this  section  is  to  enable 
the  creditors  to  have  the  bankrupt's  property  taken  into 
custody  by  the  United  States  marshal  after  the  petition  has 

1  Analogous     provision     of     act  veyance  or  disposition  thereof,  the 

of  1867.  court  may  issue  a  warrant  to  the 

"Sec.  40.  .  .  .  If  it  shall  ap-  marshal  of  the  district 
pear  that  there  is  probable  cause  and  forthwith  to  take  possession 
'for  believing  that  the  debtor  is  provisionally  of  all  the  property 
about  to  leave  the  district,  or  to  and  effects  of  the  debtor,  and 
remove  or  conceal  his  goods  and  safely  keep  the  same  until  the  fur- 
chattels  or  his  evidence  of  prop-  ther  order  of  the  court.  .  .  ." 
erty,  or  make  any  fraudulent  con- 

730 


Ch.  69  POSSESSION    OF    PROPERTY.  731 

been  filed,  and  prior  to  adjudication,  where  the  bankrupt  has 
committed  an  act  of  bankruptcy,  and  has  neglected  or  is 
neglecting  his  property,  so  that  it  is  deteriorating  in  value. 
While  the  section  does  not  specifically  provide  for  the  seizure 
of  property  of  a  bankrupt  who  is  wasting  it,  it  is  evidently  the 
intention  of  Congress  by  this  provision  to  prevent  not  only 
the  deterioration  in  value  but  also  the  wastage  and  loss  of 
property,  pending  the  adjudication.^ 

In  connection  with  this  provision,  §§  92-93  should  be  con- 
sidered, as  their  terms  are  broader  and  would  seem  also  to 
comprehend  proceedings  under  this  provision  of  the  law.^ 
See  also  §  681  ante,  for  power  of  referee  with  reference  to 
seizure  of  property. 

§  1142.  Petition. — A  petition  for  involuntary  adjudication 
in  bankruptcy  should  be  confined  to  that  purpose  and  should 
not  also  contain  an  application  for  a  warrant  of  seizure,  the 
act  indicating  by  implication  that  the  proceedings  are  distinct 
and  separate ;  at  any  rate,  the  better  practice  is  to  make  them 
such.  Under  this  section  a  warrant  of  seizure  can  issue  only 
after  a  petition  has  been  filed  by  the  creditors  and,  possibly, 
not  until  after  notice  of  it  has  been  given.'* 

§  1143.  Affidavit  in  support  of  petition.— The  affidavit  re- 
quired to  support  a  petition  for  seizure  of  property  should 
specify  all  of  the  essential  facts,  and  it  has  been  held  that  it 
should  be  as  fully  satisfactory  in  exhibiting  proof  of  the  act 
of  bankruptcy  as  the  testimony  to  be  produced  at  the  hearing 
of  the  petition  for  adjudication  in  a  contested  case,  in  order 
that  the  court  may  be  fully  apprised  of  the  facts  in  reaching 
a  conclusion  as  to  whether  the  alleged  bankrupt  has  been 
neglecting  his  property  as  charged.  Warrant  for  the  seizure 
should  not  be  made  upon  the  mere  opinions  of  witnesses  that 
an  act  of  bankruptcy  has  been  committed,  but  only  on  a  full 
showing  of  the  facts  of  the  case.^ 

§  1144.  Property  subject  to  seizure.— Prior  to  the  amenda- 
tory act  of  February  5,  1903,  summary  process  for  the  seizure 
of  property  could  be  invoked  only  where  the  property  was 
in  the  possession  of    the  bankrupt  or  his  agent^  and    never 

2  In  re  Rockwood,  1  N.  B.  N.  134.        4  in  re  Kelly,  supra. 
91  F.  R.  363,  1  A.  B.  R.  272.  s  in  re  Kelly,  supra. 

3  In  re  Kelly,  91  F.  R.  504,  1  A. 
B.  R.  306. 


732  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  G9 

where  it  was  in  the  control  of  a  third  part}^  liolding  it  undfr 
an  adverse  claim  of  right  or  title  prior  to  the  filing  of  the 
petition,*"'  but  the  mere  refusal  to  surrender  without  other 
evidence  was  insufficient  to  constitute  an  adverse  holding^ 
Hence  the  court  "vvould  not  order  possession  to  be  taken  of 
property  which  may  have  been  illegally  transferred  to  another, 
nor  issue  a  warrant  commanding  the  marshal  to  take  posses- 
sion provisionally  of  goods  and  property  so  conveyed  prior  to 
the  filing  of  the  petition,^  but  where  the  conveyance  was 
subsequently  avoided  by  the  adjudication,  as  in  the  case  of  a 
general  assignment,  the  property  would  be  restored  upon 
summary  petition  in  the  court  of  bankruptcy.*^  Where  prop- 
erty is  held  adversely  a  plenary  suit  would  doubtless  have  to 
be  resorted  to.  On  a  proper  showing  the  court  may  issue  an 
injunction  orrestraining  order,  upon  an  application  making  the 
third  person  a  party,  thereby  restraining  the  sale  or  other  dis- 
position of  the  property  until  the  hearing  upon  the  petition 
for  adjudication  and  the  appointment  of  a  trustee.^^ 

Provision  is  elsew^here  made  for  the  recovery  of  property' 
held  in  violation  of  the  statute,  through  a  voidable  prefer- 
ence ;i^  or  fraudulent  conveyance  ;i2  qj.  otherwise.^^ 

§  1145.  Liability  for  unlawful  seizure.— In  executing  a 
"warrant  for  the  seizure  of  property,  the  responsibility  rests 
upon  the  United  States  marshal  of  determining  the  ownership 

6  In  re  Kelly,  supra;  In  re  Rock-  N.  B.  R.  97,  16  Wall.  551;  In  re 
wood,    1    N.    B.    N.    134,   91    F.    R.     Smith,  1  N.  B.  N.  61. 

363.  «  Sec.    23b,    act   of    1898;    In    re 

7  Mueller  v.  Nugent,  184  U.  S.  1,  Harthill,  4  N.  B.  R.  131,  4  Ben. 
7  A.  B.  R.  224,  1  A.  B.  R.  372;  In  488,  F.  C.  6161;  In  re  Holland.  12 
re  Griffith,  1  N.  B.  N.  546;  Bardes  N.  B.  R.  403,  F.  C.  6605. 

V.  Bank,  178  U.  S.  524,  2  N.  B.  N.  9  Bryan  v.  Bernheimer,  181  U.  S. 

R.  725,  4  A.  B.  R.  163;  In  re  Ward,  188,  3  N.  B.  N.  R.  482,  5  A.  B.  R. 

104  F.  R.  985;    In  re  Brodbine,   1  623. 

N.  B.  N.  279,  326,  93  F.  R.  643,  2  lo  Sec.    11,    act    of    1898    (In    re 

A.  B.  R.  53;  In  re  Buntrock  Cloth-  Rockwood,  91  F.  R.  363,  1  N.  B.  N. 

ing  Co.,  1  N.  B.  N.   291,  92  F.  R.  134.  1  A.  B.  R.  272;  In  re  Kelly,  91 

886,  1  A.  B.  R.  454;  In  re  Pearson,  F.   R.  504,  1  A.   B.  R.  306;    In  re 

1  N.  B.  N.  474,  2  A.  B.  R.  819;  In  Holland,    12    N.    B.    R.   403,    F.    C. 

re  Fowler,  1  N.  B.  N.  265,  93  F.  R.  6605.) 

417,  1  A.  B.  R.  555;   In  re  Bender.  n  Sec.  60b,  ante,  act  of  1898. 

106  F.  R.  873,  5  A.  B.  R.  632,  and  12  Sec.  67e.  ante,  act  of  1898. 

cases  cited  under  sec.  23b,  act  of  13  Sec.  70e,  post,  act  of  1898. 
1898;  but  see  Marshall  v.  Knox,  8 


Ch.  69  POSSESSION    OF    PROPERTY.  733 

of  the  property  seized,  and  if  he  take  that  of  a  stranger,  he 
renders  himself  liable  to  an  action  for  trespass.^*  He  has  no 
authority  to  seize  property  provisionally,  outside  of  his  dis- 
trict,!^  and  where  property  is  unlawfully  taken  by  him  its 
actual  value  may  be  recovered.^^ 

1+ Marsh  v.  Armstrong,  11  N.  B.  R.  157,  F.  C.  1869;   Vogel,  3  N.  B. 

R.   125;    In   re  Muller.  3   N.  B.  R.  R.  198.  7  Blatchf.  18,  F.  C.  16982. 
86;    Deady,  513,  F.  C.  9912;    In  re         is  Carr  v.  Phillips,  18   N.  B.  R. 

Marks,  2  N.  B.  R.  175,  F.  C.  9095;  527. 

but  see  Stevenson  v.  McLaren,  14         le  Doll  v.   Harlow,  11   N.   B.  R. 

N.  B.  R.  403;  In  re  Briggs,  3  N.  B.  350. 


CHAPTER  LXX. 

TITLE    TO    PROPERTY. 


§1146.  (70a)  Time  title  vests  in 
trustee  and  property  af- 
fected. 

Advantages. 

Trustee's  title. 

Subject  to  liens. 

Onerous    or    unprofita- 
ble property. 

Extent. 

To  property  held  prior 

to  filing  petition. 
Between  filing  and  ad- 
judication. 

After  adjudication. 

Under  act  of  1867. 

Choses  in  action. 

Under  contracts. 

Obtained  through  fraud. 

Confusion  of  goods. 

Exempt  property. 

Conveyances    void    un- 
der statutes  of  fraud. 

General  assignment. 

To     property     of     hus- 
band and  wife. 

Joint  estate. 

By  the  courtesy. 

Dower  rights. 

Life  insurance  payable 

to  wife. 

With  cash  surren- 
der value. 


1147. 
1148. 
1149. 
1150. 

1151. 
1152. 

1153. 

1154. 
1155. 
1156. 
1157. 
1158. 
1159. 
1160. 
1161. 

1162. 
1163. 

1164. 
1165. 
1166. 
1167. 

1168. 

1169. 

1170. 
1171. 

1172. 

1173. 
1174. 
1175. 


For  creditors'  ben- 
efit. 

Fire  insurance. 

To  leases;  landlord  and 

tenant. 

Property  under  judg- 
ment or  attachment. 

Mortgage  or  pledge. 

Chattel  mortgage. 

To  rents  and  profits,  in 

case  of  mortgage. 


1176.  Partnership  property. 

1177.  Patents, copyrights, and 

trademarks. 

1178.  Secret  trust. 

1179.  Transferable  property;  com- 

mercial paper. 

1180.  Funds  in  bank 

1181.  Growing  crops. 

1182.  Personal  privileges,  li- 
censes, etc. 

1183.  Legacies  —  Wills  —  In- 
heritance. 

1184.  Vested   and   contingent 

remainders — powers. 

1185.  Stocks,  bonds,  or  other 

securities. 

1186.  Goods   delivered   to  be 

paid  for  when  sold. 

1187.  Property  held  in  trust. 
1188  Claims  against  proper- 
ty in  trustee's  hands. 

1189.  b.  Appraisal;    sale  of  prop- 

erty. 

1190.  Appraisers. 

1191.  Sale  of  property,  control  of 

court  over. 

1192.  Manner  of  making. 

1193.  State     court     has     no 

power  over. 

1194.  Of     incumbered     prop- 
erty. 

1195.  Free  of  lien. 

1196.  Effect    of     in    case    of 

liens. 

1197.  Liquidation  without. 

1198.  Confirmation  of. 

1199.  Setting  aside. 

1200.  c.  Conveyance  of  bankrupt's 

property. 

1201.  Trustee  to  make. 

1202.  d.  Title     on     setting     asida 
composition  or  discharge. 

1203.  Composition  set  aside. 


r34 


1213. 

— -  Collateral. 

1214. 

Fraudulent     convey- 

ances. 

1215. 

Funds  in  bank. 

1216. 

Stockholder's    liability. 

1217. 

Usury. 

1218. 

Bona  fide  purchases. 

1219. 

Stoppage  in  transitu. 

1220. 

Claims   against  United 

States. 

1221. 

f.  Title   on   confirmation  of 

composition. 

1222. 

Effect    of    confirmation    of 

composition. 

Ch.  70  TITLE    TO    PROPERTY.  ^  735 

1204.  e.  Avoidance  of  transfers. 

1205.  Preferences  voidable. 

1206.  Proceedings  when  property 

under  bankrupt's  control. 

1207.  When  claimed  adverse- 
ly by  third  persons. 

1208.  Trustee   represents  creditors 

as  well  as  bankrupt. 

1209.  Failure  to   take  possession, 
or  abandonment. 

1210.  Trustee's  rights  of  action — 
time. 

1211.  To   contest   bankrupt's 

account  as  administrator. 

1212.  Property  in  custody  of 

the  law. 

§  1146.  *  (Sec.  70a)  Time  title  vests  in  trustee  and  prop- 
'erty  affected. — The  trustee  of  the  estate  of  a  bankrupt,  upon 
'his  appointment  and  qualification,  and  his  successor  or  suc- 
'cessors,  if  he  shall  have  one  or  more,  upon  his  or  their 
'appointment  and  qualification,  shall  in  turn  be  vested  by 
'operation  of  law  with  the  title  of  the  bankrupt,  as  of  the 
'date  he  was  adjudged  a  bankrupt,  except  in  so  far  as  it  is  to 
'property  which  is  exempt,  to  all 

'(1)  "Documents:" — Documents  relating  to  his  property; 

*(2)  "Patents:" — Interest  in  patents,  patent  rights,  copy- 
' rights,  and  trade-marks; 

'(3)  "Powers:" — Powers  which  he  might  have  exercised 
'for  his  own  benefit,  but  not  those  which  he  might  have  exer- 
'cised  for  some  other  person; 

'(4)  "Property  transferred:"— Property  transferred  by 
'him  in  fraud  of  his  creditors; 

'(5)  "Transferable  property:"— Property  which  prior  to 
'the  filing  of  the  petition  he  could  by  any  means  have  trans- 
'ferred  or  which  might  h«ve  been  levied  upon  and  sold  under 
'judicial  process  against  him: 

'  "Insurance  policies:"— Provided,  That  when  any  bankrupt 
'shall  have  any  insurance  policy  which  has  a  cash  surrender 
'value  payable  to  himself,  his  estate,  or  personal  representa- 
'tives,  he  may,  within  thirt}^  days  after  the  cash  surrender 
'value  has  been  ascertained  and  stated  to  the  trustee  by  the 
'company  issuing  the  same,  pay  or  secure  to  the  trustee  the 


736 


THE   NATIONAL   BANKRUPTCY    LAW. 


Ch.  70 


'sum  so  ascertained  and  stated,  and  continue  to  hold,  own,  and 
'carry  such  policy  free  from  the  claims  of  the  creditors  par- 
'ticipating  in  the  distribution  of  his  estate  under  the  bank- 
'ruptcy  proceedinjis,  otherwise  the  policy  shall  pass  to  the 
*  trustee  as  assets;  and 

*(6)  "Rights  of  action:"— Rights  of  action  arising  upon 
'contracts  or  from  the  unlawful  taking  or  detention  of,  or  in- 
'jury  to,  his  property.'^ 

§  1147.  Advantage  of  vesting  title  on  adjudication.— :\Iuch 
of  the  inconvenience  incident  to  a  transfer  of  title  to  be  sub- 
sequently avoided  upon  a  refusal  to  make  an  adjudication  is 
obviated  by  the  provision  vesting  title  in  the  trustee  as  of  the 


1  Analogous  provision  of  act 
of  1867.  "Sec.  14.  .  .  .  That 
as  soon  as  said  assignee  is  ap- 
pointed and  qualified,  the  judge, 
or,  where  there  is  no  opposing  in- 
terest, the  register,  shall,  by  an 
instrument  under  his  hand,  assign 
and  convey  to  the  assignee  all  the 
estate,  real  and  personal,  of  the 
bankrupt,  with  all  his  deeds,  books, 
and  papers  relating  thereto,  and 
such  assignment  shall  relate  back 
to  the  commencement  of  said  pro- 
ceedings in  bankruptcy,  and  there- 
upon, by  operation  of  law,  the  title 
to  all  such  property  and  estate, 
both  real  and  personal,  shall  vest 
in  said  assignee,  although  the 
same  is  then  attached  on  mesne 
process  as  the  property  of  the 
debtor,  and  shall  dissolve  any  such 
attachment  made  within  four 
months  next  preceding  the  com- 
mencement of  said  proceedings: 
.  .  .  and  all  the  property  con- 
veyed by  the  bankrupt  in  fraud  of 
his  creditors;  all  rights  in  equity, 
choses  in  action,  patents  and  pat- 
ent rights  and  copyrights;  all  debts 
due  him,  or  any  person  for  his  use. 
and  all  liens  and  securities  there- 
for; and  all  his  rights  of  action 
for  property  or  estate,  real  or  per- 
sonal, and  for  any  cause  of  action 


which  the  bankrupt  had  against 
any  person  arising  from  contract 
or  from  the  unlawful  taking  or 
detention,  or  of  injury  to  the  prop- 
erty of  the  bankrupt,  and  all  his 
rights  of  redeeming  such  property 
or  estate,  with  the  like  right,  title, 
power,  and  authority  to  sell,  man- 
age, dispose  of,  sue  for,  and  recov- 
er or  defend  the  same,  as  the  bank- 
rupt might  or  could  have  had  if  no 
assignment  had  been  made,  shall, 
in  virtue  of  the  adjudication  of 
bankruptcy  and  the  appointment 
of  his  assignee,  be  at  once  vested 
in  such  assignee;  and  he  may  sue 
for  and  recover  the  said  estate 
debts  and  effects,  and  may  prose- 
cute and  defend  all  suits  at  law  or 
in  equity,  pending  at  the  time  of 
the  adjudication  of  bankruptcy,  in 
which  such  bankrupt  is  a  party  ir 
his  own  name,  in  the  same  manner 
and  with  the  like  effect  as  they 
might  have  been  presented  or  de- 
fended by  such  bankrupt.  .  .  . 
No  person  shall  be  entitled,  as 
against  the  assignee,  to  withhold 
from  him  possession  of  any  books 
of  account  of  the  bankrupt,  or 
claim  any  lien  thereon;  .  .  . 
but  no  property  held  by  the  bank 
rupt  in  trust  shall  pass  by  such 
o'-signment." 


Ch.  to  title  to  property.  737 

date  of  adjudication,  and  business  transactions  may  accord- 
ingly be  had  with  the  bankrupt  without  fear  as  to  imperfec- 
tions of  title.  Should  this  liberality  conduce  to  improvident 
treatment  of  the  estate  by  the  bankrupt,  the  court,  upon  satis- 
factory proof  that  the  property  is  being  neglected,  is  deterior- 
ating or  about  to  deteriorate  in  value,  may  issue  a  warrant  to 
the  marshal  to  seize  and  hold  it  subject  to  further  orders. ^ 

§  1148.  Trustee's  title.— If  the  trustee  has  any  power  over  a 
subject,  it  must  be  found  in  the  bankruptcy  act.^  The  trustee 
takes  title  to  all  of  bankrupt's  property  which  prior  to  the 
filing  of  the  petition  he  could  have  transferred  or  which  might 
have  been  levied  upon,  wherever  situated,  whether  within  the 
district  or  state  where  the  petition  is  filed  or  beyond  it.  In 
the  case  of  property  within  the  United  States  or  any  of  its 
provinces,  the  title  passes  to  the  trustee  by  operation  of  law 
without  any  conveyance  from  the  bankrupt,^  while  in  case  of 
property  beyond  the  jurisdiction  of  the  United  States  a  con- 
veyance by  the  bankrupt  is  necessary.  He  takes  no  better  title 
than  belonged  to  the  bankrupt  or  to  his  creditors  at  the  time 
when  the  trustee's  title  accrued,^  and  cannot  therefore  convey 
any  better  title.*^  While  the  trustee  is  not  a  purchaser  from  the 
bankrupt  and  does  not  occupy  a  relation  similar  to  a  judgment 
creditor,  he  has  greater  rights  than  the  assignee  had  under  the 
Act  of  1867,'''  and  represents  the  general  creditors  as  well  as 
the  bankrupt.^    He  may  proceed  summarily  against  one  hold- 

2  Sec.  69.  act  of  1898.  In  re  McNamara,  2  N.  B.  N.  R.  341; 

3  Butcher  v.  Bk.,  11  N.  B.  R.  457,  Upton  v.  Jackson,  F.  C.  16802; 
12  Blatch.  435,  F.  C.  4203.  Contra,   In   re  McKay,  1   N.  B.  N. 

*  See  Markson  &  Spalding  V.  Hsa-  133,    1    A.    B.  R.   292;    In   re   Ohio 

ney,  4  U.  B.  R.  165,  F.  C.  17980.  Co-op.   Shear  Co.,  2  A.  B.  R.  775, 

5  In  re  New  York  Economical  1  N.  B.  N.  477;  In  re  Bozeman,  1 
Printing  Co.,  110  F.  R.  514,  6  A.  B.  N.  B.  N.  479,  2  A.  B.  R.  809;  In  re 
R.  615.  Booth,  2  N.  B.  N.  R.  377,  98  F.  R. 

6  In  re  Kellogg,  112  F.  R.  52,   7  975;    comp.  In  re  Griffith,  3  N.  B. 

A.  B.  R.  270,  citing  In  re  New  York  R.  179;  Potter  v.  Cogswell,  4  N. 
Economical  Printing  Co.,  6  A.  B  B.  R.  9;  Bromley  v.  Smith,  5  N. 
R.  615;  Chattanooga  Nat.  Bank  v.  B.  R.  152,  2  Biss.  511,  F.  C.  1922; 
Rome  Iron  Co.,  4  A.  B.  R.  441.  Wilkins  v.  Davis,  15  N.  B.  R.  60,  2 

^  Sec.  67a,  act  of  1898.  Lowell,  511,  F.  C.  No.  17664;  Allen 

><  In  re  Yukon  Woolen  Co.,  1  N.  v.   Montgomery,   10   N.  B.  R.  503; 

B.  N.  420,  2  A.  B.  R.  805,  96  F.  R  In  re  Appold,  1  N.  B.  R.  178.  F.  C. 
326;  In  re  Rudnick,  2  N.  B.  N.  R.  499;  Rodgers  v.  Winsor.  6  N.  B. 
975.  102  F.  R.  750,  4.  A.  B.  R.  531;  R.  246,  F.  C.  12023;   In  re  Dow,  tJ 

47 


738  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  70 

ing  the  bankrupt's  property  without  claim  of  title,^  he  may  set 
aside  a  fraudulent  conveyance  though  the  bankrupt  could  not ; 
or  bring  an  action  to  reach  equities  beyond  legal  remedies.  He 
may  avoid  any  transfer  by  the  bankrupt  M^hich  any  creditor 
might  have  avoided,^"  thus  subrogating  the  trustee  to  the 
rights  of  creditors,  as  against  liens  and  transfers,  which  exist 
at  the  time  of  the  bankruptcy.^i  Under  the  Act  of  1867,i2  in 
addition  to  the  petition  and  the  adjudication,  as  required  now, 
an  assignment  was  necessary  to  vest  the  assets  in  the  assignee, 
such  vesting  creating  a  trust  against  which  the  statute  of  limit- 
ations ceased  to  run,  as  is  the  case  now.^^ 
See  also  ante,  §  1097, 

§  1149. Subject  to  liens.— Except  in  cases  affected  by 

fraud,  illegal  preferences,  or  liens  avoided  by  the  adjudication 
in  bankruptcy,  the  trustee  takes  the  bankrupt's  property  with 
like  right,  title,  power  and  authority  as  the  bankrupt  had  sub- 
ject to  any  valid  lien  existing  thereon.^^  He  takes  it  subject 
to  every  equity  which  would  affect  the  bankrupt  himself,  if  he 
were  asserting  such  rights  and  interests,i^  but  the  lien  must  be 
perfected  before  the  commencement  of  the  bankruptcy  pro- 
ceedings,^^ and  not  be  one  which  the  act  itself  avoids.  Where 
under  the  state  laws,  the  legal  title  to  mortgage  property  re- 
mains in  the  mortgagor,  such  title  vests  in  his  trustee  in  bank- 
ruptcy, together  with  his  statutory  right  of  redemption  from  a 

N.  B.  R.  10,  F.  C.  4036;  White  v.  Lipman,  1  N.  B.  N.  310,  2  A.  B.  R. 
Jones,  6  N.  B.  R.  175,  F.  C.  17550.     49,    94    F.    R.    353;    Sutherland    v. 

9  In  re  Moore,  104  F.  R.  869.  Davis,  10  N.  B.  R.  424;  In  re  Eld- 

10  In  re  McNamara,  2  N.  B.  N.  R.  ridge.  12  N.  B.  R.  510,  2  Hughes, 
341,  citing  In  re  Leland,  F.  C.  256,  F.  C.  4331;  Starkweather  v. 
8230;  Bradshaw  v.  Klein,  F.  C  Ins.  Co.,  4  N.  B.  R.  110,  F.  C. 
1790;    In   re   Collins.    F.    C.    3007;  13308. 

Cook  V.  Whipple,  55  N.  Y.  150;  i*  In  re  Winn,  1  N.  B.  R.  131, 
Southard  v.  Benner,  72  N.  Y.  424;  F.  C.  17876;  Courier  Journal  Co.  v. 
In  re  Metzger,  F.  C.  9510;  In  re  Schaeffer-Myer  Co.,  101  F.  R.  699. 
Duncan,  F.  C.  4131;  Barker  v.  4  A.  B.  R.  183;  Donaldson  v.  Far- 
Barker,  F.  C.  986;  In  re  Adams,  1  well.  15  N.  B.  R.  277;  Bk.  v.  Rome 
N.  B.  N.  167,  1  A.  B.  R.  94.  Iron  Co.,  102  F.  R.  755. 

11  In  re  New  York  Economical  i")  In  re  Hanna,  3  N.  B.  N.  R. 
Printing  Co.,  110  F.  R.  514,  6  A.  237;  In  re  Dow,  6  N.  B.  R.  10,  F. 
B.  R.  615.  C.  4036;   Bacon  v.  Heathcote,  1  A. 

12  Sec.  14,  act  of  1867.  B.  R.  160. 

i-!  In  re  Resler.  1  N.  B.  N.  280,  is  In  re  Smith.  1  N.  B.  R.  169,  2 
2  A.  B.  R.  166,  95  F.  R.  804;  In  re     Ben.  432,  F.  C.  12973. 


Ch.  70  TITLE    TO    PROPERTY.  73iJ 

foreclosure  sale  under  a  decree  rendered  after  the  adjudica- 
tion.i7 

In  accordance  with  equitable  principles,  a  mortgage  exe- 
cuted just  prior  to  the  bankruptcy  in  pursuance  of  a  parol 
agreement  for  a  present  valuable  consideration  more  than  four 
months  prior  to  the  filing  of  the  petition  has  been  held  valid 
as  against  the  trustee,  as  relating  back  to  such  agreement,^  ^ 
but  this  position  does  not  appear  tenable  in  view  of  the  drastic 
provisions  of  section  67  of  the  law,  and  if  it  were  valid  such 
transaction  would  be  open  to  the  closest  scrutiny  and  would 
be  sustained  only  in  case  of  proof  to  a  high  degree  of  cer- 
tainty. In  those  states  where  a  pledge  or  mortgage  is  merely 
security  for  the  debt,  and  the  superior  title  remains  in  the 
pledgor  or  mortgagor,  it  passes  to  the  trustee  on  the  bank- 
ruptcy of  the  pledgor  or  mortgagor.!'^ 

No  difference  is  made  between  the  liens  obtained  by  the 
pledge  of  property  and  those  obtained  in  any  other  way,  ex- 
cept that  a  pledge  implies  delivery,  though  delivery  is  not 
always  necessary,^^  and  does  not  require  record.  Otherwise 
the  same  rules  apply  to  pledges  as  to  mortgages. 

Where  a  license  owned  by  a  bankrupt  and  converted  into 
money  by  his  trustee  had  previously  been  pledged  by  the  bank- 
rupt, the  pledgee  is  entitled  to  intervene  in  the  bankruptcy 
proceedings  to  assert  his  right  to  payment  from  the  proceeds.^i 
If  an  insurance  policy  had  been  given  as  security  for  the 
endorsement  of  a  note,  negotiated  by  bankrupt,  the  cash  sur- 
render value  should  be  applied  by  the  trustee  first  to  the  pay- 
ment of  such  note ;--  and  the  same  is  true  where  moneys  are 
advanced  upon  the  pledge  of  such  policies.-^ 

The  trustee  is  entitled  to  hold  property  of  the  bankrupt  as 
against  a  chattel  mortgage  or  a  contract  of  conditional  sale 
which  is  void  as  against  general  creditors  for  want  of  record.-* 
If  he  sells  property  encumbered,  he  conveys  only  the  bank- 

1-  In  re  Novak,  111  F.  R.  161,  7  -i  In    re   Fisher,    103    F.   R.   860. 

A.  B.  R.  27.  4  A.   B.  R.,  646. 

isBurdick  v.   Jackson,  15  N.   B.  ^'-'  In  re  Weil,  2  N.  B.  N.  R.  295. 

R.  318;   but  see  Graham  v.  Stark,  -''.  In  re  Little  River  Lumber  Co., 

3   N.   B.   R.   92,   3   Ben.    520,    F.   C.  1  A.  B.  R.  483,  1  N.  B.  N.  307,  92 

5676.  F.  R.  585;    In  re  Sands  Ale  Brew- 

i!>  In  re  Coffin,  1  N.  B.  N.  507,  2  ing  Co..  6  N.  B.  R.  101.  3  Biss.  175, 

A.  B.  R.  344.  F.  C.  12307. 

2'i  Chatt.  Nat.  Bk.  v.  Rome  Iron  24  in  re  Andrae  &  Co..  117  F.  R., 

Co.,  102  F.  R.  755,  4  A.  B.  R.  441.  561,  9  A.  B.  R..  135. 


740  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  70 

rupt's  interest  subject  to  the  iiieumbrance,-"'  antl  with  no 
higher  or  better  interest  than  the  bankrupt  could  have  con- 
veyed.^" lie  takes  the  bankrupt's  property  free  of  all  liens 
avoided  by  the  bankruptcy  proceedings  if  created  either  be- 
fore or  after  the  filing  of  the  petition.^^ 

i^  1150. Onerous  or  unprofitable  property.— Neither  a 

receiver  nor  trustee  is  bound  to  acce})t  proi)crty  of  an  onerous 
or  unprofitable  character,  or  to  assume  an  obligation  of  the 
bankrupt,  unless  for  the  benefit  of  the  creditors;-^  and  if  the 
trustee  refuses  under  such  circumstances  to  take  title,  it  re- 
mains in  the  bankrupt.  In  case  the  trustee  refuses  to  assume 
the  performance  of  a  contract,  the  contractual  rights  and  lia- 
bilities of  the  bankrupt  remain  unaffected  by  the  bankruptcy.-'* 
This  refers  to  all  classes  of  contracts  except  for  purely  per- 
sonal service  or  those  involving  trust  or  confidence,  to  which 
the  trustee  cannot  take  title. 

§  1151. Extent.— The  trustee  takes  all  of  the  bank- 
rupt's right  and  title  and  all  those  of  the  creditors  against 
adverse  claimants  to  the  estate,  free  of  all  claims  not  valid 
against  the  creditors  and  every  one  of  them,^*^  so  that  the  bank- 
rupt cannot  maintain  a  suit  in  his  own  name  in  relation  to 
property  not  exempt,  after  the  appointment  of  a  trustee.*^^ 
But  mere  ability  of  the  bankrupt,  by  deed  or  otherwise,  to 
estop  or  preclude  himself  from  claiming  title  to  or  enjoying 
property,  acquired  after  the  execution  of  such  deed,  does  not 
constitute  property  which  prior  to  the  filing  of  the  petition 
he  could  by  any  means  have  transferred.^-  A  bare  possibility 
or  mere  expectation  of  acquiring  property  does  not  constitute 
property  or  a  title  to  property,  nor  can  it  be  transferred  or 

23  In  re  Cooper,  16  N.  B.  R.  178,  sions   v.   Romadka,   145   U.   S.    29; 

F.  C.  3190.  Sparhawk  v.  Yerkes,  142  U.  S.  1. 

^6  Ray  V.  Brigham,   12  N.  B.   R.         ■■^»  In  re  Schierrmann,  2  N.  B.  N. 

145.  R.  118. 

■■i-  In  re  Wells,   114  F.  R.  222,  8         so  in  re  Kindt,  2  N.  B.  N.  R.  369. 

A.  B.  R    75;   Rowe  v.  Page,  13  N.  reversed  101  F.  R.  107,  4  A.  B.  R. 

B.  R.  366.  48. 

2s  In  re  Schierrmann,  2  N.  B.  N.  3i  Pickens  v.  Dent,  106  F.  R.  653, 

R.  118;    In  re  Ells,  2  N.  B.   N.  R.  5  A  B.  R.  644,  affd.  187  U.  S.  177, 

360,  98  F.  R.  967,  3  A.  B.  R.  564;  9  A.  B.  R.  47. 

In  re  Chambers,  2  N.  B.  N.  R.  388,  S2  in  re  Twaddell,  110  F.  R.  145 

98  F    R.  865,  3  A.  B.  R.  537;   File  6  A.  B.  R.  539. 
Co.  V.  Barrett,  110  U.  S.  288:   Ses- 


Ch.  70  TITLE    TO    PROPERTY.  741 

levied  iipon,^^  The  bankruptcy  act  cannot  be  construed  so 
narrowly  as  to  exclude  any  interest  constituting  an  asset  avail- 
able to  creditors  merely  on  the  ground  that  it  is  not  expressly 
enumerated.^* 

§  1152.  Property  which  vests  in  trustee  in  general :  prior 
to  filing  petition. — The  distinction  between  the  property  which 
vests  in  the  trustee  and  the  time  the  title  of  the  bankrupt  to 
such  property  vests  him  in  should  be  observed.  The  trustee  is 
vested  with  the  title  of  the  bankrupt  as  of  the  date  of  the 
adjudication  of  bankruptcy,^-'"'  but  as  to  the  class  of  property 
referred  to  in  subdivision  5,  only  to  that  which  "prior  to  the 
filing  of  the  petition  the  bankrupt  could  by  any  means  have 
transferred  or  which  might  have  been  levied  upon  and  sold 
under  judicial  process."  This  limits  the  amount  of  that  partic- 
ular kind  of  property,  but  still  as  to  this  the  trustee  is  vested 
with  the  title  of  the  bankrupt  as  of  the  date  of  adjudication. 
The  one  refers  to  the  time  the  title  vests,  the  other  to  what 
title  vests  ;^^  and,  where  bankrupt  made  a  voluntary  assign- 
ment prior  to  filing  a  petition  in  bankruptcy,  the  status  of 
creditors,  who  did  not  consent  to  the  assignment,  is  not  affected 
by  it,  but  is  fixed  by  the  filing  of  the  petition.^^  To  illustrate : 
suppose,  prior  to  filing  his  petition,  the  bankrupt  had  a  trans- 
ferable interest  in  a  business  left  by  his  father,  who,  to  pro- 
tect the  business,  had  provided  in  his  will  that,  in  case  of  the 
bankruptcy  of  any  one  of  his  children,  his  interest  should 
cease  and  there  should  be  paid  to  whomever  was  entitled  the 
value  of  such  interest  as  of  the  day  he  filed  the  petition  in 
bankruptcy.  Suppose,  further,  that  between  the  filing  of  the 
petition  and  the  adjudication,  events  occurred  which  caused 
the  business  to  increase  largely  in  value,  by  the  death  of  a 
brother,  the  bankrupt  received  an  interest  equal  to  the  one 
he  had  formerly  had.  His  trustee  in  bankruptcy  would  take 
the  bankrupt's  first  interest  as  the  bankrupt  held  it  on  the  day 
of  the  adjudication,  that  is,  its  value  on  the  day  the  petition 
was  filed,  while,  as  shown  by  the  interest  still  held  by  the 

^3  In  re  Wetmore,  108  F.  R.  520.         so  in    re    Pease,    2    N.    B.    N.    R. 

6  A.  B.  R.  210.  1108,  4  A.  B.  R.  578;   In  re  Durka, 

34  In  re   Baudouine,   1  N.   B.   N      104  F.  R.  326. 

£06,  3  A.  B.  R.  55,  96  F.  R.  536.  tt  in  re  Swift,  3  N.  B.  N.  R.  52. 

35  In  re  Kellogg,   113  F.  R.  120, 

7  A.  B.  R.   623. 


743  THE    NATIONAL   BANKRUPTCY    LAW.  Ch.  70 

l);uikrupt,  the  property  itself  then  was  quite  different  both 
in  form  and  value.  The  elimination  of  the  })art  of  the  para- 
graph between  the  provisions  will  further  emphasize  what  is 
meant.  "The  trustee  *  *  *  shall  in  turn  be  vested  *  * 
*  with  the  title  of  the  bankrupt,  as  of  the  date  he  was  ad- 
judged a  bankrupt  *  *  *  to  all  *  *  *  (5)  property 
which  prior  to  the  filing  of  the  petition  he  could  by  any  means 
have  transferred.     *     *     *" 

If  insolvency  proceedings  were  pending  when  the  bank- 
ruptcy act  was  passed  and  the  bankrupt's  assets  were  vested 
in  the  assignee  appointed  therein,  the  trustee  is  entitled  only  to 
property  acquired  between  the  institution  of  the  insolvency 
proceedings  and  the  filing  of  the  petition.^^ 

To  summarize,  it  may  be  generally  stated  that  the  trustee 
becomes  vested  as  of  the  date  of  the  adjudication  to  all  prop- 
erty of  the  bankrupt  which  at  the  time  the  petition  was  filed 
by  or  against  him  might  in  any  way,  by  legal  or  equitable 
proceedings,  be  subjected  to  the  claims  of  his  creditors,^^  in- 
cluding such  as  may  have  been  conveyed  in  fraud  of  the  act 
or  of  creditors,  or  by  any  voidable  transfers  whatever.  This 
transition  of  title  is  limited  as  to  the  class  of  property  in  sub- 
division 5  of  this  section,  to  such  interests  in  property  as  the 
bankrupt  could  by  any  means  have  transferred  or  which 
might  have  been  levied  upon  and  sold  under  judicial  process 
against  him,  or  otherwise  subjected  to  the  claims  of  his  cred- 
itors prior  to  the  filing  of  the  petition,  or  property  into  which 
such  interests  have  been  converted,  including  such  as  may  have 
vested  in  him  on  the  day  but  prior  to  the  filing  of  the  peti- 
tion.^*^  It  w^ould  include  the  interest  of  a  bankrupt  in  an 
estate,  vested  before  the  bankruptcy,  although  such  interest  is 
undetermined,^^  but  would  exclude  all  inchoate  interests  which 
he  possessed  at  the  time  the  petition  was  filed  which  could 
not  be  alienated  or  disposed  of  by  him  or  levied  on  and  sold 
or  otherwise  subjected  to  his  debts,-*-  as  a  grant  of  public  lands 

3s  In  re  Mussey,  2  N.  B.  N.  R.  4i  In  re  Hosier,  112  F.  R.  138.  7 

113,  99  F.  R.  71,  3  A.  B.  R.  592.  A.  B.  R.  268. 

"9  In  re  Elmira  Steel  Co.,  5  A.  B.  ^2  in  re  Harris,  1  N.  B.  N.  384. 

R.  484;   In  re  Louis  &  Bros.,  1  A.  2  A.  B.  R.  359;    In  re  Pease,  2  N. 

B.  R.  458;  In  re  Appel,  4  A.  B.  R.  B.  N.  R.  1108,  4  A.  B.  R.  578;  Kee- 

722.  gan  v.  King,  96  F.  R.  758,  3  A.  B. 

40  In    re    Pease,    supra;     In    re  R.  79;  In  re  Legg,  1  N.  B.  N.  420,  2 

Stoner,  105  F.  R.  752,  5  A.  B.  R.  A.  B.  R.  805,  96  F.  R.  326;  but 
402. 


Ch.  70  TITLE    TO    PROPERTY.  743 

which  had  been  declared  forfeited,  although  subsequent  to 
bankruptcy  proceedings  had  been  restored.^^  Thus  the  words 
"prior  to  the  filing  of  the  petition"  as  used  in  this  subdivision, 
refer  to  what  passes,  while  the  apparently  antagonistic  words 
earlier  in  the  section  refer  to  when  it  passes.^^  No  payment 
by  or  to  a  bankrupt  subsequent  to  the  bankruptcy  in  relation 
to  transactions  anterior  thereto  is  valid,  though  made  or  re- 
ceived bona  fide  or  without  notice.^^ 

§  1153. Between  filing   petition   and   adjudication.— 

Since  it  is  the  purpose  of  the  act  to  apply  the  property  owned 
by  the  bankrupt  at  the  time  of  filing  the  petition  to  the  pay- 
ment of  the  debts  of  bankrupt  then  owing,  though  the  title 
thereto  does  not  vest  until  the  adjudication,  all  property 
acquired  between  the  filing  of  the  petition  and  adjudication, 
unless  simply  a  substitute  for  property  held  before  such  filing, 
can  be  retained  by  bankrupt  and  does  not  became  a  part  of 
his  estate  for  the  payment  of  debts,  and  need  not  therefore  be 
scheduled.^*^  If  the  interest  is  vested  when  the  petition  is 
filed,  it  would  be  otherwise.^'  Thus,  an  inheritance  received 
during  this  period  but  over  which  bankrupt  had  no  control  at 
the  time  of  filing  the  petition,  remains  his  individual  prop- 
erty,'*^ 

§  1154. After  adjudication.— All  property  acquired  by 

bankrupt  subsequent  to  his  adjudication  remains  his  individ- 
ual property,  and  does  not  inure  to  the  benefit  of  creditors. 
Thus  a  lease  which  proved  valuable,  after  the  adjudication 

see  Carter  v.  Hobbs,  1  N.  B.  N.  191,  4.-,  in   re  Gerdes,   2   N.   B.   N.  R. 

92  F.  R.  599,  1  A.  B.  R.  215;   In  re  131,  102  F.  R.  318,  4  A.  B.  R.  346; 

Gutwillig,  1  N.  B.  N.  40,  90  F.  R.  In  re  Harris,  1  N.  B.  N.  384,  2  A. 

481,  1  A.  B.  R.  78;  In  re  Abraham.  B.  R.  359;   In  re  Freeman.  2  N.  B. 

1  N.  B.  N.  281,  93  F.  R.  767,  779,  N.  R.  569. 

2  A.  B.  R.  266;   In  re  Clute,  1  N.  *-  In  re  Wood,  98  F.  R.  972,  3  A. 

B.  N.  386,  2  A.  B.  R.  376;  In  re  B.  R.  572;  In  re  Schenberger,  102 
Becker,  2  N.  B.  N.  R.  245,  98  F.  R.  F.  R.  978,  2  N.  B.  N.  R.  783,  4  A. 
407,  3  A.  B.  R.  412.  B.    R.    487;    Smith   v.    Schultz,   17 

«  In  re  Hansen,   107  F.  R.   252.  N    B.  R.  520;  see  also  In  re  Baud- 

44  In  re  Pease,  supra.  ouine,  1  N.  B.  N.  506,  3  A.  B.  R.  55, 

4-^  Mays  V.  Bk.,  4  N.  B.  R.  147;  96  F.  R.  536. 
In  re  Hayden,  7  N.  B.  R.  192,  F.         48  in  re  Freeman,  2  N.  B.  N.  R. 

C.  6257;    Babbitt  v.  Burgess,  7  N.  569;   In  re  Wetmore,  99  F.  R.  703, 
B.  R.   561,   4  Dill.   169,  F.  C.  693;  3  A.  B.  R.  700;  s.  c.  102  F.  R.  290; 
Duffield  V.  Horton,  16  N.  B.  R.  59;  In  re  Hoadley,  2  N.  B.  N.  R.  704, 
s.    c.    19    N.    B.    R.    13;    Booth    v.  101  F.  R.  233,  3  A.  B.  R.  780. 
Meyer.  14  N.  B.  R.  575. 


H4:  THE    NATIONAL    BANKRUPTCY    LAW.  ClI.  TO 

on  a  forfeited  contract  though  it  appeared  not  to  be  so  at  th  ■ 
time  of  filing'  the  petition  and  was  accordingly  not  scheduled, 
no  creditor  objecting  to  the  omission,  was  held  to  be  after- 
acquired  property  ;^'^  so  a  patent  allowed  after  adjudicatiou 
on  application  filed  prior  to  the  petition,^^ 

§  1155. Under  Act  of  1867.— Under  the  Act  of  1867,  it 

was  held  that  all  the  rights  and  the  duties  of  the  bankrupt  in 
respect  to  whatever  property,  not  excluded  from  the  operation 
of  the  bankruptcy  act,  he  might  hold  under  whatever  title, 
legal  or  equitable,  however  incumbered,  passed  to  the  assignee 
upon  the  filing  of  the  petition  y*'^  likewise  all  money  and  prop- 
erty on  hand  used  and  held  as  his  own,  notwithstanding  an 
endeavor  to  set  up  title  in  a  third  person  merely  to  hold  it 
himself  as  against  the  assignee.^- 

§  1156. Choses  in  action. — Any  chose  in  action  arising 

upon  contracts  or  from  the  unlawful  taking  or  detention  of,  or 
injury  to  the  bankrupt's  property,  if  beneficial  to  the  estate, 
will  pass  to  the  trustee.  It  will  not  pass  to  the  trustee  if  it 
be  a  right  of  action  of  a  personal  nature,  such  as  for  libel  or 
slander,  or  for  damages  for  a  malicious  prosecution  and  arrest 
suffered  by  the  bankrupt  prior  to  filing  the  petition  ;^3  or  one 
held  by  the  bankrupt  in  a  fiduciary  capacity  ;^^  or  of  a  wife 
not  reduced  to  possession  by  her  husband,  the  bankrupt,  which 
would  not  pass;^^  but,  if  reduced  to  possession,  it  does,  and 
the  question  of  survivorship  is  laid  aside  by  the  bankruptcy  ;••" 

49  In  ra  Oliver,  2  N.  B.  N.  R.  Hayes  v.  Dickinson,  15  N.  B.  R. 
212;  to  same  effect,  Norton  v.  350;  Hersey  v.  Elliott,  18  N.  B.  R. 
Hood,  124  U.  S.   20.  358. 

50  In  re  McDonald,  101  F.  R.  239,  -'^  In  re  Moses.  1  F.  R.  845,  19  N. 
4  A.  B.  R.  92.  B.  R.  412,  F.  C.  9870. 

51  In  re  Wynne,  4  N.  B.  R.  5,  ■"  in  re  Haensell,  91  F.  R.  355, 
F.  C.  18117;  In  re  Rosenberg,  3  N.  IN.  B.  N.  340  (note),  1  A.  B.  R. 
B.  R.  33,  3  Ben.  366,  F.  C.  12055;  286;  see  also  Tufts  v.  Matthews,  10 
Smith  V.  Buchanan.  4  N.  B.  R.  133,  F.  R.  609;  Wright  v.  Bk.,  18  N.  B. 
F.  C.  13016;  Markson  v.  Heaney,  4  R.  87,  F.  C.  18078;  Noonan  v. 
N.    B.    R.    165,    1    Dill.    497,    F.    C.  Orton,  12  N.   B.  R.  405. 

9098;  Purviance  v.  Bk.,  8  N.  B.  R.  •>*  In  re  Bk.  of  Madison,  9  N.  B. 

447,  F.  C.  11475;   Bk.  v.  Bk.,  10  N.  R.  184,  5  Biss.  515,  F.  C.  890. 

B.  R.  44;    Randolph  v.  Canby,    11  55  wickham  v.   Valle's  Ex'rs,   11 

IS.  B.  R.  296,  F.  C.  11559;  Barnard  N.  B.  R.  83,  F.  C.  17613. 

V.   R.    R.   Co.,    14  N.   B.  R.    469,    4  r,6  in  re  Boyd,  15  N.  B.  R.  119,  2 

Cliff.  351,  F.  C.  1007;  Aiken  v.  Ed-  Hughes,  349.  F.  C.  1745. 

rington.  15  N.  B.  R.  271,  F.  C.  Ill; 


Ch.  70  TITLE    TO    PROPERTY.  745 

unless  by  the  laws  of  the  state  he  has  no  interest  m  her  choses 
in  action ;  or  if  non-negotiable  and  suable  only  in  the  name  of 
the  assignor  so  as  to  be  a  set-off  as  a  nuitual  debt  or  credit  ;^^ 
or  for  the  malicious  abuse  of  the  garnishee  process;^*  or  if  ex 
delicto.-'"'^  Where  prior  to  bankruptcy  the  debtor  turns  a  long- 
ipending  suit  over  to  his  son,  without  consideration,  and  then 
after  his  discharge  takes  a  reassignment,  the  fund  should  go 
to  the  trustee.60 

See  Claims  against  the  United  States,  post  §  1220. 

§  1157. Title  to  bankrupt's  contracts.— The  trustee  may 

assume  all  contracts  of  the  bankrupt,  or  rights  of  action  aris- 
ing thereon,  which  have  a  transferable  value,  or  which  would 
be  beneficial  to  the  estate  except  those  of  a  purely  personal 
character  or  involving  personal  qualities  or  services.  He  is 
entitled  to  property  in  the  possession  of  the  bankrupt  under  a 
conditional  contract  of  sale  if  such  contract,  by  reason  of  not 
being  recorded,  or  for  want  of  a  statement  endorsed  thereon, 
under  oath,  of  the  amount  of  the  claim,  or  other  similar  reason, 
is  not  binding  on  every  creditor,*^!  and,  even  if  such  contract 
is  valid  as  to  creditors,  he  can  take  the  property,  paying  what 
remains  unpaid  thereon.*'- 

A  trustee  may  sue  on  a  written  contract,  entered  into  be- 
tween the  bankrupt  and  another  to  recover  a  debt  alleged  to 
be  due  the  bankrupt  thereunder,"-''  and  it  has  been  held  that 
he  is  entitled  to  have  the  compensation  apportioned  between 
himself  and  the  bankrupt  in  proportion  to  the  value  of  the 
services  rendered  before  and  after  the  bankruptcy,  where  the 
bankrupt,  under  a  general  contract,  has  rendered  partial  serv- 
ice, but  has  not  completed  the  contract,  prior  to  filing  the  peti- 

57  Rollins  V.  Twitchell,  14  N.  B.  805,   96   F.   R.   326;    Contra,    In   re 

R.  201,  2  Hask.  66,  F.  C.  12027.  McKay,  1  N.  B.  N.  133,  2  A.  B.  R. 

ssNoonan  v.   Orton,   2  N.   B.   R.  292;  In  re  Ohio  Co-op.  Shear  Co.,  1 

405.  N.  B.  N.  477,  2  A.  B.  R.  775;   In  re 

59  In  re  Brick,  19  N.  B.  R.  504.  Bozeman,  2  A.  B.  R.  809,  1   N.  B. 

fio  Scott  V.  Devlin,  1  N.  B.  N.  561,  N.  479. 

89  F.  R.  970.  «2  In  re  Bozeman,  2  A.  B.  R.  809. 

61  Press    Post    Printing    Co.    v.  1    N.  B.  N.  479;    In  re  Lyon,  7  N. 

Landon  Printing  &  Pub.  Co.,  2  N.  B.   R.   182.  F.  C.   8644;    Sawyer  v. 

B.  N.  R.   774;    In   re  Leigh  Bros.,  Turpin,   5  N.  B.   R.  339,  2  Lowell 

1  N.  B.  N.  526,  96  F.  R.  806;   aff'g  29,  F.  C.  12410. 

]  N.  B.  N.  425,  2  A.  B.  R.  606;   In  cs  Babbit  v.  Burgess,  7  N.  B.  R. 

re  Legg.  1  N.  B.  N.  420,  2  A.  B.  R.  561.  2  Dill.  169.  F.  C.  693. 


14G  THE  NATIONAL  BANKRUPTCY   LAW.  Cu.  TO 

tion,  but  subsequently  fulfills  the  same;  unless  the  contract 
is  contingent  upon  full  x)erforniance  of  the  services.^^ 

There  are  certain  classes  of  property  which  may  be  in  the 
bankrupt's  possession,  or  under  his  control,  by  virtue  of  some 
contract,  which  should  not  be  classed  as  an  asset  and  would 
not  pass  to  the  trustee,  as,  for  instance,  where  bankrupt  has 
possession  of  property  for  certain  purposes,  the  title  to  which 
is  in  another  ;<*-''  property  in  which  the  title,  by  written  con- 
tract, remains  in  the  vendor  until  the  stipulated  price  is  paid, 
all  of  the  requirements  of  the  law  being  fully  complied  with  f' 
a  business  conducted  in  bankrupt's  name,  but  which  is  the 
bona  fide  property  of  another  ■,^''  or  the  earnings  of  a  minor  son 
who  has  been,  emancipated  by  his  father,®^  or  where  goods  are 
purchased  on  credit  by  an  insolvent  merchant  who  does  not 
intend  to  pay  for  them,  and  they  are  re-taken  by  the  vendor, 
the  value  thereof  cannot  be  recovered  by  the  trustee  of  the 
purchaser.^9 

§  1158.  Property  obtained  through  fraud.— Where  a  party 
by  fraudulently  concealing  his  insolvency  and  his  intent  not  to 
pay  for  goods  or  property,  induces  the  owner  to  sell  them  to 
him  on  credit,  the  vendor,  if  no  innocent  third  party  has 
acquired  an  interest  in  them,  is  entitled  to  disaffirm  the  con- 
tract and  recover  his  property.'^*'  It  is  not  necessary  that  the 
false  representation  should  be  the  sole  and  exclusive  consider- 
ation for  the  credit,  only  that  it  was  the  material  consideration 
without  which  the  credit  would  not  have  been  given  ;^i  thus 
the  representations  made  to  a  commercial  agency  of  the  finan- 
cial standing  of  the  purchaser,  if  false,  would  hardly  by  itself 

64  In  re  Jones,  4  N.  B.  R.  114,  F.  69  Donaldson  v.  Forwell,  15  N.  B. 

C.  7448.  R.  277. 

60  In  re  Noakes,  1  N.  B.  R.  164,  to  Donaldson  v.  Farwell,  93  U.  S. 

F.  C.  12281;   In  re  Pusey,  7  N.  B.  631,    23    L.    Ed.     993;     Turner    v. 

R.  45,  F.  C.  11478;   In  re  Cohn,  2  Ward,  154  U.  S.  618,  23  L.  Ed.  391; 

N.  B.  JM.  R.  299,  98  F.  R.  75,  3  A.  In  re  Weil,  111  F.  R.  897,  7  A.  B. 

B.  R    421.  R.  90;   In  re  Gany,  103  F.  R.  930; 
66  In  re  Lyon,  7  N.  B.  R.  182,  F.  In     re     Epstein,    109    F.    R.    876; 

C.  8644;  Sawyer  v.  Turpin,  5  N.  B.  Bloomingdale  v.  Rubber  Mfg.  Co., 
R.  339,  2  Low.  29,  F.  C.  12410.  114  F.  R.  1016,  8  A.  B.  R.  74;   In  re 

6T  In  re  Beardsley,  1  N.  B.  R.  Hamilton  Furniture  &  Carpet  Co., 
121.  F.  C.  1184.  117  F.  R.  774,  9  A.  B.  R.  65;     Oil 

68  In  re  Dunavant.  1  N.  B.  N.  Co.  v.  Hawkins,  74  F.  R.  395;  In 
542,  96  F.  R.  542,  3  A.  B.  R.  41.         re  O'Connor,  9  A.  B.  R.  18. 

71  In  re  Gany,  supra. 


Cn.  70  TITLE    TO    PROPERTY.  747 

be  sufficient  to  warrant  a  rescission  of  the  sale  and  a  recovery 
of  the  property,  but  in  connection  with  the  representations 
made  to  the  vendor  or  his  agent,  it  would  be.~-  In  property 
thus  obtained  by  the  bankrupt,  the  trustee  takes  no  better  title 
than  he  did,  accordingly  the  defeasible  title  of  the  bankrupt 
passes  to  the  trustee  which  may  be  determined  by  a  prompt 
disaffirmance  of  the  contract  by  the  vendor,  in  which  event  the 
goods  will  be  returned  to  the  creditor."^  The  subsequent  dis- 
covery of  the  insolvency  of  the  debtor  through  bankruptcy 
proceedings  will  not  be  permitted  as  an  excuse  for  a  creditor 
to  rescind  the  sale,  but  actual  fraudulent  representation  in 
obtaining  the  property  must  be  shown  by  the  creditor,  and  the 
disaffirmance  of  the  contract  must  have  been  promptly  made. 
Where  goods  are  obtained  through  misrepresentation  by  a 
firm,  composed  of  several  members,  a  return  of  the  goods  or 
their  proceeds  will  be  valid,  as  against  the  trustee  of  two  of 
the  creditors,  if  the  goods  have  not  lost  their  identity .'^^  But 
it  is  not  in  harmony  with  the  purpose  of  the  bankruptcy  act, 
which  is  to  secure  equality  between  creditors,  to  permit  all 
creditors  who  sold  goods  to  a  bankrupt,  which  they  can 
identify,  to  rescind  the  sales  and  reclaim  the  goods  on  the 
ground  of  fraud,  where  other  creditors  having  an  equal  right 
to  a  rescission,  cannot  enforce  it  because  their  goods  were  dis- 
posed of.  Clear  proof  of  fraudulent  representations  is  re- 
quired.'^^ 

§  1159. Title  in  case  of  confusion  of  goods.— Where  a 

bailee,  prior  to  his  bankruptcy,  mixes  the  property  of  another 
with  his  own  so  that  the  identical  property  cannot  be  distin- 
guished, the  whole  passes  to  the  trustee  ;'^'5  and  the  same  is 
true  where  the  bankrupt  has  money  due  from  him  as  trustee 
but  indistinguishable  from  any  other  moneys  in  his  possession ; 
it  cannot  be  considered  "property  held  in  trust,"  but  passes 
to  the  trustee.""  If  money  is  given  another  to  invest  which  he 
uses  in  his  speculations,  so  that  it  does  not  remain  in  specie, 

T2  In   re   Hamilton   Furniture   &  '■'  In  re  O'Connor,  112  F.  R.  666, 

Carpet  Co.,  supra;   In  re  Weil,  su-  7  A.  B.  R.  428. 

pra;  In  re  Epstein.  ""  Adams  v.  Meyers,  8  N.  B.  R. 

73  Donaldson   v.    Farwell,   supra.  214,  1  Sawy.  306,  F.  C.  62. 

'*  Montgomery  v.  Bucyrus  Mach.  ""  In   re  Richard,  2  N.   B.  N.  R. 

Wks.,  14  N.  B.  R.  193,  92  U.  S.  257.  1029,    104    F.    R.    792;    Hosmer   v. 

Jewett,  6  Ben.  208,  F.  C.  6713. 


748  THE  NATIONAL  BANKRUPTCY   LAW.  Ch.  70 

on  his  becoming  bankrupt  the  cestuis  que  trustent  cannot  claim 
the  money  from  the  trustee  and  can  only  come  in  pari  passu 
with  the  other  creditors  ;"*^  us  must  a  depositor  whose  specie 
deposit  has  been  appropriated  by  the  depositee,  a  bankrupt^'' 

§1160. Exempt    property.— See    Exemptions,    ante, 

§185. 

§  1161.  Conveyances  void  under  state  statutes  of  Fraud.— 
The  bankruptcy  act  does  not  abrogate  state  statutes  of  fraud 
but,  if  under  state  laws  a  sale  by  the  bankrupt  is  void  for  want 
of  delivery  followed  by  an  actual  and  continuing  change  of 
possession,  or  of  record,  or  other  reason,  and  vests  no  title  in 
the  vendee,  the  trustee  is  entitled  to  the  property.*^"  If  on  the 
contrary  an  unrecorded  mortgage,  or  unacknowledged  deed,  is 
valid  as  to  general  creditors,  it  is  valid  as  to  the  trustee.^^  In 
certain  states  a  chattel  mortgage,  executed  long  before  the 
bankruptcy  but  not  recorded  until  a  month  prior  thereto,  is 
void  only  as  to  creditors  who  became  such  between  the  execu- 
tion and  record  by  a  new  credit  or  by  the  extension  of  an  old 
indebtedness  existing  at  or  prior  to  the  execution  of  said 
mortgage.^2  The  statutory  trust  of  creditors  in  real  estate  held 
by  the  wife  of  a  debtor,  subsequently  adjudged  a  bankrupt, 
inures  as  assets  to  the  trustee  when  purchased  by  the  bank- 
rupt prior  to  the  bankruptcy  and  paid  for  with  his  own  money 

-8  In  re  Faneway,  4  N.  B.  R.  26;  162,  F.  C.  12610;  Potter  v.  Cogge- 

Ungewitter  v.  Von  Sachs,  3  N.  B.  shall,  4  N.  B.  R.  19,  F.  C.  11322;  In 

R.  178,  4  Ben.  167,  F.  C.  14343;   In  re    Collins,     12    N.   B.    R.   379,    12 

re  Swift  et  al.,  5  A.  B.  R.  232;  see  Blatch.  548,  F.  C.  I.  3007;   Schulze 

In  re  Richard,  2  N.  B.  N.  R.  1029,  v.  Boltins,  17  N.  B.  R.  167,  8  Biss. 

104  F.  R.  792.  174,    F.    C.    12489;    but    see    In    re 

79  In  re  King,  9  N.  B.  R.  140;  In  Bozeman,  1  N.  B.  N.  479,  2  A.  B.  R. 
re  Hosie,  7  N.  B.  R.  601,  F.  C.  6711.  809;  In  re  Ohio  Co-op.  Shear  Co.,  1 

80  In  re  Taylor,  1  N.  B.  N.  480,  95  N.  B.  N.  477,  2  A.  B.  R.  775;  In  re 
F.  R.  956;  In  re  Leigh  Bros.,  1  N.  McKay,  1  N.  B.  N.  133,  1  A.  B.  R. 
B.  N.  526,  425,  96  F.  R.  806,  1  N.  B.  292. 

N.  420,  2  A.  B.  R.  805,  96  F.  R.  326;  «i  In  re  Wright,  1  N.  B.  N.  38L 

Press  Post  Printing  Co.  v.  Landon  2  A.  B.  R.  364,  96  F.  R.  187;   In  re 

Printing  &  Pub.  Co.,  2  N.  B.  N.  R.  Kansas  City  S.   &  M.   Mfg.   Co.,   9 

774;  In  re  Booth,  2  N.  B.  N.  R.  377,  N.    B.  R.   76,   F.   C.   7610;    Duplan 

98  F.  R.  975;   In  re  Legg,  96  F.  R.  Silk  Co.  v.  Spencer,  8  A.  B.  R.  367. 

326,  1  N.  B.  N.  420,  2  A.  B.  R.  805;  §2  in  re  Adams,  1  N.  B.  N.  503. 

Massey  v.  Allen.  7  N.  B.  R.  401,.  17  2  A.  B.  R.  415,  97  F.  R.  188;   and 

Wall.  351;   Edmondson  v.  Hyde,  7  see  In  re  Kaufmann,  2  N.  B.  N.  R. 

N.  B.  R.  1,  2  Sawy.  205,  F.  C.  II.  778. 
4285;    In   re  Eldridge,  4  N.   B.  R. 


Ch.  70  TITLE    TO    PROPERTY.  749 

in  fraud  of  creditors.^^  jf  ^  purchaser  of  property,  paying 
consideration  therefor,  causes  it  to  be  conveyed  to  another, 
that  it  may  be  held  in  trust  for  the  benefit  of  third  persons, 
and  the  trust  fails  because  not  in  conformity  to  the  Statute  of 
Frauds,  a  trust  results  in  favor  of  the  purchaser.^'* 

See  Conveyances  to  Relatives,  ante,  §  1103. 

^  1162.  Title  to  property  affected  by  general  assignment.— 
A  general  assignment  for  the  equal  benefit  of  all  creditors  is 
void  as  against  the  trustee,  if  made  within  four  months  of 
bankruptcy,  as  being  opposed  to  the  policy  of  the  bankrupt 
law,  and  the  property  so  assigned  upon  the  subsequent  bank- 
ruptcy of  the  assignor  vests  in  the  trustee.'^^  If  the  assignment 
was  made  prior  to  such  period  the  property  would  not  pass  to 
the  trustee.^^  He  takes  title  to  property  in  the  hands  of 
a  common  law  assignee  although  a  replevin  suit  or  other  pro- 
ceedings with  reference  thereto  are  pending.^"  It  has  been 
held  that  the  title  of  a  trustee  who  was  also  the  assignee  under 
a  voluntary  assignment  relates  back  to  such  assignment,  and 
his  acts  after  receiving  the  property,  if  not  inconsistent  with 
his  duty  as  trustee,  will  be  ratified.^^  Where  a  receiver  ap- 
pointed under  state  laws  is  not  invested  with  title  until  a  certi- 
fied copy  of  the  order  appointing  him  is  filed  with  the  clerk  of 
the  county,  a  receiver  who  has  not  complied  with  the  law,  has 
no  title  as  against  the  subsequently  appointed  trustee  in  bank- 
ruptcy.^'' On  application  to  the  state  court  by  the  trustee  in 
bankruptcy  of  an  insolvent  corporation,  the  funds  in  the  hands 
of  the  receiver  of  the  corporation,  appointed  shortly  before  the 

S3  In  re  Mayers,  1  N.  B.  R.  162,  2  2  A.  B.  R.  383;  In  re  Curtis,  1  N. 

Ben.  424,  F.  C.  9518.  B.  N.  41,  163,  91  F.  R.  737,  1  A.  B. 

84  In  re  Davis,  112  F.  R.  129,  7  R.  440;  Ins.  Co.  v.  Ins.  Co.,  14  N. 
A.   B.  R.   258.  B.  R.  311,  F.  C.  5486. 

85  West  Co.  V.  Lea  Bros.,  174  U.  86  in  re  Arledge,  1  N.  B.  R.  195, 
S.  590,  1  N.  B.  N.  409,  2  A.  B.  R.  F.  C.  533. 

463;  s.  c.  1  N.  B.  N.  79,  1  A.  B.  R.         «-  in  re  Solomon,  2  N.  B.  N.  R. 

261,  91  F.  R.  237;  In  re  Gutwillig,  460;    In   re  Kenny,  2   N.  B.  N.  R. 

1  N.  B.  N.  40,  1  A.  B.  R.  78,  90  F.  140,  97  F.  R.  554,  3  A.  B.  R.  353; 

R.  475;   s.  c.  92  F.  R.  337;   In  re  cdmp.  Macdonald  v.  Moore,  15  N. 

Sievers,  91  F.  R.  366,  1  N.  B.  N.  B.  R.  26,  8  Ben.  579,  F.  C.  8763. 
68,  1  A.  B.  R.  117;  s.  c,  as  Davis  v.         ss  in  re  Walker.  18  N.  B.  R.  56, 

Bohle,  92  F.  R.  325,  1  N.  B.  N.  216.  F.  C.  17063. 

1  A.  B.  R.  412;  Leidigh  Co.  v.  Sten-         v'  In  re  Tyler,   104  F.  R.   778,  5 

gel,  95  F.  R.  637,  1  N.  B.  N.  387,  A.  B.  R.  152. 


760  THE  NATIONAL  BANKRUPTCY   LAW.  Ch.  70 

filing  of  the  petition,  should  be  turned  over  to  him.'^^  This  is 
likewise  true  in  the  case  of  a  partnership,'*^  as  well  as  in  the 
case  of  an  individual. 

See  General  Assignments,  ante,  §  1100. 

§1163.  Title  to  property  of  husband  and  wife.— In 
bankruptcy  proceedings  the  bankruptcy  of  the  husband  in  no 
wise  affects  the  wife  or  her  property  and  vice  versa,  and  the 
proper  way  of  reaching  property  in  the  hands  of  the  one  not 
bankrupt,  alleged  to  have  been  conveyed  in  fraud,  in  those 
states  where  the  wife  is  not  a  competent  witness,  is  by  a  bill 
of  discovery,^-  if  the  examination  afforded  by  the  bankruptcy 
law  is  insufficient.  Where  a  married  woman  engages  in  busi- 
ness on  her  own  account  in  a  state  where  she  is  required  to  file 
a  certificate  to  make  her  a  feme  sole  trader,'*-'^  and  neglects  to  do 
so,  her  property  employed  in  such  business,  may  be  attached 
by  her  husband's  creditors  and,  if  so  attached  within  four 
months  of  the  bankruptcy  proceedings,  the  trustee  takes  title 
thereto.'*^  Where,  however,  through  mistake  or  fraud  the  hus- 
band is  vested  with  title  to  real  estate  inherited  by  the  wife, 
he  will  be  held  to  be  trustee  for  his  wife  and  it  will  not  be 
liable  for  his  debts.^^  In  some  states  the  products  of  a  wife's 
land  conveyed  to  her  separate  use  by  deed  without  limitation, 
and  occupied  by  her  husband  according  to  his  marital  rights, 
are  assets  belonging  to  his  estate  in  bankruptcy.^ 

Where  there  has  been  no  consummated  conversion  of  the 
wife's  separate  estate,  the  husband's  trustee  cannot  get  the 
legal  title  without  a  decree  for  its  conveyance  to  him ;  and  the 
same  rule  applies  where  the  conversion  has  been  consum- 
mated by  fraud.-  If  a  bankrupt,  while  insolvent,  purchases 
articles  of  luxury  for  his  wife,  though  they  are  not  appropri- 
ated to  her  individual  use,  and  she  attempts  to  hold  them 
against  his  trustee,  the  bankrupt  must  answer  the  trustee's 
petition.-'^  The  question  whether  stock  purchased  with  money 
borrowed  on  the  joint  note  of  husband  and  wife  and  issued  to 
her,  can  be  impounded  for  the  benefit  of  the  husband's  estate, 

80  Mauran  v.  Carpet  Lining  Co.,  9"  In  re  Anderson,  23  F.  R.  482. 

6  A.  B.  R.  734.  i  In  re  Rooney,  6  A.  B.  R.  478. 

91  Wilson  V.  Parr,  8  A.  B.  R.  230.  2  in  re  Campbell,  17  N.  B.  R.  4, 

»2  In  re  Fowler,  1  N.  B.  N.  265.  S  Hughes  276,  F.  C.  2348. 

1  A.  B.  R.  555,  93  F.  R.  417.  3  in  re   Pierce,  15  N.  B.  R.  449, 

93  Pub.  Stat.  Mass.  c.  147,  par.  11.  7   Biss.  426,   F.  C.   11139. 

94  In  re  Hammond,  98  F.  R.  845, 
3  A.  B.  R.  466. 


Ch.  70  TITLE    TO    PROPERTY.  751 

can  be  determined  only  in  a  direct  proceeding  between  the 
proper  parties.^  Where  a  bankrupt,  when  solvent  and  not 
contemplating  bankruptcy,  conveys  lands  to  his  wife,  reserving 
to  himself  a  power  of  revocation  and  also  power  to  appoint  to 
other  uses,  and  several  years  later  is  adjudged  a  bankrupt,  it 
has  been  held  that  the  trustee  cannot  recover  such  lands;" 
though  the  contrary  has  been  held  where  the  conveyance  was 
not  recorded  until  after  the  petition  had  been  filed.  The  mere 
application  of  a  trustee  to  have  property  of  a  wife  delivered  to 
him  as  her  husband's  trustee,  alleging,  but  submitting  no  proof, 
that  she  holds  the  property  in  her  name  as  a  cloak  against  her 
husband's  creditors,  the  application  will  be  denied.^  A  wife, 
entitled  on  divorce  to  one-third  of  her  husband's  personal 
property,  who  has  merely  commenced  an  action  for  divorce, 
cannot  enjoin  his  trustee  as  to  the  disposition  of  such  one- 
third.7 

§1164. Joint  estate.— The  fact  that  the  bankrupt  is 

jointly  interested  in  an  estate  with  another,  will  not  defeat  the 
title  of  his  trustee  in  bankruptcy  to  such  interest.  The  trustee 
becomes  vested  Avith  the  title  of  the  husband  on  his  bankruptcy 
where  he  invests  his  wife's  money  in  realty  in  her  name  until 
he  accumulates  property  by  his  skill  and  energy;*^  or  a  one- 
half  interest  less  the  amount  of  homestead  right  where  hus- 
band and  wife  build  jointly  on  land  acquired  by  the  wife  with 
their  joint  funds  ;^  or  he  may  sue  to  recover  the  reversionary 
interest  of  the  husband  in  property  fraudulently  conveyed  to 
his  wife.^o  ^  gift  by  bankrupt  to  his  wife  before  adjudication, 
and  not  in  contemplation  of  bankruptcy,  of  funds  used  in  im- 
proving her  separate  estate,  does  not  vest  him  with  such  an 
interest  therein  as  would  pass  to  the  trustee. ^^  Where  bank- 
rupt and  his  wife  held  real  estate  as  an  entirety  and  she  ob- 

4  Fellows  V.  Freudenthal,  102  F.  »  Johnson   v.   May,   16  N.   B.   R. 
R.  731,  4  A.  B.  R.  490.  425,  F.  C.  7397. 

5  Jones  V.   Clifton,    18   N.   B.   R.  lo  In   re   Peltasohn,   16  N.   B.  R. 
125,  F.  C.  7453.  265,  4  Dill.  107,  F.  C.  10912;  In  re 

6  Driggs  V.   Russell,   3  N.   B.  R.  Griffith,  1  N.  B.  N.  546,  citing  How- 
39,  F.  C.  4084.  ell  v.  Jones,  7  Pickle,  402;  Flatt  v. 

7  Hawk  V.  Hawk,  102  F.  R.  679,  Stadler  &  Co.,  16  Lea,  371;   Rouhs 
2  N.  B.  N.  R.  940,  4  A.  B.  R.  436.  v.  Hooke,  3  Lea,  302. 

8  Muirhead  v.  Aldridge,  14  N.  B.  u  In  re  Wyatt,  2  A.  B.  R.  94,  F. 
R.   249,   F.   C.    9904;    Comp.   In   re  C.  18106. 

Fitchard.  2  N.  B.  N.  R.  1075,  103 
F.  R.  742,  4  A.  B.  R.  609. 


752  THE    NATIONAL   BANKRUPTCY    LAW.  ClI.  70 

tained  a  divorce  subsequent  to  the  bankruptcy,  if  the  joint 
tenancy  was  thereby  transformed  into  a  tenancy  in  common, 
the  bankrupt's  interest  has  been  held  to  be  after  acquired 
property  and  would  not  pass  to  the  trustee.^ - 

§  1165. By  the  curtesy.— The  interest  of  a  husband  as 

tenant  by  the  curtesy  in  his  wife's  real  estate  during  her  life 
time,  and  after  issue  born,  is  not  a  power  or  such  property  as 
will  pass  to  the  husband 's  trustee  in  bankruptcy  in  the  absence 
of  a  state  law  to  the  contrary,^ ^  as  in  Tennessee  where  it  does 
pass  to  the  trustee  subject  to  the  statutory  right  of  the  hus- 
band and  wife  to  continue  to  hold  the  land  during  her  life.^^  It 
a  wife  mortgages  her  realty  to  secure  money  to  pay  her  hus- 
band's debts,  in  excess  of  his  estate  by  the  curtesy,  and  he  and 
she  unite  in  a  general  assignment  of  all  his  property,  expressly 
reserving  hers,  on  the  death  of  the  wife  and  the  sale  of  her 
realty,  if  a  sum  is  realized  greater  than  the  incumbrances,  the 
wife's  heirs  or  representatives  are  entitled  to  the  fund.^'^ 

§  1166. Dower  rights.— The  bankruptcy  law  provides 

that  the  death  of  the  bankrupt  pending  the  proceedings  shall 
in  no  wise  affect  the  right  of  dower  and  allowances  fixed  by 
the  law  of  the  state  where  the  bankrupt  resides.^  ^  Accordingly 
in  case  of  the  husband's  death  after  filing  the  petition,  lands 
owned  by  him  at  the  time  of  filing  will  pass  to  the  trustee  sub- 
ject to  the  wife's  right  of  dower.^'''  This  right  is  not  divested 
by  proceedings  in  bankruptcy,^'*  nor  by  a  sale  thereunder,^** 
but  she  is  entitled  to  her  one-third  of  the  real  estate  or  of  an 
equitable  interest  of  her  husband  which  passed  to  the  trus- 
tee.-** If  she  joins  in  a  mortgage  with  him,  her  dower  can  be 
barred  only  by  a  sale  under  the  power  contained  in  the  mort- 
gage.2i 

12  In  re  Benson,  16  N.  B.  R.  377,  is  in  re  Angler,  4  N.  B.  R.  199, 

8  Diss.  116,  F.  C.  1328.  F.  C.  388. 

isHesseltine  v.  Prince,   1   N.   B.  la  In  re  Shaeffer,  105  F.  R.  352; 

N.  528,  2  A.  B.  R.  600,  95  F.  R.  802,  Porter    v.    Lazear,    109    U.    S.    84; 

citing  Lynde  v.   McGregor,   13  Al-  Contra,  Kelly  v.   Strange,  3  N.  B. 

len,  182,  184;  Walsh  v.  Young,  110  R.   2,   F.   C.   7276;    In   re  Shaeffer, 

Mass.   396,   399.  105  F.  R.   352. 

14  In  re  McKenna,  9  F.  R.  27.  20  Walford  v.  Noble,  19  N.  B.  R. 

15  Shippen  v.  Robbins'  Appeal,  15  440;    In  re  Slack.  Ill  F.  R.  523,  7 
N.  B.  R.  533.  A.   B.   R.   121. 

16  Sec.  8,  act  of  1898.  --^^  In  re  Bartenbach,  11  N.  B.  R. 
"  In  re  Hester,  5  N.  B.  R.  285,     61,  F.  C.  1068. 

F.  C.  6437. 


Ch.  7U  title  to  insurance  policies.  753 

Where  a  conveyance  is  set  aside  as  an  unlawful  preference 
or  is  surrendered  by  the  creditor,  the  land  becomes  again  sub- 
ject to  the  wife's  dower;--  and  she  is  not  estopped  from  claim- 
ing it  by  having  joined  in  the  deed.^^  A  reasonable  support 
has  been  allowed  a  wife  in  preference  to  the  husband's  cred- 
itors, out  of  the  rents  and  profits  of  realty  conveyed  to  her  by 
him  through  a  third  person  without  consideration,  where  they 
are  her  only  means  of  support.-'* 

§  1167.  Title  to  insurance  policies  payable  to  wife.— An  in- 
surance policy  on  a  bankrupt's  life  payable  to  his  wife  is  her 
separate  property.^^  It  cannot  be  assigned  by  him,-^  nor  sur- 
rendered to  his  trustee  with  the  purpose  of  cutting  off  his 
wife's  interest.-^  Accordingly  property  bought  with  money 
obtained  by  surrendering  such  policy  is  hers.-^  A  bankrupt, 
whose  wife  takes  out  an  insurance  policy  on  her  own  life  for 
his  benefit,  pays  the  premiums  out  of  her  separate  estate,  and 
dies  after  the  adjudication,  is  entitled  to  the  proceeds  of  such 
policy  as  against  his  trustee.-^  Where  a  husband  and  a  wife 
are  each  adjudged  bankrupt,  policies  of  insurance  on  the 
life  of  the  husband,  having  a  cash  surrender  value,  and  payable 
to  the  wife  if  she  survive  him,  and  to  his  personal  representa- 
tives if  he  survive,  pass  to  the  trustee  as  assets  of  their 
respective  estates.^*^ 

§  1168.  Life  insurance  policy,  cash  surrender  value.— Any 
policy  of  insurance  held  by  a  bankrupt,  having  a  cash  sur- 
render value  payable  to  himself,  his  estate  or  personal  repre- 
sentatives, passes  to  his  trustee  for  the  benefit  of  the  estate, 
unless  within  thirty  days  after  the  ascertainment  of  its  sur- 
render value,  the  bankrupt  pays  or  secures  to  the  trustee  the 
sum  so  ascertained,  in  which  event  he  can  continue  to  hold, 

--  In  re  Detert,  11  N.  B.  R.  293.  kins   v.    Equitable   Life  Assurance 

F.  C.  3929;  McFarland  v.  Goodman,  Society,  132  Mass.  395. 

11  N.  B.  R.  134.  2.-.  In  re  Bear,  11  N.  B.  R.  46,  F. 

23  Coxe  V.  Wilder,  7  N.  B.  R.  241,  C.  1178. 

2  Dill.  45,  F.  C.  3308.  rev'g  5  N.  B.  27  Central    Bank   of   Washingtoa 
R.  443,  F.  C.  3309.  v.  Hurne,  128  U.  S.  195. 

24  Clark  V.  Hezediah,  24  F.  R.  28  in  re  Dews,  1  N.  B.  N.  411,  2 
663;    In  re  Brandt,  5  Biss.  217,  F.  A.  B.  R.  283,  96  F.  R.  181. 

C.  1811.  2n  In  re  Owen,  8  N.  B.  R.  6,  F. 

25  In  re  Steele,  2  N.  B.  N.  R.  281      G.  10627. 

3  A.  B.   R.  549,  98   F.  R.   78;    At-         :'o  in  re  Holden,  114  F.  R.  650,  7 

A.  B.  R.  615. 
48 


754  THE    NATIONAL,   BANKRUPTCY    LAW.  ClI.  70 

own  and  carry  such  policy  free  from  the  claims  of  his  cred- 
itors. While  the  term  "cash  surrender  value"  is  used  in  the 
statute,  the  evident  intention  of  Congress  was  that  any  policy 
held  by  the  bankrupt  in  which  he  had  such  an  interest  as 
could  be  converted  into  cash  for  his  benefit,  whether  in  the 
nature  of  a  loan  or  in  any  other  guise,  should  pass  to  the  trus- 
tee. 

Where  an  insurance  policy  is  held  by  a  bankrupt,  payable 
to  his  wife  only  in  case  of  his  death  prior  to  its  maturity,  such 
death  not  having  occurred  when  the  petition  is  filed,  the  cash 
surrender  value  of  such  policy  passes  to  the  trustee  ;^'  since 
such  a  policy  is  property .^^  Although  by  its  terms  the  policy 
has  no  cash  surrender  value,  if  it  has  a  large  actual  value,  and 
is  assignable  or  transferable  by  its  terms,  it  will  pass  to  the 
trustee  who  may  hold  it  for  the  benefit  of  the  estate  if  the 
bankrupt  does  not  die  within  the  period  for  which  issued,  or 
turn  it  over  to  the  party  to  whom  payable  in  case  of  death, 
if  he  does  die.^^  If  a  policy  with  a  paid  up  value  has  been 
given  as  security  for  the  endorsement  of  a  note,  negotiated  by 
the  bankrupt,  the  surrender  value  should  be  applied  by  the 
trustee  first  to  such  note.^*  Policies  of  this  character  become 
part  of  the  bankrupt's  estate,  unless  he  avails  himself  of  the 
right  to  pay  or  secure  the  surrender  value  of  the  trustee,^^  and 
this  is  so  notwithstanding  the  same  may  be  exempt  under  the 
state  laws.'^*"'  Where  an  endowment  policy  payable  to  the  wife 
if  the  bankrupt  died  during  the  term,  or  to  himself  if  he  sur- 
vived it,  was  issued  upon  their  joint  application,  and  for  sev- 
eral years  the  wife  saved  the  policy,  by  paying  the  premiums, 

31  In  re  Grabs,  1  N.  B.  N.  164,  1  2  N.  B.  N.  R.  1034;  In  re  Fisher, 
A.  B.  R.  465;  In  re  Holden,  114  F.     103  F.  R.  860. 

R.  650,  7  A.  B.  R.  615.  ■■'■'  In  re  Welling,   113  F.  R.  189, 

32  Bassett  v.  Parsons,  140  Mass.  7  A.  B.  R.  340;  In  re  Slingluff, 
169;    Brigham   v.   Home   Life   Ins.     106  F.  R.  154,  5  A.  B.  R.  76. 

Co.,  131  Mass.  319;  New  York  Life  -tc  in  re  Boardman,  103  F.  R.  783, 

Ins.   Co.   V.   Armstrong,   117   U.   S.  2  N.  B.  N.  R.  821,  4  A.  B.  R.  620; 

591;    New    York    Life    Ins.    Co.   v.  In  re  Lange,  1  N.  B.  N.  44,  60,  1  A. 

Flack,    3    Md.    341;     Williams     v.  B.  R.  186,  189,  91  F.  R.  361;   In  re 

Heard,  140  U.  S.  529.  Steele,  2  N.  B.  N.  R.  281,  3  A.  B.  R. 

33  In  re  Slingluff,  106  F.  R.  154,  549,  98  F.  R.  78;  see  reversal.  104 
5  A.  B.  R.  *76;  In  re  Welling,  113  F.  R.  968,  5  A.  B.  R.  165;  In  re 
F.  R.  189,  7  A.  B.  R.  340.  Buelow,  2  N.  B.  N.  R.  26,  3  A.  B. 

34  In  re  Weil,  2  N.  B.  N.  R.  295;  R.  389,  98  F.  R.  86;  In  re  Scheld, 
see  also  In  re  Adams,  104  F.  R.  72,  104  F.  R.  870;  In  re  Scheld,  5  A. 

B.  R.  102. 


Ch.  70  TITLE    TO    INSURANCE    POLICIES.  755 

she  had  an  equitable  lien  upon  the  cash  surrender  value  for 
the  amount  so  paid,  and  the  bankrupt  should  assign  to  the 
trustee  his  interest  in  the  surrender  value,  after  the  premiums 
so  paid  by  her  were  deducted ;  or  the  policy  should  be  assigned 
to  the  wife,  if  desired,  on  payment  of  his  interest  therein.^" 

If  the  cash  surrender  value  of  the  policy  is  payable  to  a 
beneficiary  other  than  the  bankrupt,  who  must  execute  any 
transfer  assignment  or  surrender  of  said  policy,  it  is  not  an 
asset  of  the  bankrupt.^**  If  the  policy  has  no  cash  surrender 
value,  and  no  value  for  any  purpose  except  as  it  becomes  val- 
uable upon  the  death  of  the  insured,^'*'  or  if  the  bankrupt  him- 
self is  not  the  contracting  party  with  the  insurance  company 
and  would  not  be  entitled  to  receive  the  value  of  the  policy 
if  surrendered  at  the  date  of  the  adjudication,4o  it  would  not 
pass  to  the  trustee. 

§1169.  Title  to  insurance  policies  for  creditor's  benefit.— 
When  a  debtor,  at  his  own  expense,  insures  his  life  as  security 
to  a  creditor,  he  is  entitled  to  have  the  policy,  if  he  pays  the 
debt  during  his  life ;  and,  if  not,  upon  his  death,  his  representa- 
tive is  entitled  to  any  surplus  over  the  debt.  If  the  insurance 
is  effected  and  the  premiums  paid  by  the  creditor,  who  after- 
wards proves  his  debt  in  bankruptcy  and  receives  dividends 
thereon,  and  then  upon  the  death  of  the  bankrupt  prior  to  the 
last  dividend  receives  the  full  amount  from  the  insurance 
company,  after  deducting  premiums  paid  with  interest,  the 
creditor  must  pay  to  the  trustee  all  over  an  amount  sufficient, 
Avith  the  dividends  and  payments  previously  made,  to  pay 
the  debt  in  full.« 

§  1170.  Title  to  fire  insurance  policies.— An  adjudication 
terminates  bankrupt's  interest  in  his  estate  and  his  interest  in 
insurance  policies  therein  ceases.-  If  at  the  time  of  his  adjudi- 
cation a  building  owned  by  him  is  covered  by  a  policy  of  in- 
surance, providing  that  transfer  or  change  of  title,  or  assign- 
ment without  the  company's  written  consent  will  avoid  it,  and 
the  building  is  burned  after  adjudication,  the  transfer,  being 

37  In  re  Diack,  2  N.  B.  N.  R.  664,  3  A.  B.  R.  389,  98  F.  R.  86;  Morris 

100  F.  R.  770,  3  A.  B.  R.  723.  v.  Dodd.  2  N.  B.  N.  R.  823. 

3s  In  re  Steele,  2  N.  B.  N.  R.  281,         4o  in  re  McDonald,  101  F.  R.  239, 

3  A.  B.  R.  549,  98  F.  R.  78;   In  re  4  A.  B.  R.  92. 
Hernich.  1  A.  B.  R.  713.  4t  in  re  Newland,  9  N.  B.  R.  62, 

30  In  re  Buelow,  2  N.  B.  N.  R.  26,  7  Ben.  63,  F.  C.  10171. 


756  THE    NATIONAL    BANKRUPTCY    LAW.  ClI.  TO 

b}'  operation  of  law,  does  not  avoid  the  policy,  and  the  trustee 
can  recover.'*^ 

§1171.  Landlord  and  tenant;  title  to  lease.— A  lessee's 
bankruptcy  does  not  in  and  of  itself  terminate  a  lease,  but  it 
becomes  an  asset  of  his  estate.'*^ 

While  there  has  been  some  diversity  of  opinion  as  to  effect 
of  an  adjudication  of  bankruptcy  upon  a  lease  the  weight  of 
authority  sustains  the  proposition  that  the  discharge  in  no 
wise  releases  the  lessee  from  liability  under  the  lease  for  rent 
accruing  subsequent  to  the  filing  of  the  petition,  but  the  lease 
remains  a  binding  contract  between  the  parties,^^  unless  the 
landlord  re-enters  or  the  trustee  assumes  the  lease,^^'  in  which 
event  the  adjudication  operates  like  any  other  assignment  and 
all  liability  of  the  tenant  ceases.  The  trustee  has  a  reasonable 
time  within  which  to  elect  whether  he  will  assume  the  lease, 
and  the  right  to  assume  it  exists  although  there  is  the  ordi- 
nary covenant  against  subletting  or  assignment  by  the 
tenant;  since  the  transfer  to  the  trustee  in  case  of  the 
tenant's  bankruptcy  is  by  operation  of  law  and  not  the  act  of 
the  bankrupt  against  which  the  ordinary  covenant  in  a  lease 
is  in  restraint.^*'     While  there  are  eminent  authorities  which 

42  starkweather  v.  Ins.  Co.,  4  N.  N.  R.  301,  98  F.  R.  399,  3  A.  B.  R. 

B.  R.  110,  F.  C.   13308;    Comp.   In  380;  In  re  Gose,  3  N.  B.  N.  R.  840; 

re  Carow,   4   N.    B.   R.    178,   F.   C.  In  re  Washburn,   11  N.  B.   R.   66. 

2426;    In  re  Hamilton,  2  N.  B.  N.  F.    C.    17211;    In   re    Laurie,    4   N. 

R.  957,  102  F.  R.  683.  4  A.  B.   R.  B.  R.  7;  White  v.  Griffing,  18  N.  B 

543.  R.  399;  In  re  Ten  Byck,  7  N.  B.  R. 

4'  In  re  Ells,  2  N.  B.  N.  R.  360.  26,  F.  C.  13829;   In  re  Webb,  6  N. 

98  F.  R.  967,  3  A.  B.  R.  564;  In  re  B.    R.    302,    F.    C.    17315;    Ex    p. 

Thiessen,  2  N.  B.  N.  R.  625;  Wild-  Houghton,  1  Low.  554,  F.  C.  6225. 

man  v.  Taylor,  F.  C.  17654;  Stark-  *■'  In  re  Houghton.  1  Lowell  554, 

weather  v.  Ins.  Co.,  4  N.  B.  R.  110.  12  F.  C.  584;    Savory  v.  Stocking. 

F.  C.  13308;    In  re  Pennewell,  119  4  Cash.  667;  Treadwell  v.  Marden, 

F.  R.  139;    but  see  In  re  Brick  &  123  Mass.  390;   In  re  Mahler,  2  N. 

Schermerhorn,   12  N.  B.  R.  215.  S  B.  N.  R.  70;   In  re  Sallignon.  2  N. 

Ben.  93,  F.  C.   1822;    and  see  also  B.  N.  R.  660;   In  re  Frankel,  2  N. 

In  re  Hays.  Foster  and  Ward  Co..  B.  N.  R.  840;   In  re  Curtis,  33  bo. 

117  F.  R.  879.  Rep.  125,  9  A.  B.  R.  286;    Contra, 

*i  In  re  Ells,  2  N.  B.  N.  R.  360  In  re  .lefferson,  93  F.  R.  951,  2  A. 

98  F.  R.  967,  3  A.  B.  R.  564;    dis-  B.  R.  206;  Bray  v.  Cobb,  100  F.  R. 

agreeing  with  In  re  Jefferson.  1  N.  270,  3  A.  B.  R.  788;  In  re  Hays,  9 

B.  N.  288,  2  A.  B.  R.  206,  93  F.  R.  A.  B.  R.  144. 

948,  951;   In  re  Schierman,  2  N.  B.  ^g  In  re  Thiessen,  2  N.  B.  N.  R. 

N.  R.  118;   In  re  Rhoads,  2  N.  B.  G25;  In  re  Ells,  supra;  In  re  Gose, 


Ch.  to  title  to  property  leases.  757 

sustain  the  position  that  if  the  lease  speeifically  provides  that 
the  insolveney  or  bankruptcy  of  the  tenant  shall  operate  to 
cancel  the  lease,  the}'  are  evidenth'  under  laws  which  mate- 
rially differ  from  that  in  force  in  this  country,  for  if  that  posi- 
tion be  true,  a  tenant  holding  a  valuable  lease  may  be  ad- 
judged a  bankrupt  on  the  petition  of  his  landlord,  when  the 
sole  purpose  of  the  proceedings  may  be  to  destroy  the  contract 
of  lease  and  thereby  result  in  profit  to  the  bankrupt  or  the 
landlord.  Having  in  view  one  of  the  main  purposes  of  the 
bankruptcy  law,  which  is  the  equitable  distribution  of  the  as- 
sets of  an  insolvent  to  his  creditors,  the  true  rule  would  seem 
to  be  that  notwithstanding  such  a  provision,  the  assignment 
being  by  operation  of  law,  the  trustee  would  assume  the  lease. 
Notwithstanding  the  fact  that  the  trustee  assumes  the  lease, 
he  is  not  required  to  remain  the  tenant,  but  the  covenant 
against  assignment  is  relaxed  in  his  favor,  and  he  may  dispose 
of  the  same  for  the  best  price  obtainable,  and  thus  be  relieved 
from  further  liability  thereunder.^^  A  stipulation  in  a  lease 
against  subletting,  in  the  absence  of  some  provision  requiring 
it,  will  not  be  construed  as  a  condition  but  as  a  covenant,  the 
breach  of  which  does  not  work  a  forfeiture.'** 

Without  assuming  the  lease,  the  trustee  may  occupy  and 
use  the  leased  premises  for  the  estate,  and,  under  such  circum- 
stances, compensation  for  such  use  and  occupation  will  be 
chargeable  to  the  estate,  not  as  rent  under  the  lease,  but  as 
costs  and  expenses  of  administration.^-'  Where  the  trustee 
accepts  a  lease  and  sells  the  interest  so  acquired  to  the  lessor, 
the  guarantor  of  the  lease  is  discharged  from  all  liability  ac- 
cruing after  the  bankruptcy .^^ 

Where  a  lease  is  made  for  a  term  of  years  and  is  transferred 
to  a  creditor  to  secure  a  debt,  and  the  lessor  becomes  bankrupt, 
the  trustee  takes  the  estate  subject  to  such  lease,'^^  and  takes  th(> 
movable   property  found  upon  such   premises  subject  to  tht^ 

3  N.  B.  N.  R.  840;  In  re  Mahler,  3  353;  Onslow  v.  Corrle,  2  Mad.  330. 

N.  B.  N.  R.  39,  44;    see  Atkins  v.  4«  In  re  Pennewell,  119  F.  R.  139. 

Wilcox,   3   N.   B.  N.   R.   497;    Far-  49  Bray  v.  Cobb,   2   N.  B.   N.   R. 

nam  v.  Hefner,  79  Calif.  580,  s.  c.  586,  100  F.  R.  270,  3  A.  B.  R.  788; 

92  id.   543;    Smith    v.    Putnam,   3  In  re  Jefferson,  supra. 

Pick.   221;    see  In   re  Steedman.  8  ^>o  White  v.  Griffin.   18   N.  B.  R. 

N.  B.  R.  319,  F.  C.  13.  330;    In  re  399. 

Pennewell,  119  F.  R.  139.  •'  Meador  v.  Everett,  10  N.  B.  R. 

4  7  Dol   V.   Goodbehen,   3   M.  &  S.  421.  F.  C.  9376. 


758  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  70 

rights  of  all  other  persons.  Where  rent  is  a  lien  upon  bank- 
rupt's personal  property,  it  must  be  paid  first  out  of  the  pro- 
ceeds of  the  sale. ■''2 

§  1172.  Title  to  property  under  judgments  or  attachment.— 
Where  a  judgment  is  entered  and  an  attachment  or  execution 
is  levied  on  a  debtor's  property  within  four  months  of  his 
being  adjudicated  bankrupt,  the  trustee  in  bankruptcy  is  enti- 
tled to  the  proceeds  of  a  sale  thereunder,  less  reasonable  costs 
of  sale,  whether  the  proceeds  be  in  the  hands  of  the  sheriff  or 
of  a  state  court  ;•■'  and  the  sheriff  may  be  enjoined  from  pay- 
ing the  proceeds  to  the  judgment  creditor,  and  may  be  required 
upon  a  summary  petition  to  pay  it  over  to  the  trustee.-''*  After 
the  period  of  redemption  from  an  execution  sale  has  expired 
before  the  appointment  of  a  trustee,  he  takes  nothing  but  the 
bankrupt's  naked  title,  which  is  valueless,  since  the  purchaser 
can,  at  any  time,  demand  a  deed  from  the  sheriff.^s 

§  1173.  Title  to  mortgaged  or  pledged  property.— The  trus- 
tee takes  property  mortgaged  or  pledged,  subject  to  the 
amount  legally  due  thereon.  It  is  his  duty  to  investigate  the 
liens  claimed  to  be  held  against  the  property  and  the  value  of 
the  property  on  which  held ;  and  in  case  of  doubt  test  the  valid- 
ity of  the  liens  by  suit.^^  He  should  plead  usury  as  long  as  any 
part  of  the  debt  on  which  usury  was  paid  remains  unpaid.^' 
If  he  finds  there  is  any  interest  in  the  property  which  might  be 
obtained  for  the  general  creditors,  he  should  intervene  in  the 
suit  to  foreclose  the  security,  or  take  other  steps  to  realize  such 
interest.^^  Where  a  state  court  has  rendered  a  decree  fixing 
the  mortgagor's  liability  and  orders  a  sale  prior  to  the  bank- 

52Longstreth  v.  Pennock,  12  N.  1  A.  B.  R.  577,  93  F.  R.  188;  s.  c. 

B.  R.  95.  97  F.  R.  324;  In  re  Fellerath,  1  N. 

53  In  re  Moyer,  97  F.  R.  324;  B.  N.  292,  2  A.  B.  R.  40,  95  F.  R. 
Wallace  v.  Conrad,  3  N.  B.  R.  10;  121;  In  re  Frank,  95  F.  R.  635,  2 
In  re  Duguid,  100  F.  R.  274,  2  N.  A.  B.  R.  634.  See  Bryan  v.  Bern- 
B.  N.  R.  607,  3  A.  B.  R.  794.  heimer,  181  U.   S.  188,   5  A.   B.  R. 

54  In  re  Kenney.   2  N.   B.  N.   R  623. 

140,  3  A.  B.  R.  353,  97  F.  R.  554;  nr,  in  re  Goldman,  2  N.  B.  N.  R. 

s.  c.  1  N.  B.  N.  401,  2  A.  B.  R.  494,  818,  102  F.  R.  122,  4  A.  B.  R.  100. 

95  F.  R.  427;  In  re  Francis-Valen-  r,6  In  re  N.  Y.  Kerosene  Oil  Co. 

tine  Co.,  1  N.  B.  N.  529,  2  A.  B.  R.  3  N.   B.   R.   31,   F.   C.  7726;    In  re 

522,  94  F.  R.  793;  s.  c.  below  1  N.  Metzger,  2  N.  B.  R.  114,  F.  C.  9510. 

B.  N.  532.  2  A.  B.  R.  188,  93  F.  R.  57  In  re  Prescott,  9  N.  B.  R.  385, 

953;    Reese  v.  Vinton,  1  N.  B.  N.  5  Biss.  523,  F.  C.  11389. 

544;   In  re  Moyer,  1  N.  B.  N.  260,  ss  in  re  Coffin,  1  N.  B.  N.  507,  2 


Ch.  70       TITLE  TO  MORTGAGED  PROPERTY.         759 

I'uptoy,  he  is  entitled  to  any  surplus  proceeds  aud  takes  the 
title  subject  to  such  decree  ;•"''•  or  to  the  proceeds  of  the  sale  of 
inortgaged  property  in  the  possession  of  a  state  court,  not  car- 
ried there  by  final  process  to  enforce  the  mortgage,  and  the 
mortgagee  must  assert  his  claim  in  the  bankruptcy  court.^*' 

Unless  there  is  some  benefit  to  be  gained  for  the  estate,  it 
is  not  necessary  for  the  trustee  to  move  in  the  matter  of  a 
mortgage.^^  If  it  is  deemed  for  the  benefit  of  the  estate  to 
redeem  property  from  any  mortgage,  or  other  pledge,  or  de- 
posit, or  lien,  or  a  conditional  contract,  or  to  tender  perform- 
ance of  the  conditions  of  the  last,  or  to  compound  or  settle 
any  debts,  the  trustee  should  petition  the  court,  which  will  fix 
a  time  for  a  hearing  thereon  and  direct  how  notice  shall  be 
given,  and  upon  a  hearing  make  such  order  as  seems  proper  ;^- 
and,  in  case  it  is  necessary,  the  trustee  may  be  subrogated  to 
the  rights  of  the  holder  of  such  security  until  from  the  pro- 
ceeds of  the  property,  the  fund  is  made  good.^^  Where  the 
legal  title  to  a  bankrupt's  mortgaged  property  is  held  by  the 
trustee,  the  federal  court  has  jurisdiction  to  hear  and  deter- 
mine a  question  as  to  the  validity  and  amount  of  the  mortgage 
lien.^*  After  a  petition  in  bankruptcy  is  filed  the  court  will 
punish  either  the  mortgagor  or  the  mortgagee  for  interfering 
with  the  mortgaged  property j*^^  as  the  title  to  such  property 
has  then  passed  to  the  trustee.^^ 

A  creditor  who  relinquishes  a  security  by  mistake,  either  of 
law  or  fact,  should  be  reinstated  in  his  security  by  the  court 
of  bankruptcy,  if  the  estate  will  be  left  by  the  reinstatement  no 
worse  off  than  if  the  security  had  been  originally  retained.^" 

A.  B.  R.  344;   Heath  v.  Shaffer,  1  64  in  re  Kellogg,  113  F.  R.  120,  7 

N.  B.  N.  399,  2  A.  B.  R.  98,  93  F.  A.  B.  R.  623. 

R.  647;  In  re  Holloway,  1  N.  B.  N.  es  in  re  Arnett,  112  F.  R.  770,  7 

264,  1  A.  B.  R.  659,   93  F.  R.   638.  A.  B.  R.   522. 

53  In  re  Gerdes,  102  F.  R.  318,  4  cs  in  re  Gutman,  114  F.  R.  1009, 

A.  B.  R.  346,  2  N.  B.  N.  R.  131.  8  A.  B.  R.  252. 

60  Morris  v.  Davidson,  11  N.  B.  ct  in  re  Swift,  111  F.  R.  503,  7 
R.  454.  A.  B.  R.  117;   In  re  Condon,  9  Ch. 

61  In  re  Lambert,  2  N.  B.  R.  138,  App.  609;  Oil  Co.  v.  Hawkins,  20 
F.  C.  8026;  In  re  Gibbs,  109  F.  R.  C.  C.  A.  468,  74  F.  R.  395;  Bank  v. 
627,  6  A.  B.  R.  485.  McKey,  42  C.  C.  A.  583,  102  F.  R. 

62  G.  0.  XXVIII;  Form  43;  Reed  662;  In  re  Parkes.  10  N.  B.  R.  82, 
V.  Bullington,  11  N.  B.  R.  408.  F.  C.  10754. 

63  McLean  v.  Cadwalader,  15  N. 

B.  R.  383. 


IGO  THE    NATIONAL    BANKRUPTCY    LAW.  ('ll.';i) 

55 1174.  Title  to  chattel  mortgage.— Tlic  provision  vesting' 
in  the  trustee  title  to  property  ol"  the  bankrupt  whieli  prior  to 
the  filinj,^  of  the  petition  he  could  \)y  any  means  have  trans- 
ferred, covers  personal  property  which,  although  mortgaged, 
the  banicrupt  w^as  authorized  to  sell  by  the  terms  of  the  mort- 
gage,*'"  but  as  the  trustee  takes  no  better  title  than  the  bank- 
rupt, he  would  obtain  no  title  as  against  subsequent  purchasers, 
where  the  bankrupt  was  a  conditional  purchaser  under  an  un- 
recorded contract,  the  state  law  requiring  the  recording 
thereof.*'-*  A  chattel  mortgage  within  four  months  of  bank- 
ruptcy, made  to  hinder,  delay  and  defraud  creditors,  or  which 
is  invalid  under  the  state  law  for  want  of  record,  or  because 
mortgagor  retains  possession,  is  void  under  the  bankruptcy 
proceedings  and  may  be  set  aside  upon  suit  by  the  trustee,  who 
becomes  vested  with  the  title  thereto.  Where,  however,  it  is 
for  a  present  bona  fide  valuable  consideration,  and  valid  under 
a  state  law,  the  mortgagee's  title  cannot  be  divested. 

See  also  Chattel  Mortgages,  ante,  §§  1079.  1091. 

§  1175.  Disposition  of  rents  and  profits— in  case  of  mort- 
gage.— Rents  and  profits  arising  from  a  bankrupt's  estate 
after  bankruptcy  and  collected  by  the  trustee,  belong  to  the 
general  estate,  and  not  to  the  mortgagee,  notwithstanding  the 
mortgagee's  security  is  insufficient,  the  mortgage  itself  not 
pledging  them  by  its  terms,  and  no  proceedings  having  been 
taken  to  sequestrate  them  as  by  obtaining  the  appointment  of 
a  receiver  before  bankruptcy  or  by  direct  application  to  the 
bankruptcy  court  afterward.'''^  If  the  mortgagee  purchases 
mortgaged  property  at  a  foreclosure  sale  subject  to  the  taxes 
then  due  and  the  property  remains  in  the  possession  of  the 
trustee  during  the  redemption  period  and  the  latter  collects 
the  rents,  the  mortgagee  is  not  entitled  to  be  reimbursed  out 
of  such  rents,  taxes  due  on  the  property  when  sold  ;^^  nor  is  a 
second  mortgagee  entitled,  the  first  consenting,  to  take  and 

fi"  In  re  Hull,  115  F.  R.  858,  8  A.  1 ;    Foster  v.   Rhodes,  10  N.  B.  R. 

B.  R.  302.  533,  F.  C.  4981;  Hays  v.  Dickinson, 

«9  In  re  Kellogg,  112  F.  R.  52,  7  15   Id.  350;    In  re  Bennett,   12   Id. 

A.  B.  R.  270.  257,  2  Hughes,  156,  F.  C.  1313. 

70  In  re  Cass,  6  A.  B.  R.  721;  In  71  In  re  Hollenfeltz,  1  N.   B.  N. 

re  Dole,  110  F.  R.  926,  7  A.  B.  R.  503,  2  A.  B.  R.  499,  94  F.  R.  629; 

21;  but  see  In  re  Sink,  2  N.  B.  N.  In  re  Veitch,  101  F.  R.  251,  4  A.  B. 

R.  645;    Comp.   In  re  Snedaker.   t  R.  112. 
N.  B.  R.  43;  In  re  Ellis,  107  Mass. 


ClI.  70  TITLE    TO    PROPERTY.  "^61 

hold  the  mortgaged  property  to  foreclose  his  mortgage,  as 
against  the  trustee,  nor  to  appropriate  the  rents  and  profits  to 
the  payment  of  his  debt ;"-  but  a  mortgagee  of  real  estate,  with 
condition  broken  before  the  institution  of  bankruptcy  proceed- 
ings, is  entitled  to  all  the  product  of  the  premises  unharvested 
as  against  the  trustee."^  An  agreement  by  a  mortgagor  to  col- 
lect the  rents  from  the  mortgaged  property,  which  was  in  his 
possession,  and  to  pay  the  same  to  the  mortgagee  on  the  mort- 
gage debt,  does  not  make  him  the  agent  of  the  mortgagee  to 
collect  such  rents,  nor  give  to  the  mortgagee  right  to  such  as 
are  uncollected  or  have  not  been  paid  over  at  the  time  the 
mortgagor  is  adjudged  a  bankruptJ^ 

§1176.  Title  to  partnership  property.— The  same  rule  ap- 
plies with  reference  to  the  title  of  the  trustee  to  partnership 
property,  as  to  that  of  individuals.  Whether  property  is  part- 
nership or  individual  property  is  purely  a  question  of  inten- 
tion of  the  partners,  to  be  inferred  from  their  actions  and  the 
surrounding  circumstances,''''^'  and  hence  as  between  the  credit- 
ors of  a  firm  and  a  member  thereof,  real  estate  is  assets  of  the 
firm,  although  the  legal  title  was  allowed  to  stand  in  the  name 
of  such  member,  where  the  consideration  moved  from  the 
firm.'^^  Where  a  firm  after  giving  a  mortgage  is  dissolved, 
one  of  the  partners  taking  its  assets  and  assuming  its  debts, 
and  bankruptcy  proceedings  are  instituted  against  him,  in  the 
course  of  which  the  property  is  sold,  the  balance,  after  paying 
the  mortgage,  should  be  retained  by  the  trustee.'^'^ 

See  Partners,  ante,  §  172. 

§  1177.  Title  to  patents,  patent  rights,  copyrights  and  trade- 
marks.— The  trustee  is  vested  with  the  interest  owned  by  the 
bankrupt  at  the  time  of  adjudication  in  patents  already  issued 
and  in  force,  or  allowed,  whether  as  patentee,  assignee  of  the 
patent  or  part  thereof,  or  holder  of  rights  acquired  under  a 
patent  to  a  third  person,  such  as  licenses  or  manufacturing 
rights;  but  he  does  not  take  the  interest  of  the  bankrupt  in 
a  patentable  invention,  or  in  a  pending  application  for  a  pat- 

T2  Hutchins  v.  Iron  Wks.,  8  N.  B.  7r,  Art.  on  Part.,  17  Am.  &  Eng. 

R.  458,  F.  C.  6952.  Enc.  of  Law,  p.  945. 

-•■!  In  re  Bruce,  16  N.  B.  R.  318,  tc,  in    re   Groetzinger,   110   F.   R. 

9  Ben.   236,  F.  C.   2045.  366,  6  A.  B.  R.  399. 

74  In  re  Dole,  110  F.  R.  926,  7  A.  7-  in  re  Sanderlin,  109  F.  R.  857, 

B.  R.  21.  6  A.  B.  R.   384. 


7G2  THE   NATIONAL   BANKRUPTCY    LAW.  Ch.  70 

entJ*^  While  the  title  to  patents  and  the  like  vests  in  the 
trustee  by  operation  of  law  without  any  order  of  court,  a  certi- 
fied copy  of  the  decree  of  adjudication/-'  together  with  a  cer- 
tified copy  of  the  order  approving  the  bond  of  the  trustee, 
should  be  filed  in  the  Patent  or  Copyright  Office,  as  the  case 
may  be,  as  evidence  of  the  title  of  the  trustee  to  such  patents 
or  copyrights.^"  If  one  holds  a  lien  on  bankrupt's  letters  pat- 
ent as  security,  the  court  may  order  them  sold  jointly  by  the 
trustee  and  the  lien-holder,  and  the  proceeds  will  be  deposited 
pending  settlement  of  the  respective  claims.^^ 

§  1178.  Secret  trust.— Any  property,  in  which  there  is  a 
secret  trust  for  the  bankrupt's  benefit  no  matter  how  much 
covered  up,  passes  to  the  trustee.^-  Hence  where  land  is  sold 
under  a  deed  of  trust  and  bid  in  by  the  secured  creditor  for 
enough  to  cover  his  debt  and  the  amount  of  a  superior  lien, 
and  conveyed  to  him  without  collecting  the  bid,  there  is  a  re- 
sulting trust  in  favor  of  the  original  owner  which  might  be 
subjected  in  equity  to  his  debts  and  therefore  passes  to  his 
trustee  in  bankruptcy.^^ 

§1179.  Transferable  property;  commercial  paper.— The 
trustee  takes  all  interest  that  a  bankrupt  has  in  commercial 
paper,  but  the  trustee  of  the  payee  of  negotiable  paper  is  not 
entitled  to  such  paper,  where  such  payee  sold  and  delivered 
the  same  before  bankruptcy,  but  without  indorsement,  and  such 
payee  may  indorse  it  after  bankruptcy  to  enable  the  holder 
to  sue  on  it  in  his  own  name.^^  He  is  entitled  to  funds  of  the 
bankrupt  held  by  the  drawee  of  an  ordinary  commercial  bill 
of  exchange,  which  has  merely  been  presented  to  such  drawee, 
without  his  accepting  it,  such  naked  presentation  not  operating 
as  an  equitable  assignment  of  such  funds  ;^^  and  he  is  entitled 
to  demand  the  surrender  of  notes  given  for  the  excess  over 
legal  interest,  such  notes  not  being  provable  in  bankruptcy .^^ 

T8  In  re  McDonald,  101  F.  R.  239,  969,  102  F.  R.  979,  4  A.  B.  R.  331. 
4  A.  B.  R.  92.  S3  In   re    Dunavant,    1   N.    B.    N. 

79  Sec.  47c,  act  of  Feb.  5,  1903.  542,  3  A.  B.  R.  41,  96  F.  R.  542. 
so  Sec.  29e,  act  of  July  1,  1898.  st  Percy  v.   Elliott,   18   N.  B.  R. 

81  In  re  Columbia  Metal  Works,  358. 

3  N.  B.  R.  18,  F.  C.  3039.  ss  Randolph  v.  Candy,  11  N.  B. 

82  In  re  Quackenbush,  102  F.  R.     R.  296,  F.  C.  11559. 

282,  2  N.  B.  N.  R.  964,  4  A.  B.  R.         se  Shafer  v.  Fritchery,  4  N.  B.  R. 
274;    In  re  Berner,  2  N.  B.  N.  R.     179,  F.  C.  12697. 
268;  In  re  Hoffman,  2  N.  B.  N.  R. 


Ch.  70  TITLE   TO    FUNDS    IN    BANK.  763 

He  cannot  compel  an  indorser  of  a  note,  Avho  receives  none 
of  its  proceeds  and  whose  contingent  liability  never  becomes 
absolute,  to  pay  the  amount  of  the  note  paid  by  the  bankrupt 
to  the  holder;**"  nor  can  he  maintain  an  action  to  set  aside  the 
bankrupt's  subscription  to  an  endowment  fund,  and  for  which 
the  bankrupt  gave  his  note.^^  Notes  taken  by  a  bankrupt 
after  adjudication,  for  the  future  rental  of  land  which  is  ex- 
empt, do  not  constitute  assets  of  his  estate  in  bankruptcy.^^ 

§  1180. Funds  in  bank.— Like  any  other  assets  of  the 

bankrupt,  funds  deposited  in  bank  or  stock  therein  passes  to 
the  trustee  on  the  adjudication.  A  banker's  liability  is  not 
fiduciary,  but  that  of  an  ordinary  debtor,  and  his  trustee  will 
not  pay  out  of  the  bank's  funds  a  note  and  interest,  because 
deposited  for  collection  simply,  the  customer's  account  being 
overdrawn  at  the  time  the  proceeds  were  credited  on  the  bank's 
books,^''  but  the  banker  is  not  entitled  to  a  deposit,  for  which 
the  depositor  simultaneously  draws  a  check  in  payment  of  a 
draft  which  the  banker  issued,  though  insolvent,  and  aware 
it  would  be  dishonored,  but  such  depositor  is  entitled  to  have 
the  funds  returned  before  the  payment  of  other  claims.^^  The 
bank  is  entitled  to  funds  as  against  the  purchaser  from  it  of 
a  check  upon  another  bank,  not  presented  until  after  the  draw- 
er's bankruptcy,  when  payment  was  refused,  and  such  pur- 
chaser is  not  entitled  to  priority  of  payment  f^  or  to  the  deposit 
with  a  bank,  as  agent  for  another  for  clearing  house  purposes, 
under  an  arrangement  requiring  the  latter 's  deposit  to  be  suffi- 
cient to  meet  its  checks  received  at  the  clearing  house.^^ 

See  also  Funds  in  Bank,  post,  §  1215. 

§  1181. Growing  crops.— The  trustee  of  a  bankrupt, 

who  schedules  a  farm  with  growing  crops,  is  vested  with  the 
title  to  the  real  estate,  which  carries  the  growing  crops,  unless 
exempt  under  the  state  law.'*^     The  rule  is  not  changed  be- 

8T  Bean  v.  Laflin,  5  N.  B.  R.  333.  0=  In  re  Smith,  12  N.  B.  R.  459. 

F.  C.  1172.  F.  C.  12990. 

8s  Sturgis  V.  Colby,  18  N.  B.  R.  a^  Phelan  v.  Bk.,  16  N.  B.  R.  308. 

168,  F.  C.  13574.  4  Dill.  88,  F.  C.  11069. 

89  In  re  Oleson,  110  F.  R.  796,  a*  In  re  Eastman,  2  N.  B.  N.  R. 
D.  C.  Iowa,  7  A.  B.  R.  22.  86;  In  re  Barrow,  3  N.  B.  N.  R.  95. 

90  In  re  Bank  of  Madison,  9  N.  98  F.  R.  582,  3  A.  B.  R.  414;  In  re 
B.  R.  184.  5  Biss.  515,  F.  C.  890.  Daubner,  1  N.  B.  N.  520,  3  A.  B.  R. 

91  Richardson  v.  Coffee  Co.,  102  368,  96  F.  R.  805;  In  re  Coffman, 
p.  R.   785.                      -  1  N.  B.  N.  402,  1  A.  B.  R.  530,  93 

F.  R.  422. 


764  THE   NATIONAL   BANKRUPTCY    LAW.  (li.  TO 

cause  bankrupt  is  only  a  tenant  under  a  contract  reserving  to 
the  landlord,  as  rent,  a  share  of  the  crops  raised  on  the  land, 
and  the  crops  were  immature  and  unsevered  when  the  peti- 
tion was  filed.  But  bankrupt  may  be  allowed  a  reasonablo 
compensation  for  the  care  and  labor  bestowed  on  them  from 
the  adjudication,  and  the  proceeds  of  any  part  of  such  crops 
sold  will  take  the  place  of  such  part.^^ 

^  1182. Personal  privileges,  licenses,  memberships,  etc. 

— A  membership  in  a  stock  exchange,'"^  or  other  corporatiou 
authorized  for  business  purposes,  or  a  license  to  sell  liquors,''" 
or  any  other  license,  right  or  privilege,  which  the  bankrupt 
might  have  transferred  by  any  means  prior  to  filing  his  peti- 
tion, is  property  of  the  bankrupt  and  passes  to  his  trustee, 
who  may  sell  the  same.  A  performance  by  the  bankrupt  of  the 
conditions  or  formalities  necessary  to  the  transfer  will  be  or- 
dered by  the  court.^*  In  the  case  of  a  seat  in  a  stock  exchange 
where  the  articles  of  membership  provide  that  it  may  be  sold 
in  case  there  is  no  unsettled  contract  or  claim  against  him  by 
any  other  member  of  the  exchange,  arising  out  of  the  business 
of  the  exchange,  the  seat  will  pass  to  the  trustee  after  the 
satisfaction  of  such  claim,  or  the  court  may  order  that  the 
seat  be  sold  b}'  the  trustee  for  the  benefit  of  the  estate,  in 
which  event  the  prior  right  of  members  of  the  exchange  to  any 
claim  held  by  them  will  be  passed  upon  by  the  court  and  first 
paid  from  the  proceeds.^  In  the  case  of  the  expulsion  of  a 
member,  the  seat  would  pass  to  the  trustee,  where  the  consti- 

95  In  re  Barrow,  3  N.  B.  N.  R.  142  U.  S.  1;   Id.  v.  Ackley,  Id.;  In 
95.  98  F.  R.  5S2,  3  A.  B.  R.  414.  re  Fisher.  1  N.  B.  N.  206.  1  A.  E. 
&6Page   V.    Edmunds,   187   U.    S.  R.  557;  aff'd  2  N.  B.  X.  R.  221.  98 
— .  9  A.  B.  R.  277;   In  re  Gaylord,  F.  R.  89;  aff'd  103  F.  R.  860;  citing 
111  F.  R.  717,  7  A.  B.  R.  195;    In  In  re  Ketchum.  51  F.  R.  840;  Hyde 
re  Hutchinson,  8  A.  B.  R.  382;  see  v.    Woods.   94   U.    S.   523;    Fish    v. 
In  re  Swift.  118  F.  R.  348.  Fisk^  154  Mass.  302;    In  re  War- 
p-In re  May.  5  A.  B.  R.  1.  der.   10  F.  R.  275;    s.  c.   15  F.   R. 
9*  In  re  Page.  2  N.  B.  X.  R.  1069.  789;    In  re  Gallagher.  19  N.  B.  R. 
102  F.  R.  746.  4  A.  B.  R.  467;    In  224.    16    Blatch.    410.    F.    C.    5197: 
re  Becker.  2  N.  B.  N.  R.  241.  245,  Shearman     v.    Bingham.     3     Cliff. 
98  F.  R.  407.  3  A.  B.  R.  412;  In  re  552.  F.  C.  12672;  Lathrop  v.  Dijake. 
May.  3  N.  B.  N.  R.  128;  In  re  Em-  91  U.  S.  516;   Goodall  v.  Tuttle.  7 
rich,  2  N.  B.  N.  R.  656.  101  F.  R  N.  B.  R.  193;   In  re  Sievers.  91  F. 
231,  4  A.  B.  R.  89;  In  re  Brodbine,  R.  366;  Ex  p.  Butler.  1  Atk.  210. 

1  N.  B.  N.  279;  326,  93  F.  R.  643,         ^  Page  v.  Edmunds,  supra;  In  re 

2  A   B.  R.  53;  Sparhawk  v.  Yerkes,  Hutchinson,  supra. 


Ch.  to  title  to  securities.  765 

tution  of  the  organization  does  not  provide  for  the  forfeiture 
of  the  money  value  of  the  membership  in  such  case.-  If  the 
bankrupt  and  another  hold  a  liquor  license,  the  court  of  bank- 
ruptcy has  no  jurisdiction  to  pass  on  the  rights  of  such  other 
party  in  a  summary  proceeding,  but  the  trustee  may  file  a  bill 
in  equity,  or  take  other  steps,  to  realize  the  bankrupt's  interest." 

§  1183.  Legacies— Wills— Inheritance.— Any  interest  which 
a  bankrupt  may  have  in  a  decedent's  estate, whether  as  a  legacy 
or  otherwise,  passes  to  the  trustee  for  the  benefit  of  the  cred- 
itors. The  unpaid  balance  of  a  legacy  passes  to  the  trustee, 
and  the  bankruptcy  court  may  summarily  order  the  bankrupt 
to  execute  a  transfer  of  such  legacy,  or  the  executor  may  be 
ordered  to  pay  it  to  the  trustee.*  Property  inherited  by  the 
bankrupt  prior  to  the  filing  of  the  petition,  although  on  the 
same  day.  would  pass  to  the  trustee,  notwithstanding  the  fact 
that  fractions  of  a  day  are  not  ordinarily  considered.^  Prop- 
erty thus  acquired  after  the  filing  of  the  petition,  although 
prior  to  the  adjudication,  remains  the  bankrupt 's.** 

An  adjudication  in  bankruptcy  does  not  revoke  the  bank- 
rupt's will,  but  if  at  the  time  of  his  death  he  has  any  assets 
upon  which  it  would  operate,  it  would  be  of  as  much  force 
and  effect  as  though  bankruptcy  had  not  intervened.' 

§  1184.  Vested  and  contingent  remainders— Powers.— The 
title  of  the  bankrupt  as  of  the  date  of  the  adjudication  vests 
in  the  trustee  to  all  property  which  he  might  have  transferred 
or  which  might  have  been  levied  upon  prior  to  the  filing  of 
the  petition.  A  bare  possibility  or  mere  expectation  of  acquir- 
ing property  does  not  constitute  property  or  title  to  property; 
nor  can  it  be  transferred  or  levied  upon.  While  the  right  of 
enjoyment  may  be  uncertain  and  contingent,  it  is  necessary 
that  an  interest  or  title  of  some  kind  be  vested  in  the  bankrui)t 
in  order  that  it  may  pass  by  operation  of  law  to  the  trustee. 
If  the  uncertainty  or  contingency  be  such  as  relates  to  the 
person,  and  not  merely  to  the  event,  and  he  who  is  to  take 
remains  unascertain<al  hy  name,  designation  or  description,  no 

2  In  re  Gaylord.  supra.  n  in  re  "Wetmore,  108  F.  R.  520. 

s  In  re  Brodbine.  1  N.  B.  N.  279.  3  N.  B.  N.  R.  143,  6  A.  B.  R.  210; 

326,  93  F.  R.  643.  2  A.  B.  R.  53.  In   re  Braentigan,    3    N.    B.   N.    R. 

4  In  re  May.  3  N.  B.  N.  R.  128.  5  461. 

A.  B.  R.  1.  ■  Charman  v.  Charman,  14  Ves. 

5  In  re  Stoner.  3  N.  B.  N.  R.  423.     580. 


766  THE  NATIONAL  BANKRUPTCY   LAW.  ClL  70 

given  individual  while  so  unascertained  can  be  held  to  have 
a  property  right  to  or  in  the  subject  matter  of  the  gift  or 
limitation.  But  if  he  has  no  claim  or  title  absolute 
or  defeasible,  vested  or  contingent,  but  merely  an  expectation 
of  an  estate  or  interest,  in  the  future,  then  there  is  nothing 
in  him  to  pass  to  the  trustee.  One  may  have  a  right  in  or  to  a 
future  contingency.  But  it  cannot  be  affirmed  of  any  one  that 
he  has  either  a  contingent  right  or  a  right  in  or  to  a  con- 
tingency unless  the  person  of  whom  the  affirmation  is  made  is 
ascertained  by  name,  designation  or  description.  Thus  a  fund 
left  to  bankrupt's  mother  in  trust  for  her  use  during  life  with 
power  of  disposing  the  fund  by  will,  and  in  the  event  she  fails 
to  exercise  the  power,  then  to  the  testators  surviving  next  of 
kin,  no  interest  of  the  bankrupt  would  pass  to  the  trustee  prior 
to  her  death.8 

Where  a  bankrupt  under  a  will  takes  merely  a  future  con- 
tingent interest,  which  is  not  vested  or  alienable,  it  is  not  such 
an  interest  as  would  pass  to  the  trustee,^  nor  where  it  is  sub- 
ject to  be  devested  by  the  happening  of  a  contingency  men- 
tioned in  a  will  as  by  the  death  of  the  bankrupt  before  the 
property  is  divisible,  he  being  merely  one  of  a  class  to  which 
he  may  or  may  not  belong  on  the  vesting  of  the  gift.^^  If  the 
interest  which  the  bankrupt  takes  is  vested  or  if  it  be  such 
as  would  be  alienable  under  the  laws  of  the  state,  it  would  pass 
to  the  trustee.^  ^ 

§  1185. Stocks,  bonds  or  other  securities.— Any  stock, 

bonds  or  other  securities  of  the  bankrupt  having  a  transfer- 
able value  upon  his  adjudication  become  a  part  of  the  assets 
of  the  estate  for  the  benefit  of  creditors,  title  to  w'hich  passes 
to  the  trustee  without  the  necessity  of  transfer  unless  in  a 
foreign  corporation,  in  which  event  the  necessary  assignment 
must  be  made  by  the  bankrupt. 

The  trustee  is  not  bound  by  the  bankrupt's  ratification  or 
acquiescence  in  a  sale  of  collaterals  made  after  the  commence- 

8  In  re  Wetmore.  108  F.  R.  520.  n  In  re  Twaddle,  3  N.  B.  N.  R. 
fi  N.  B.  N.  R.  143,  6  A.  B.  R.  210.  752,  110  P.  R.  145,  6  A.  B.  R.  539: 

9  In  re  Gardner,  3  N.  B.  N.  R.  In  re  St.  John,  3  N.  B.  N.  R.  114: 
480,  5  A.  B.  R.  432.  105  F.  R.  234,  5  A.   B.  R.   190:    In 

10  In  re  Hoadley,  2  N.  B.  N.  R.  re  Wood,  98  F.  R.  972,  3  A.  B.  R. 
704,  101  F.  R.  233,  3  A.  B.  R.  780;     572. 

In  re  Ehle,  109  F.  R.  625,  6  A.  B. 
R.  476. 


Ch.  70  TITLE    TO    SECURITIES.  767 

nient  of  bankruptcy  proceedings  ;i^'  and  he  is  entitled  to  the 
surplus  over  and  above  the  amount  necessary  to  liquidate  the 
debt,  where  the  security  of  a  creditor  is  reduced  to  money/"* 
and  to  any  and  all  securities  held  for  the  debt  where  a  secured 
creditor  proves  his  claim  as  unsecured  and  thereby  relinquishes 
his  right  to  the  securities.^**  A  trustee,  who  redeems  pledges 
is  subrogated  to  the  rights  of  the  pledgee  until,  from  the 
proceeds  of  the  pledges  redeemed,  the  fund  is  made  good/^ 

§  1186. Goods  delivered  to  be  paid  for  when  sold.— 

Where  goods  are  sold  to  a  bankrupt  on  credit,  and  with  the 
understanding  that  the  title  to  such  as  are  not  sold  shall  re- 
main in  the  vendor  until  the  payment  of  the  purchase  price, 
the  title  thereto  vests  in  the  trustee.^"  But  a  person  selling 
a  bankrupt  goods  on  credit,  owing  to  false  statements,  may 
rescind  the  sale  and  recover  the  goods,  whether  or  not  the 
false  statements  were  made  with  fraudulent  intent.^  ^  A  trus- 
tee is  entitled  to  the  proceeds  of  goods  sold  by  the  bankrupt, 
where  by  agreement  between  the  bankrupt  and  another  the 
latter  was  to  furnish  the  bankrupt  goods  at  a  fixed  price,  the 
bankrupt  to  pay  all  freight,  storage  and  charges,  and,  at  the 
expiration  of  each  three  months,  to  pay  for  all  goods  sold  or 
shipped  from  the  bankrupt's  warehouse/^  and  to  certain 
articles  delivered  under  an  arrangement  whereby  the  bankrupt 
has  the  exclusive  right  to  sell  them,  with  the  understanding 
that  he  is  to  pay  for  them  if  sold  w^ithin  a  certain  time,  and,  if 
not,  he  is  "to  take  them  for  the  next  season,"  and  the  transac- 
tion appears  on  his  books  and  upon  the  owner's  invoices  as  a 
sale.i9 

,§1187. Property  held  in  trust.— The  possession  by  a 

bankrupt  of  assets,  though  by  a  defeasible  title,  makes  a  suf- 

12  Sparhawk  v.  Drexel,  12  N.  B.         it  in  re  Epstein,   109   F.  R.   874, 
R.  450,  F.  C.  13204.  6  A.  B.  R.  60,  and  cases  cited;    In 

13  In  re  Newland,  9  N.  B.  R.  62,     re   O'Connor,   114   F.   R.   777,   7  A. 

7  Ben.  63,  F.  C.  10171.  B.  R.  428. 

14  In  re  Granger,  8  N.  B.  R.  30.         is  In    re    Linforth,    16    N.    B.    R. 
F.  C.  5684.  435,  4  Sawy.  370.  F.  C.  8369. 

i"' McLean  v.  Cadwalader,  15  N.         it>Wood    M.    &   R.    Mach.    Co.    v. 
3.  R.  383.  Brooke,   9   N.    B.   R.   395,   2    Sawy. 

16  In  re  Garcewich,  115  F.  R.  87,     576,  F.  C.  17980. 

8  A.  B.  R.  149;    In  re  McCallum, 
113  F.  R.  393,  7  A.  B.  R.  596. 


768  THE  NATIONAL  BANKRUPTCY  LAW.  ClI.  TU 

ficient  title  for  his  trustee,  until  it  shall  be  successfully  dis- 
puted,-^ but  a  trustee  takes  no  title  to  property  held  by  a 
i)ankrupt  merely  in  trust,  although  if  the  trust  be  coupled  with 
an  interest,  he  is  vested  with  such  interest.^''  One  claiming  the 
right  to  recover  a  sum  from  a  trustee  on  the  ground  that  it 
was  a  trust  fund  held  by  the  bankrupt,  has  the  burden  of 
proving  that  such  fund  was  in  some  form  a  part  of  the  bank- 
rupt's estate,  when  it  passed  into  the  hands  of  the  trustee.-- 
Where  a  trustee  is  presumed  to  have  held  money  in  trust  for 
his  wife,  she  is  entitled  to  prove  her  claim  against  his  estate.^-'' 
The  trustee  has  no  title  to  an  interest  imder  a  will, 
which  gives  the  trustee  absolute  discretion  which  he  is  not 
obliged  to  exercise  in  favor  of  the  bankrupt  ;-■''  nor  to  the 
income,  or  any  aliquot  part  thereof,  derived  from  a  sum  de- 
posited in  trust,  such  income  to  be  applied  to  the  support  of 
the  cestui  que  trust  and  his  wife,  and  for  the  maintenance  and 
education  of  their  children,  the  annuity  and  principal  sum 
being  declared  to  be  inalienable  by  the  grantees,  and  not  sub- 
ject to  their  debts  or  control.-*'  Where  property  is  left  in  trust 
to  the  use  of  a  person  with  power  of  appointment,  and  even  if 
the  power  of  appointment  be  not  exercised,  the  person  who 
would  take  thereafter  remained  uncertain  until  the  death  of 
the  former,  the  latter  takes  no  estate  during  the  life  of  the 
former  that  can  pass  to  his  trustee  in  bankruptcy.^'  But 
where  there  is  a  devise  to  one  for  life  and  at  her  decease  to 
her  surviving  children,  and  after  the  death  of  the  testator  and 
before  that  of  the  beneficiary_,  one  of  such  children  was  ad- 
judged a  bankrupt,  his  interest,  being  vested  and  alienable, 
passes  to  his  trustee  in  bankruptcy.^^  Where  the  interest  is 
contingent  only,  such  beneficiary  acquires  no  interest  that  will 

^0  In  re  Cobb,  1  N.  B.  N.  557,  3  3  A.  B.  R.  700;    In  re  Hoadley,   2 

A.  B.  R.  129,  96  P.  R.  821;    In  re  N.  B.  N.  R.  704,  100  F.  R.  233,  3  A. 

Beal,  2  N.  B.  R.  178,  1  Lowell,  323,  B.  R.  780;  Nicholas  v.  Eaton,  13  N. 

F.  C.  1156.  E.  R.  421,  91  U.  S.  716. 

21  Walker  v.  Siegel.  12  N.  B.  R.  26  Durant  v.  Ins.  Co.,  16  N.  B.  R. 
394,  F.  C.  17085.  324,  F.  C.  4188. 

22  In  re  Marsh,  116  F.  R.  396.  8  2-  m  re  Wetmore.  108  F.  R.  520. 
A.  B.  R.  576.  6  A.  B.  R.   210. 

2-'!  In  re  Neiman,  109  F.  R.  113.  G         2s  in  re  Twaddell.  110  F.  R.  145. 

A.  B.  R.  329.  6  A.  B.  R.  539;  In  re  McHarry,  111 

2- In  re  Wetmore.  102  F.  R.  290.  F.   R.   498.    7    A.   B.   R.   83;    In   re 

4  A.  B.  R.  335.  s.  c  99  F.  R.  703,  Haslett,  116   F.  R.   680. 


Ch.  70  SALE  OF  ESTATES.  769 

vest  in  his  trustee  in  bankruptcy.^^  The  surplus  income  of  a 
trust  fund  beyond  the  sum  necessary  for  the  support  of  the 
beneficiary  passes  to  the  trustee  in  bankruptcy  of  the  bene- 
ficiary.^*' 

Where  a  will  bequeathed  a  sum  to  trustees,  with  directions 
to  apply  the  income  for  the  benefit  of  a  daughter  of  the  testa- 
tor during  her  life,  the  principal  on  her  death  to  be  divided 
between  the  testator's  two  sons,  who  were  named,  the  interest 
taken  by  the  sons  in  the  trust  fund,  under  the  statutes  of  cer- 
tain states,  is  a  vested  remainder  which  is  alienable ;  and, 
on  the  bankruptcy  of  one  of  the  sons  while  the  life  estate  is 
still  outstanding,  will  pass  to  his  trustee,  as  assets.^^  Where  a 
bankrupt,  having  possession  of  another's  property,  with 
authority  to  sell  and  pay  over  the  proceeds,  sells,  but  uses  the 
proceeds,  either  by  depositing  them  to  his  own  account  or  by 
dealings  with  a  broker,  the  owner  cannot  establish  a  lien  upon 
the  bankrupt's  account  when  less  than  the  amount  of  such 
proceeds,  nor  upon  stocks  in  the  hands  of  the  broker  where 
there  is  no  evidence  that  the  same  were  purchased  with  the 
proceeds  of  the  sale  of  his  property .^^  Where  a  creditor  has 
received  from  his  debtor  money,  under  circumstances  which 
are  entirely  lawful,  it  is  free  from  all  trust  and  claim  on  behalf 
of  the  cestui  que  trust,  unless  it  be  shown  that  the  creditor 
knew  of  the  trust  and  passes  to  the  creditor's  trustee.^^ 

§  1188.  Claims  against  property  in  trustee's  hands.— A  court 
of  bankruptcy  has  no  authority  to  deprive  the  trustee  of  the 
possession  of  the  bankrupt's  property  without  due  process  of 
law,3^  and  where  he  asserts  title  in  himself,  as  property  of  the 
bankrupt,  the  claimant  cannot  proceed  by  summary  petition  ■,^^ 
nor  where  property  is  in  the  possession  of  a  third  person 
claiming  title.^^     The  bankrupt's  property  is  not  subject  to 

29  In  re  Gardner,  106  F.  R.  670,  34  Wood  M.  &  R.  Mach.  Co.  v. 
5  A.  B.  R.  432;  In  re  Ehle,  109  F,  Brooke,  9  N.  B.  R.  395,  2  Sawy. 
R.  625,  6  A.  B.  R.  476.  576,  F.  C.  17980. 

30  Brown  v.  Barker  et  al.,  8  A.  35  Hurst  v.  Tefft,  13  N.  B.  R.  108, 
B.  R.  450.  12  Blatch.  217,  F.   C.  6939;    In  re 

31  In  fe  St.  John,  105  F.  R.  234,  Kleinhaus,  113  F.  R.  107,  7  A.  B. 
3  N.  B.  N.  R.  120,  5  A.  B.  R.  190.  R.  604. 

32  In  re  Mulligan,  116  F.  R.  715,  36  in  re  Bryant,  2  N.  B.  N.  R. 
9  A.  B.  R.  8.  1058. 

33  White  V.  Jones,  6  N.  B.  R.  175. 
F.  C.  17550. 


770  THE  NATIONAL  BANKRUPTCY  LAW.  ClI.  70 

levy  by  a  sheriff  to  satisfy  a  judgment  against  the  trustee,  who 
is  entitled  to  an  order  restraining  such  a  threatened  levy.^"^ 
The  trustee  cannot  be  required  to  surrender  property  where 
the  equities  are  equal,  as  between  creditors  of  a  bankrupt,  to 
whom  property  was  fraudulently  transferred  before  bank- 
ruptcy, and  creditors  of  the  transferrer.^*^  He  can  plead  the 
defense  of  usury  so  long  as  any  part  of  the  debt,  for  which  the 
usury  was  to  be  paid,  remains  unpaid.^'^  After  the  filing  of 
the  petition,  no  interest  by  a  receivership  created  by  a  state 
court,  or  otherwise,  can  be  acquired  in  the  property  of  the 
bankrupt  which  will  affect  the  trustee  ;'*o  but  there  is  nothing 
to  prevent  a  state  from  taxing  the  funds  in  the  hands  of  a 
trustee.''^  A  trustee  seeking  by  legal  proceedings  to  enforce 
the  bankrupt's  title  to  personal  property,  will  be  subject  to  all 
legal  and  equitable  claims  of  others  to  the  property,  which 
exist  against  the  bankrupt,  and  which  are  not  in  fraud  of  the 
bankruptcy  law  or  the  rights  of  general  creditors.^-  Where 
there  has  been  an  equitable  assignment  of  part  of  a  fund  by  a 
bankrupt,  valid  as  between  him  and  the  assignee,  the  trustee 
takes  the  fund  subject  to  the  assignment,  even  though  for  rea- 
sons of  public  policy  it  could  not  have  been  enforced  against 
the  holder  of  the  fund.^^ 

§  1189.  'b.  Appraisal— Sale  of  property.— All  real  and  per- 
'sonal  property  belonging  to  bankrupt  estates  shall  be  ap- 
' praised  by  three  disinterested  appraisers;  they  shall  be  ap- 
*  pointed  by,  and  report  to,  the  court.  Real  and  personal  prop- 
*erty  shall,  when  practicable,  be  sold  subject  to  the  approval 
*of  the  court;  it  shall  not  be  sold  otherwise  than  subject  to  the 
'approval  of  the  court  for  less  than  seventy-five  per  centum  of 
*its  appraised  value.' 

§  1190.  Appraisers.— The  referee  has  general  authority  to 
appoint  appraisers  and  his  action  is  subject  to  revision  by  the 
court  of  bankruptcy.    The  prevailing  cost  to  the  trade  should 

37  In  re  Neely,  108  F.  R.  371,  5  «  in  re  Mitchell,  16  N.  B.  R.  535, 
A.  B.  R.  836.  F.  C.  9658;  Contra,  In  re  Booth,  14 

38  Aiken  v.  Edrington,  15  N.  B,     N.  B.  R.  232,  F.  C.  1645. 

R.  271,  F.  C.  111.  42  Duplan    Silk   Co.    v.    Spencer, 

39  In  re  Prescott,  9  N.  B.  R.  385,     115  F.  R.  689,  8  A.  B.  R.  367. 

5  Biss.  523,  F.  C.  11389;  In  re  Kel-        43  in  re  Hanna  et  al.,  105  F.  R, 
logg,  113  F.  R.  120,  7  A.  B.  R.  623.     587,  5  A.  B.  R.  127. 

40  Smith  V.  Buchanan,  4  N.  B.  R. 
133,  F.  C.  13016. 


Ch.  to  sale  of  estates.  771 

be  adopted  by  the  appraisers  as  the  actual  value,  due  allow- 
ance being  made  for  any  actual  deterioration  or  depreciation 
in  value.^^ 

§  1191.    Sale  of  bankrupt's  property,  control  of  court  over.— 

At  least  ten  days'  notice  by  mail  of  all  sales  must  be  given 
creditors,  unless  waived  in  writing,^*^  or  the  court  orders  it 
without  notice.^^  While  it  will  not  take  possession  of  immoral 
places,  to  conduct  a  disreputable  business  there  carried  on,  it 
will,  under  proper  circumstances  and  at  the  proper  time,  take 
possession  to  sell  bankrupt's  interest  therein.-^^  A  court  will 
not  summarily  order  the  sale  of  property,  real  or  personal, 
claimed  by  the  trustee,  even  though  the  title  be  in  dispute,  if 
the  estate  be  in  a  third  person's  actual  possession  holding  as 
owner  and  claiming  absolute  title  to  it,  whether  derived  from 
the  debtor  before  he  was  adjudged  bankrupt  or  from  another.*^ 
The  purchasers  under  a  sale  will  be  left  to  establish  their  title 
whenever  the  occasion  may  arise.^*^  The  form  of  the  order  is 
sufficient  if  it  directs  the  sale  of  the  right,  title,  etc.,  of  the 
bankrupt,  and  it  need  not  direct  the  sale  of  the  right,  title,  etc., 
which  the  trustee  acquired  by  the  decree  of  bankruptcy.^^  A 
sale  by  the  marshal  under  a  special  order,  prior  to  the  appoint- 
ment of  a  trustee,  is  to  be  considered  as  in  the  nature  of  a  sale 
made  by  a  provisional  trustee.^^ 

§1192.  Manner  of  making  sales.— All  sales  are  to  be  at 
public  auction  unless  otherwise  ordered  by  the  court.  For 
good  reason  shown  a  specified  portion  may  be  ordered  sold  at 
private  sale,  in  which  case  an  account  of  each  article,  the  price 
brought  and  to  whom  sold  must  be  kept  and  filed.  Perishable 
property  may  be  ordered  sold  immediately  with  or  without 
notice.^3  Assuming  that  a  sale  of  real  estate  by  a  trustee  is  to 
be  assimilated  to  a  sale  under  a  decree  in  equity  silent  as  to 

45  In  re  Prager,  8  A.  B.  R.  356,  si  Smith  v.  Scholtz,  17  N.  B.  R. 

46  Sec.  58a    (4),  act  of  1898.  520. 

47  G.  O.  XVIII.  52  In   re   Hitchings,   4   N.  B.   R. 
4s  In  re  Pittner,  2  N.  B.  R.  915.  125,  F.  C.  6542. 

49Gifford  V.  Helms,  19  N.  B.  R.  53  Q.    O.    XVIII;    Forms    42,    45, 

113,  98  U.  S.  248;   Beach  v.  Macon  and  46;    In  re  Beutel's  Sons,  2  N. 

Grocery  Co.,  116  F.  R.  143.  B.  N.  R.  1011,  7  A.  B.  R.  768;  see 

50  In  re  Alden,  16  N.  B.  R.  39,  F.  also  ante,  §  1189. 
C.  151. 


772  THE  NATIONAL  BANKRUPTCY  LAW.  Ch.  70 

the  manner  of  sale,  it  cannot  be  attacked  collaterally  and  held 
void  because  not  made  in  parcels.^'* 

Where  a  prospective  bidder  and  the  trustee's  solicitor  agree 
that  the  bidder  will  let  the  solicitor  have  the  property  at  a 
certain  price  without  reference  to  the  selling  price,  such  agree- 
ment will  not  avoid  the  sale;^^  nor  will  the  sale  of  a  claim 
marked  "worthless"  in  the  schedule,  which  subsequently  be- 
comes valuable.^^  A  creditor  has  the  right  to  call  for  an 
investigation  into  the  conduct  of  the  trustee  in  selling  the 
property,  even  after  the  latter 's  account  has  been  filed  and 
approved.^^  A  purchaser  at  a  sale  by  the  trustee  stands  on 
the  same  footing  with  a  purchaser  at  an  execution  sale  and 
takes  the  estate  of  the  bankrupt  subject  to  all  equities  against 
it,  whether  he  knows  of  them  or  not.^^ 

§  1193.  State  court  has  no  power  over  sales.— The  title  to 
the  bankrupt's  property  vests  in  the  trustee  as  soon  as  the 
adjudication  is  made;  any  sale  thereafter  must  be  made  by 
such  trustee  under  the  direction  of  the  bankruptcy  court.  The 
state  court  has  no  jurisdiction  to  sell  such  property  under 
such  circumstances,  but  if  it  did  make  sale,  the  purchaser 
would  take  no  title.^^  Where  a  federal  court  authorizes  a  sale 
and  the  deposit  of  the  proceeds,  such  decision  will  control  in 
spite  of  the  fact  that  the  action  of  a  state  court  in  which 
insolvency  proceedings  were  brought  prior  to  the  bankruptcy 
proceedings,  permitting  a  sale,  was  reversed  on  appeal.*^^ 

§  1194.  Sale  of  incumbered  property.— A  court  of  bank- 
ruptcy, as  well  as  the  referee,  has  power  to  order  the  sale  of 
incumbered  property  and  direct  the  money  arising  therefrom 
to  be  brought  into  court  for  distribution  among  those  entitled 
to  it.^i  Such  sale  should  not  be  ordered  unless  it  is  satisfac- 
■^orily  shown  that  the  interests  of  the  general  creditors  will 

54  Smith  V.  Scholtz,  17  N.  B.  R.  59  in  re  Azule  Nat.  Seltzer 
520.  Water  Co.,  2  N.  B.  N.  R.  639;    In 

55  Citizens'  Bk.  v.  Ober,  13  N.  B.  re  Lyon,  7  N.  B.  R.  182,  F.  C.  8644. 
R.  328,  1  Woods  80,  F.  C.  2731.  eo  in  re  Riker,   107  F.  R.   96,   5 

56  Phelps  V.  McDonald,  16  N.  B.  A.  B.  R.  720. 

R.  217.  61  In  re  Salmons,  2  N.  B.  R.  19, 

57  In  re  Peabody,  16  N.  B.  R.  243,  F.  C.  12268;  In  re  Styer,  2  N.  B.  N. 
F.  C.  10866.  n.  205,  98  F.  R.  290,  3  A.  B.  R.  424. 

58  Stedman  v.  Taylor,  17  N.  B.  R. 
283. 


Ch.  70  SALE  OF  ESTATES.  773 

be  thereby  advaiiced,®^  and  until  the  trustee's  appointment,  so 
as  not  to  interfere  with  the  exercise  of  his  election  to  redeem 
the  property  pledged,  to  sell  it  subject  to  the  lien,  or  to  release 
the  equity  of  redemption  at  an  agreed  price.^^  The  trustee 
should  not  be  required  to  take  charge  of  or  to  sell  any  portion 
of  an  estate,  where  the  appraiser's  return  shows  it  to  be  so 
heavily  encumbered  with  valid  liens  that  nothing  can  be  real- 
ized therefrom  for  the  unsecured  creditors.^^  Where  property 
is  sold  upon  the  petition  of  the  trustee,  under  a  mortgage,  only 
the  actual  costs  of  sale  are  chargeable  upon  such  proceeds  and 
not  any  portion  of  the  costs  in  bankruptcy.^^  , 

§  1195.  Sale  of  encumbered  property— Free  of  liens.— A 
court  of  bankruptcy,  including  the  referee,  has  authority  to 
direct  a  sale  of  property  by  the  trustee  in  bankruptcy  free 
and  clear  of  all  liens  and  incumbrances,  in  which  event  the  liens 
are  transferred  to  the  proceeds*''^  according  to  their  priority  f^ 
or  it  may  direct  a  sale  of  the  property  and  require  the  trustee 
in  bankruptcy  to  institute  suit  to  determine  the  validity  of 
a  lien.^s  Such  an  order  of  sale  will  not  be  made,  however, 
where  it  is  evident  that  there  is  no  equity  in  the  property,*"'''^ 
but  only  where  the  interests  of  the  general  creditors  will  be 
advanced  thereby.'^"  Upon  such  a  sale,  interest  has  been  al- 
lowed to  the  date  of  the  report  of  distribution.^^     The  same 

«2  In    re    Styer,    supra;     In    r-:^  1057;   Foster  v.  Ames,  2  N.  B.  R. 

Shaeffer,  105  F.  R.  352,  5  A.  B.  R.  147,  F.  C.   4965;    In  re  Christy,  3 

248.  How.  290;  Houston  v.  Bk.,  6  How. 

63  In  re  Grinnell,  9  N.  B.  R.  29,  486;  Ray  v.  Norseworthy,  23  Wall. 

7  Ben.  42,  F.  C.  5830;     consult  In  128;  In  re  Salmons,  2  N.  B.  R.  19, 

re  Kelly  Dry  Goods  Co.,  102  F.  R.  F.  C.  12268;  Markson  v.  Haney,  12 

747,  4  A.  B.  R.  528.  N.  B.  R.  484;   In  re  Styer,  2  N.  B. 

04  In  re  Cogley,  107  F.  R.  73,  5  N.  R.  205,  98  F.  R.  290,  3  A.  B.  R. 

A.  B.  R.  731.  424;   In  re  Gerson,  4  A.  B.  R.  346, 

65  In  re  Blue  Ridge  R.  R.  Co.,  13     102  F.  R.  318;  Forms  43,  44. 

N.  B.  R.  315,  2  Hughes  224,  F.  C.  07  McNair  v.  Mclntyre,  113  F.  R. 

1570.  113,  7  A.  B.  R.  638;    In  re  Riker, 

66  In  re  Worland,  1  A.  B.  R.  450,  107  F.  R.  96,  5  A.  B.  R.  720. 
92  F.  R.  893;  also  see  In  re  Pittel-  es  in  re  Reed,  117  F.  R.  358. 
kow,  1  A.  B.  R.  472,  92  F.  R.  903;  69  in  re  Cogley,  107  F.  R.  73,  5 
Southern  Loan  &  Trust  Co.  v.  Ben-  A.  B.  R.  731. 

bow,  3  A.  B.  R.  9;   96  F.  R.  514;  to  in  re  Styer,  2  N.  B.  N.  R.  205, 

In  re  Sanborn,  86  F.  R.  551,  3  A.  3  A.  B.  R.  425,  98  F.  R.  290;  In  re 

B.  R.  54;  In  re  Nat.  Iron  Co.,  8  Shaeffer,  105  F.  R.  352;  In  re 
N.  B.  R.  422,  F.  C.  10,  45;  In  re  Waterlow  Organ  Co.,  118  F.  R.  904. 
Kahley,  4  N.  B.  R.  124,  F.  C.  7593;  'i  In  re  Devore,  16  N.  B.  R.  56, 
In  re  Barrow,  1  N.  B.  R.  125,  F.  C.  F.  C.  3847. 


774  THE  NATIONAL  BANKRUPTCY  LAW.  ClI.  TO 

rule  with  reference  to  the  sale  free  of  liens  would  apply  to 
perishable  property J^ 

A  sale  free  of  liens  does  not,  however,  affect  a  lien  in  the 
nature  of  a  tax  assessment  against  the  property  sold,  but  in 
this  case  the  trustee  should  protect  the  purchaser  by  providing 
for  the  payment  of  the  taxes.'''^  Where  more  than  four  months 
before  the  petition  was  filed,  the  bankrupt  executed  a  real 
estate  mortgage  to  one  creditor,  a  chattel  mortgage  on  fixtures 
to  the  real  estate  to  another  and  suffered  judgments  to  be 
taken  by  a  third,  the  bankruptcy  court  will  direct  a  sale  clear 
of  all  liens,  and  out  of  the  proceeds  pay  off  the  incumbrances 
or  liens  according  to  the  priority  to  which  they  would  be 
entitled  under  the  said  lawJ-* 

A  judgment  creditor  who  has  not  perfected  his  lien  by  exe- 
cution and  levy  is  not  entitled  to  the  proceeds  of  such  sale  as 
against  a  junior  creditor  whose  lien  was  perfected  prior  to  the 
commencement  of  the  proceedingsJ^ 

A  referee  or  court  of  bankruptcy  may  direct  the  trustee  to 
sell  free  of  incumbrances,  personal  property  of  the  bankrupt 
in  his  possession,  but  covered  by  a  chattel  mortgage,  on  notice 
to  the  incumbrancers,  and  to  approve  the  sale  when  made.  It 
is  within  the  fair  exercise  of  his  discretion  to  approve  a  sale 
found  to  be  the  fair  cash  value  of  the  property,  though  less 
than  the  amount  of  the  mortgage  debt.'^*^ 

§  1196.  Effect  of  sale  in  case  of  liens.— A  sale  of  incum- 
bered land  by  the  trustee  subject  to  the  incumbrance  does  not 
divest  the  land  of  the  incumbrance.'^'''  It  will  be  taken  for 
granted  that  the  trustee  sells  such  subject  thereto,  although 
the  lien  creditor,  or  creditors,  must  be  notified  before  the  sale 
takes  place  ;'^^  and  the  purchaser  will  be  estopped  from  deny- 
ing the  validity  of  the  lien.'^'^     The  sale  of  a  bankrupt's  real 

72  In  re  San  Gabriel  Sanatorium  ~>'  Wicks  v.  Perkins,  13  N.  B.  R. 
Co.,  2  N.  B.  N.  R.  827,  102  F.  R.  280,  1  Woods  383,  F.  C.  17615;  In 
310,  4  A.  B.  R.  197.  re  Gerry,  112  F.  R.  957,  7  A.  B.  R. 

73  In  re  Keller,  109  F.  R.  131,  6  459. 

A.  B.   R.  334;    In  re   Keller,   6  A.  78  Meeks  v.  Whatley,  10  N.  B.  R. 

B.  R.  351.  498;    In   re   McGilton,  7  N.   B.   R. 

74  In  re  Worland,  supra.  294,  3  Biss.  144,  F.  C.  8798. 

75  In  re  Mebane,  3  N.  B.  R.  91,  79  Bucknam  v.  Dunn,  16  N.  B.  R. 
F.  C.  9380.  470,  2  Hask.  215,  F.  C.  2096. 

76  In  re  Sanborn,  3  A.  B.  R.  54, 
96  F.  R.  551. 


Ch.  rO  SALE  OF  ESTATES.  775 

estate  by  his  trustee  does  not  bar  his  wife's  right  of  dower 
therein.^" 

§  1197.  Liquidation  without  sale.— The  trustee  may,  if  to 
the  interest  of  the  estate,  relieve  the  property  from  the  lien  by 
discharging  the  incumbrance,  or  he  may  agree  with  the  cred- 
itors as  to  the  value  of  the  property,^^  or  he  may  apply  to  have 
the  lien  ascertained  and  liquidated,  or  for  an  order  directing 
the  sale  of  the  property  held  as  security  for  any  provable  claim, 
as  the  most  correct  means  of  ascertaining  its  true  value,  and 
from  the  proceeds  may  pay  the  debts  covered  by  the  security.^^ 

§  1198.  Confirmation  of  sales.— In  judicial  sales,  that  is,  a 
sale  of  particular  property  specifically  pointed  out  by  the  court 
and  ordered  during  the  pendency  of  proceedings  concerning  it, 
such  as  are  sales  by  trustees,  the  court  is  the  seller  and  the 
trustee  its  agent  to  get  the  highest  bidder,  the  sale  not  being 
consummated  nor  any  title  passing  until  confirmation,  the  act 
of  confirmation  alone  completing  the  passing  of  the  title.  In 
execution  sales,  that  is,  a  sale  of  any  property  belonging  to  the 
judgment  debtor  that  the  sheriff  may  seize,  the  court  has  ren- 
dered its  decision  and  is  done  with  it,  the  sheriff  being  the  real 
seller  and  the  title  passing  at  once  to  the  highest  bidder.  In 
execution  sales  the  purchaser  immediately  becomes  vested  with 
rights  which  can  only  be  divested  by  showing  that  he  himself 
or  his  agents  have  been  guilty  of  fraud,  whilst,  in  judicial 
sales,  until  confirmation,  the  so-called  purchaser  has  no  such 
rights,  but  is  simply  the  preferred  bidder  awaiting  the  accept- 
ance of  his  offer  by  the  court.  Gross  inadequacy  of  price  is 
sufficient  ground  for  refusing  to  confirm  a  sale,  and  it  is  not 
necessary  that  there  should  be  fraud  or  such  gross  inadequacy 
of  price  as  to  be  evidence  of  fraud.  No  sale  for  less  than  sev- 
enty-five per  cent  of  the  appraised  value  ought  to  be  confirmed, 
unless  good  reasons  are  shown  why  a  better  price  would  not 
be  obtainable  on  a  resale,  and  the  burden  of  proof  rests  upon 
the  trustee,  who  brings  such  report  to  the  court  for  confirma- 
tion, to  make  such  showing,  rather  than  upon  the  creditors  to 
make  good  their  objections  thereto.  In  a  case  where  the 
inadequacy  of  price  is  insignificant,  the  sale  should  not  be 
set  aside  on  that  ground  when  the  objecting  party  was  present 

80  In  re  Shaeffer,  105  F.  R.  352.        §2  in  re  Stewart,  1  N.  B.  R.  42, 

81  Reed  v.  BuUington,  11  N.  B.  R.     F.  C.  13418. 
408. 


776  THE  NATIONAL  BANKRUPTCY  LAW.  Ch.  70 

as  a  creditor  at  the  sale.^^  Where  before  confirmation  of  a 
trustee's  sale,  it  is  alleged  in  opposition  thereto  that  competi- 
tion was  stifled,  it  is  not  necessary  to  prove  that  the  successful 
bidder  was  connected  with  the  fraud.^* 

§  1199.  Setting  sale  aside.— Objection  to  a  sale  must  be 
made  in  a  court  of  bankruptcy  and  not  in  a  collateral  action ; 
and  where  fraud  by  the  trustee  is  alleged,  every  fact  relied 
on  to  establish  it  should  be  distinctly  stated,  and  the  whole 
should  be  verified  by  some  one  cognizant  of  the  facts.^^ 

A  sale  will  be  set  aside  where  the  required  notice  is  not 
given ;^6  or  where  the  trustee's  solicitor  bids  at  the  sale;^^ 
or  where  the  trustee  purchases  at  his  own  sale;^^  or  where 
property  purchased  from  a  trustee  was  held  a  few  months 
later  at  a  vastly  increased  price,  where  there  is  evidence  of  a 
lack  of  good  faith  ;^9  or  where  a  sale  is  made  by  order  of  court 
in  which  it  develops  the  court  had  no  authority  over  the  prop- 
gj.^y.90  QY  -v;vhere  there  is  a  gross  inadequacy  of  price  or  cir- 
cumstances impeaching  the  fairness  of  the  sale  (by  which  is 
not  meant  a  subsequent  offer  of  a  better  price)  ;9^  or  a  sale 
without  the  approval  of  court  for  less  than  seventy-five  per 
centum  of  its  appraised  value,  unless  of  perishable  property. 

While  the  uniform  practice  is  to  make  no  order  of  sale  until 
after  adjudication,  unless  necessary  to  preserve  the  property, 
an  order  of  sale  made  by  a  referee  prior  to  the  adjudication, 
while  exercising  the  power  of  the  district  judge,  will  not  be 
disturbed,  when  the  sale  was  made  by  consent  and  no  prejudice 
is  shown.^2 

§  1200.  *c.  Conveyance  of  bankrupt's  property.— The  title 
'to  property  of  a  bankrupt  estate  which  has  been  sold,  as 

83  In  re  Groves,  2  N.  B.  N.  R.  30,  ss  in  re  Hawley,  117  P.  R.  364,  9 
466;    In  re  O'Fallon,  F.  C.  10445;     A.  B.  R.  63. 

In  re  Thompson,  1  N.  B.  N.  355,  2  89  in  re  Mott,  1  N.  B.  R.  9,  F.  C. 

A.  B.  R.  216;  In  re  Bousfield,  16  N.  9879. 

B.  R.  481,  F.  C.  1703.  so  Davis  v.  R.  R.  Co.,  13  N.  B.  R. 

84  In  re  Groves,  2  N.  B.  N.  R.  30.  258,  1  Woods  661,  F.  C.  3648. 

85  In  re  Peabody,  16  N.  B.  R.  243,  9i  in  re  Ethier,  118  F.  R.  107,  9 
F.  C.  10866.  A.  B.  R.  160. 

86  Ex  p.  Bryan,  In  re  Major,  14  92  in  re  Kelly  Dry  Goods  Co.,  102 
N.  B.  R.  71,  2  Hughes  273,  F.  C.  F.  R.  747,  4  A.  B.  R.  528;  see  In  re 
2061.  Grinnell,  9  N.  B.  R.  29,  7  Ben.  42, 

87  Bk.  V.  Ober,  13  N.  B.  R.  328,  1  F.  C.  5830;  but  see  March  v.  Heat- 
Woods  80,  F.  C.  2731.  on,  2  N.  B.  R.  66,  1  Lowell  278,  F. 

C.  906L 


Ch.  70  TITLE  ON  SETTING  ASIDE  COMPOSITION.  777 

'herein  provided,  shall  be  conveyed  to  the,  purchaser  by  the 
'trustee.' 

§  1201.  Trustee  to  make  conveyances.— The  title  to  bank- 
rupt's property  vesting  in  the  trustee  by  virtue  of  the  adjudica- 
tion, in  case  of  a  sale  by  him,  he  should  transfer  the  same  to  the 
purchaser  by  such  deed  of  conveyance  as  may  be  necessary  to 
pass  title  under  the  laws  of  the  state,  the  same  as  would  be 
necessary  in  the  case  of  any  individual.  Though,  of^course,  the 
trustee  transfers  only  such  title  as  he  has,'-*^  and  if  it  be  real 
property,  he  has  no  authority  to  warrant  the  title,  other  than 
his  title  to  the  same  and  in  the  condition  in  which  he  received 
it.  In  the  case  of  securities  held  by  any  creditor  the  trustee 
should  be  ordered  to  execute  a  proper  transfer  to  said  creditors 
of  all  the  rights  and  claims  which  the  bankrupt,  or  his  cred- 
itors, may  have  in  the  same,^*  provided  if  there  is  no  equity  in 
it  for  the  estate.  A  trustee  can  transfer  only  such  title  as  he 
may  possess.^^  If  the  trustee  sells  property  but  refuses  to 
deliver  possession,  he  is  liable  to  an  action  at  law,  or  if  ordered 
by  the  court  and  declined  would  be  guilty  of  contempt.^^ 

§1202.  'd.  Title  on  setting  aside  composition  or  discharge. 
'—Whenever  a  composition  shall  be  set  aside,  or  discharge 
'revoked,  the  trustee  shall,  upon  his  appointment  and  qualifica- 
'tion,  be  vested  as  herein  provided  with  the  title  to  all  of  the 
'property  of  the  bankrupt  as  of  the  date  of  the  final  decree 
'setting  aside  the  composition  or  revoking  the  discharge.' 

§  1203.  Composition  set  aside.— Upon  application  of  parties 
in  interest  filed  at  any  time  within  six  months  after  a  composi- 
tion has  been  confirmed,  the  judge  may  set  it  aside  and  rein- 
state the  case;^'^  or  he  may  revoke  a  discharge  at  any  time 
within  one  year  after  it  was  granted.^^  In  this  event -the  title 
to  all  the  property  held  by  the  bankrupt  vests  in  the  trustee, 
which  would  include  not  only  such  as  was  held  at  the  time  the 
petition  was  filed  but  also  such  as  was  acquired  by  him  subse- 
quent thereto.  An  assignment  to  a  trustee  after  an  incomplete 
composition  must  be  without  prejudice  to  lawful  acts  done  or 
titles  acquired  under  and  by  virtue  of  such  composition.^ 

93  Bk.  V.  Bk.,  11  N.  B.  R.  49.  97  Sec.  13,  act  of  1898. 

94  In  re  Coffin,  1  N.  B.  N.  507,  2        98  Sec.  15,  act  of  1898. 

A.  B.  R.  344.  1  Ex  Hamlin,  16  N.  B.  R.  320,  2 

95  Lowell  571,  F.  C.  5993. 

96  Ives  V.  Tregent,  14  N.  B.  R.  60. 


TiS  THE  NATIONAL  BANKRUPTCY  LAW.  Ch.  70 

^1204.  'e.  Avoidance  of  transfers.— The  trustee  may  avoid 
'any  transfer  by  the  bankrupt  of  his  property  which  any  cred- 
'itor  of  such  bankrupt  might  have  avoided,  and  may  recover 
'the  property  so  transferred,  or  its  value,  from  the  person  to 
'whom  it  was  transferred,  unless  he  was  a  bona  fide  holder  for 
'value  prior  to  the  date  of  the  adjudication.  Such  property 
'may  be  recovered  or  its  value  collected  from  whoever  may 
'have  received  it,  except  a  bona  fide  holder  for  value.  For 
'the  purpose  of  such  recovery  any  court  of  bankruptcy  as  here- 
'inbefore  defined,  and  any  state  court  which  would  have  had 
'jurisdiction  if  bankruptcy  had  not  intervened,  shall  have  con- 
' current  jurisdiction.'- 

§  1205.  Preferences  voidable.— Any  preference  given  by  a 
bankrupt  within  four  months  before  the  filing  of  the  petition 
and  before  the  adjudication,  where  the  person  benefited  had 
reasonable  cause  to  believe  it  was  intended  as  a  preference, 
is  voidable  at  the  discretion  of  the  trustee  ;^  as  is  also  any  pay- 
ment to  counsel  except  to  the  extent  of  a  reasonable  amount.* 
A  receiver  appointed  to  preserve  the  estate  until  the  trustee 
qualifies  has  no  authority  to  maintain  such  a  suit.^  A  creditor 
without  notice  may  acquire  rights  in  the  property  superior  to 
those  of  the  trustee.^  Any  lien  created  in  pursuance  of  a  suit 
in  law  or  equity  within  four  months  before  the  filing  of  a 
petition  will  be  dissolved,  and  any  conveyance,  transfer,  assign- 
ment or  incumbrance  of  the  bankrupt's  property,  with  intent 
to  defraud  or  delay  his  creditors,  is  null  and  void  as  against 
the  creditors,  except  as  to  purchasers  in  good  faith  and  for 
present  consideration,'''  and  in  case  of  a  sale  thereunder,  the 
proceeds  should  be  turned  over  to  the  trustee.^ 

See  also  ante,  §  961,  et  seq. 

-  Subdivision   "e"   was  amended  *  Sec.  60d,  act  of  1898. 

iDy  the  act  of  February  5,  1903,  by  s  Boonville  Nat'l  Bank  v.  Blakey, 

the  addition  at  the  end  thereof,  of  107  F.  R.  891,  6  A.  B.  R.  13. 

the  following:     "For  the  purpose  e  in  re  Mullen,  101  F.  R.  413,  4 

of    such    recovery     any     court     of  A.  B.  R.  224;   Phelps  v.  Curtis,  16 

bankruptcy     as     hereinbefore    de-  N.  B.  R.  85;  see,  generally,  Barnes 

fined   and   any   state   court   which  Mfg.    Co.   v.   Norden,    7   A.    B.    R. 

would    have    had    jurisdiction    if  553. 

bankruptcy    had    not    intervened,  7  Sec.  67,  act  of  1898;  Barker  v. 

shall     have     concurrent    jurisdic-  Franklin,  8  A.  B.  R.  468. 

tion."  s  In  re  Kenney,  105  F.  R.  897,  5 

3  Sec.    60b,    act   of    1898;    In    re  A.  B.  R.  355. 
Nathan.  2  N.  B.  N.  R.  613;  Colt  v. 
Sears,  38  Atl.  Rep.  1056. 


Ch.  70  TRUSTEE  TO  AVOID  TRANSFERS.  779 

§  1206.  Nature  of  proceeding  when  property  under  bank- 
rupt's control. — A  referee'*  or  a  court  of  bankruptcy  has  juris- 
diction and  power  to  order  a  bankrupt  to  pay  over  to  his 
trustee  money,  or  other  property,  found  to  be  in  his  possession 
or  control,  and  properly  belonging  to  his  estate  in  bankruptcy, 
and,  if  the  bankrupt  fails  to  obey  such  order,  he  may  be  com- 
mitted as  for  a  contempt  until  he  complies  upon  motion  of  the 
trustee.^ "^  Thus  where  the  court  of  bankruptcy  finds  a  transfer 
of  property  by  a  bankrupt  in  fraud  of  creditors,  the  property 
still  remaining  in  bankrupt's  hands,  it  must  be  turned  over  to 
the  trustee,^  ^  but  no  such  order  can  be  made  until  the  issue 
is  squarely  raised  between  the  trustee  and  the  bankrupt,  as 
to  whether  the  bankrupt  has  in  his  possession  or  under  his 
control  such  money  or  property;^-  nor  unless  the  testimony 
proves  beyond  a  reasonable  doubt  that  the  same  is  in  fact  in 
his  possession  or  under  his  control.^^  If  the  bankrupt  abso- 
lutely denies  having  it  and  the  evidence  to  the  contrary  is 
only  inferential,  and  there  is  any  reasonable  doubt  as  to  bank- 
rupt's ability  to  comply  with  the  order,  it  should  not  be  made.^-^ 
Where  a  bankrupt  admits  receiving  a  large  sum  of  money 
just  before  his  bankruptcy  for  which  he  fails  to  satisfactorily 
account,  or  there  is  an  unexplained  deficit  in  his  stock,  or  in 
the  proceeds  of  sales,  he  may  be  ordered  to  turn  over  to  his 
trustee  such  goods  or  money,  less  reasonable  cost  of  living  ;i^ 

9  In  re  Miller,  105  F.  R.  57;  "In  re  McCormlck,  2  N.  B.  N. 
Mueller  v.  Nugent.  184  U.  S.  1,  7  R.  104,  3  A.  B.  R.  340,  97  F.  R. 
A.  B.  R.  224.  566;      Ripon     Knitting     Wks.     v. 

10  In  re  Schlesinger,  102  F.  R.  Schrieber,  2  N.  B.  N.  R.  545,  899, 
117,  4  A.  B.  R.  361;  Ripon  Knitting  101  F.  R.  810,  4  A.  B.  R.  299;  In 
Wks.  V.  Schreiber,  2  N.  B.  N.  R.  re  Tischler,  2  N.  B.  N.  R.  549;  In 
899,  101  F.  R.  810,  4  A.  B.  R.  299;  re  Mayer,  2  N.  B.  N.  R.  257,  3  A. 
In  re  Purvine,  1  N.  B.  N.  326,  96  B.  R.  533,  98  F.  R.  839;  In  re 
F.  R.  192,  2  A.  B.  R.  787;  In  re  Bryant,  2  N.  B.  N.  R.  1058. 
Rosser,  1  N.  B.  N.  469,  2  A.  B.  R.  i^  In  re  Thiessen,  2  N.  B.  N.  R. 
746,  96  F.  R.  308,  s.  c.  101  F.  R.  625;  In  re  Friedman,  1  N.  B.  N. 
562;  In  re  Oliver,  1  N.  B.  N.  329,  2  332,  2  A.  B.  R.  301;  In  re  Ogles,  1 
A.  B.  R.  783,  96  F.  R.  95;  In  re  N.  B.  N.  400,  2  A.  B.  R.  514. 
Kuntz,  1  N.  B.  N.  256;  In  re  Sal-  is  In  re  Kuntz.  1  N.  B.  N.  256; 
key,  11  N.  B.  R.  423,  516,  F.  C.  In  re  Friedman,  1  N.  B.  N.  332,  2 
12253;  In  re  Speyer,  6  N.  B.  R.  255,  A.  B.  R.  301;  In  re  McCormick,  2 
F.  C.  13339.  N.  B.  N.  R.  104,  3  A.  B.  R.  '340,  97 

11  In  re  Smith,  1  N.  B.  N.  533,  F.  R.  566;  In  re  Rosser.  1  N.  B.  N. 
100  F.  R.  795,  3  A.  B.  R.  95.  469,  2  A.  B.  R.  746,  96  F.  R.  308; 

12  In  re  Pearson,  1  N.  B.  N.  474,  In  re  Purvine,  1  N.  B.  N.  326,  96 
2  A.  B.  R.  819.  F.  R.   192,   2  A.   B.   R.  787;    In   re 


780  THE  NATIONAL  BANKRUPTCY  LAW.  Ch.  70 

but,  if  the  difference  has  been  used  in  paying  creditors,  or 
business  expenses  or  in  any  other  similar  manner  or  is  claimed 
to  be  due  to  a  defective  appraisal  and  defects  are  shown  in 
such  appraisal,  the  order  will  not  be  made.^"  Where  a  trustee 
has  peaceably  secured  personal  property,  it  is  in  the  custody 
of  the  court;  and,  if  such  property  is  subsequently  seized 
under  process  from  a  state  court,  on  petition  of  the  trustee  it 
will  be  forthwith  restored  to  the  latter 's  possession,!^  See 
also  the  section  following. 

§  1207. When   property   claimed   adversely   by  third 

persons. — Prior  to  the  amendment  of  February  5,  1903,  if  the 
property  in  controversy  at  the  adjudication  was  in  a  third 
person's  actual  possession,  claiming  absolute  title,  the  owner- 
ship, if  claimed  by  the  trustee,  had  to  be  determined  by  an 
action  at  law  or  suit  in  equity  in  the  same  court  as  if  there 
had  been  no  bankruptcy  and  the  bankrupt  himself  was  the 
party  instead  of  the  trustee  ;i8  but  now  the  court  of  bank- 
ruptcy is  given  concurrent  jurisdiction  with  the  state  courts 
over  actions  of  this  character.  In  passing  upon  the  trustee's 
claims  in  such  cases,  the  state  court  does  not  proceed  under 
the  bankruptcy  law,  but  simply  recognizes  it  as  the  source  of 
the  trustee's  title,  in  like  manner  as  it  would  a  contract  or 

Tudor,  2  N.  B.  N.  R.  168,  100  F.  Buntrock  Clothing  Co.,  1  Id.  291. 
R.  796,  4  A.  B.  R.  78;  In  re  Deuell,     92  F.  R.   886,  1  A.  B.  R.   454;    In 

100  F.  R.  633;    In  re  Schlesinger,     re  Brodbine,  1  N.  B.  N.  279,  93  F. 

2  N.  B.  N.  R.  169,  3  A.  B.  R.  342,  R.  643,  2  A.  B.  R.  53;  In  re  Cohn, 
97  F.  R.  930,  102  Id.  117;  In  re  2  N.  B.  N.  R.  299,  98  F.  R.  75,  3 
Peltasohn,  16  N.  B.  R.  265,  F.  C.  A.  B.  R.  421;  Smith  v.  Mason,  6 
10912;  Ripon  Knitting  Wks.  v.  N.  B.  R.  1,  14  Wall.  419;  Bardes  v. 
Schreiber,  2  N.  B.  N.  R.  545,  899,  Hawarden  Bk.,  178  U.  S.  524,  2  N. 

101  F.  R.  810,  2  A.  B.  R.  299;  B.  N.  R.  725.  4  A.  B.  R.  163;  Hicks 
In  re  De  Gottardi,  114  F.  R.  328,  v.  Knost.  178  U.  S.  541,  2  N.  B.  N. 
7  A.  B.  R.  723.  R.  734,  4  A.  B.  R.  178;   Mitchell  y. 

16  In  re  Tischler,  2  N.  B.  N.  R.  McClure,  178  U.  S.  539,  2  N.  B.  N. 
549;  In  re  Mayer,  2  N.  B.  N.  R.  257,     R.  735,  4  A.  B.  R.  177;   s.  c.  In  re 

3  A.  B.  R.  533,  98  F.  R.  839.  Scott,  1   N.  B.   N.   327;    Knight  v. 

17  In  re  Endl.  99  F.  R.  915,  3  A.  Cheney,  5  N.  B.  R.  305.  F.  C.  7883; 
B.  R.  813.  In  re  Marter,  12  N.  B.  R.  185,  F. 

18  In  re  Baudouine,  101  F.  R.  C.  9143;  In  re  Bonesteel.  3  N.  B.  R. 
574,  3  A.  B.  R.  651;  In  re  Bryant,  127,  7  Blatch.  175,  F.  C.  1627; 
2  N.  B.  N.  R.  1058;  In  re  Griffith,  Rogers  v.  Winsor,  6  N.  B.  R.  246, 
1  N.  B.  N.  546;  In  re  Pearson,  1  Id.  F.  C.  12023;  Kidder  v.  Horrabin, 
474,  2  A.  B.  R.  819;   In  re  Fowler,  18  N.  B.  R.  146. 

1   Id.   215,  1  A.  B.  R.   637;    In  re 


Ch.  70  TRUSTEE  TO  AVOID   TRANSFERS.  781 

deed  from  which  he  derived  his  title.^^  While  the  court  of 
bankruptcy  now  has  jurisdiction,  on  a  trustee's  summary 
petition,  to  order  a  sheriif,  or  other  person,  to  pay  over  to  him 
moneys  or  property  received  as  such  officers  as  the  result  of  a 
lien  or  conveyance  avoided  by  the  law,  owing  to  the  comity 
existing  between  the  state  and  federal  courts,  the  better  prac- 
tice is  for  the  trustee  first  to  apply  for  such  order  to  the  court 
whose  officer  he  is;-"^  and  the  same  is  true  of  property  in  the 
hands  of  an  assignee  under  a  general  assignment,  and  would 
extend  to  the  case  of  a  transferee  of  the  assignee  who  pur- 
chased for  value  but  with  notice  that  an  adjudication  in  bank- 
ruptcy had  been  rendered.^i 

§1208.    Trustee  represents  creditors  a^  well  as  bankrupt.— 

This  subdivision  expressly  provides  that  the  trustee  "may 
avoid  any  transfer  by  the  bankrupt  of  his  property  which  any 
creditor  might  have  avoided."  Whatever  his  relation  to  the 
bankrupt's  property  in  other  respects  may  be,  for  the  purpose 
of  attacking  transfers  of  property  by  the  bankrupt,  the  trustee 
stands  in  the  shoes  of  judgment  as  well  as  general  creditors 
besides  succeeding  to  all  the  rights  of  the  bankrupt,  and  may 
therefore  maintain  or  defend  proceedings  in  regard  to  the 
bankrupt's  property,  which  the  latter  himself  could  not.22 

§  1209.  Failure  to  take  possession  or  abandonment.— The 
trustee  is  not  bound  to  take  all  the  bankrupt's  property,  but 
may  reject  such  as  will  be  more  of  a  burden  than  a  benefit  to 
the  estate.23  His  failure  to  record  the  evidence  of  his  title  in 
a  county  in  which  land  of  the  bankrupt  is  situated  is  evidence 
of  a  disposition  not  to  assert  title  to  such  land  and  after  a 

19  Cook  V.  Waters,  9  N.  B.  R.  155.  R.  793;   aff'g  1  N.  B.  N.  532,  2  A. 

20  See   as    to   decisions   prior    to  B.  R.  532,  93  F.  R.  953. 
amendment:     In  re  Franks,  Ex  p.        21  Bryan  v.   Bernheimer,   181   U. 
Sharpe,   95   F.  R.  635,  2  A.   B.  R.  S.  188,   5  A.  B.  R.  623. 

634;    In   re   Abraham,   1  N.   B.  N.         22  Jn  re  McNamara,  2   N.  B.  N. 

281,  2  A.  B.  R.  266,  93  F.  R.  767;  R.  341;  and  cases  cited  under  "Na- 

In  re  Price,  1  N.  B.  N.  240,  92  F.  ture  of  Trustee's  title,"  ante,  §  1148, 

R.  987,  1  A.  B.  R.  606;   Connor  v.  see  also  In  re  Harrison,  2  N.  B.  N 

Long,  104  U.  S.  228;   In  re  O'Con-  R.  541;   In  re  St.  Helen's  Mill  Co., 

ner,  1  N.  B.  N.  132,  1  A.  B.  R.  381;  10  N.  B.  R.  411,  3  Sawy.  88,  F.  C. 

In  re  Lesser,   100  F.  R.  433,  2  N.  12222;    Barnewall   v.   Jones,  14   N. 

B.  N.  R.  599;  see  Metcalf  v.  Barker,  B.  R.  278,  F.  C.  1027. 
187  U.  S.  165,  9  A.  B.  R.  36;   Con-         23  in  re  Schiermann,  2  N.  B.  N. 

tra,  In  re  Francis  Valentine  Co.,  1  R.   118;    Kimberling  v.   Hartley,  1 

N.  B.  N.  529,  2  A.  B.  R.  522,  94  F.  F.  R.  571. 


782  THE  NATIONAL  BANKRUPTCY  LAW.  Ch.  70 

reasonable  time,  he  will  be  estopped  if  the  bankrupt  in  pos- 
session has  sold  it  to  an  innocent  purchaser  for  value.^^  Where 
the  bankrupt  omits  from  his  schedules  a  patent  or  like  interest 
owned  by  him  and  the  trustee  asserts  no  claim  thereto  and 
after  the  discharge  of  both,  the  bankrupt  sells  the  same,  the 
title  of  the  purchaser  is  goodp^  or,  if  he  refuses  to  pay  the 
dues  on  seats  in  stock  exchanges,  license  fees,  and  the  like, 
and  takes  no  steps  to  have  them  sold,  he  cannot  years  later 
compel  their  sale  for  the  benefit  of  the  estate,  or  make  the 
bankrupt  refund  dividends  paid  his  fellow  members,  both  reme- 
dies having  been  lost  through  laches.^^  His  failure  for  a  num- 
ber of  years  to  prosecute  a  claim  belonging  to  the  bankrupt 
does  not  show  an  abandonment  in  the  absence  of  evidence  that 
he  knew,  or  had  means  of  knowing,  of  the  existence  of  the 
claim.-'^ 

§1210.  Trustee's  rights  of  action— Time.— The  trustee  is 
not  limited  to  recovering  property  transferred  within  four 
months  of  the  filing  of  the  petition  in  bankruptcy,  but,  if  he 
discovers  any  that  has  been  transferred  by  bankrupt  at  any 
time  within  the  state  statute  of  limitation  in  fraud  of  cred- 
itors,^*  whose  claims  existed  at  the  time  of  such  transfer,  he 
may  have  them  set  aside,  and,  until  they  are  so  set  aside,  he 
has  no  title  to  such  property.^^  If  he  files  a  petition  in  respect 
to  property  in  which  he  is  not  interested,  he  must  pay  the  costs 
himself.30 

The  trustee  has  the  same  rights,  with  respect  to  setting  aside 
fraudulent  conveyances  by  the  bankrupt,  as  the  bankrupt's 
creditors,  or  any  of  them,  had  by  the  common  law  or  the 
statutory  law  of  the  particular  state  ;3i  and  it  is  not  as  a 
penalty,  but  has  its  operation  in  the  vesting  of  the  title  in 
the  trustee  after  the  transfer  is  declared  void.^-    After  bank- 

24  Taylor  v.  Irwin,  20  F.  R.  615.  29  in  re  Grabs,  1  N.  B.  N.  164,  1 

25  Sessions  v.  Romadka,  145  U.  A.  B.  R.  465;  Pratt  v.  Curtis,  6  N. 
S.  29.  B.  R.  139,  2  Lowell  87,  F.  C.  11375. 

26  Sparhawk  v.  Yerkes,  142  U.  S.  so  in  re  Preston,  6  N.  B.  R.  545, 
1;  Id.  V.  Ackley,  Id.  F.  C.  11394. 

27  Dunshane  v.  Beall,  161  U.  S.  31  in  re  Mullen,  101  F.  R.  413,  4 
513;  Mabin  v.  Raymond,  15  N.  B.  A.  B.  R.  224;  In  re  Harrison,  2  N. 
R.  353,  F.  C.  9338.  B.  N.  R.  541;  In  re  McNamara,  Id. 

28  In  re  Chaplin,  115  F.  R.  162,  341. 

8  A.  B.  R.  121 ;  In  re  Scbenck,  116        32  Cook  v.  Waters,  9  N.  B.  R.  155. 
F.  R.  554,  8  A.  B.  R.  727;  Andrews 
V.  Mather,  9  A.  B.  R.  296. 


Ch.  70  TRUSTEE'S  RIGHT  TO  PROPERTY.  783 

ruptey  proceedings  are  begun,  the  trustee,  and  not  a  creditor, 
must  bring  a  suit  to  set  aside  a  conveyance  claimed  to  be 
void,^^  or  in  fraud  of  creditors  or  any  one  of  them.^^ 
See  Suits  By  and  Against  Bankrupts,  ante,  §  275,  et  seq. 

§1211. ,To  contest  bankrupt's  account  as  adminis- 
trator.— The  trustee  of  an  heir  may  contest  the  account  of  an 
administrator  or  representative  of  the  decedent's  estate,  in 
order  to  determine  the  bankrupt's  interest  therein,  and  he  may 
do  so,  notwithstanding  the  bankrupt  objects.-'^'^ 

§  1212. As  to  property  in  custody  of  the  law.— The 

ultimate  property  in  attached  goods  being  in  the  debtor,^^  the 
net  proceeds  of  a  sale  on  legal  process  constitute  part  of  bank- 
rupt's estate  and  vest  in  his  trustee,  if  within  four  months, 
bankruptcy  proceedings  are  instituted.-^ '^  If  no  sale  has  been 
made,  the  trustee  is  entitled  to  the  property,  or,  if  deemed  for 
the  best  interests  of  the  estate,  he  will  be  subrogated  to  the 
rights  of  the  attaching  creditors  as  respects  the  lien.^*^  The 
trustee  is  entitled  to  property  in  the  bankrupt's  possession 
free  of  lien  notwithstanding  the  sheriff,  more  than  four  mouths 
before  bankruptcy,  having  attachments  against  him,  took  re- 
ceipts for  such  property  but  left  it  in  the  bankrupt's  posses- 

33  In  re  Carter,  1  N.  B.  N.  162,  1     544;   In  re  Moyer,  1  N.  B.  N.  260, 

A.  B.  R.  160;   In  re  Pearson,  IN.  1  A.  B.  R.  577,  93  F.  R.  188;  In  re 

B.  N.  474,  2  A.  B.  R.  819;  In  re  Fellerath,  1  N.  B.  N.  292,  95  F. 
Adams,  1  N.  B.  N.  167,  1  A.  B.  R.  R.  121,  2  A.  B.  R.  40;  In  re  Rich- 
94;  In  re  Griffith,  1  N.  B.  N.  546;  ards,  95  F.  R.  258,  2  A.  B.  R.  518; 
Thurmond  v.  Andrews  et  ux.,  13  see  also  In  re  Globe  Cycle  Works, 
N.  B.  R.  157.  1  N.  B.  N.  570;    In  re  Mullen,  101 

34  In  re  Gurney,  15  N.  B.  R.  373,  F.  R.  413,  4  A.  B.  R.  224;  Long  v. 
•:  Biss.  414,  F.  C.  5873.  Conner,  17  N.  B.  R.  540,  F.  C.  8479; 

35  In  re  Clute,  1  N.  B.  N.  386,  2  In  re  Black,  1  N.  B.  R.  81,  2  Ben. 

A.  B.  R.  376.  196,  F.  C.  1457. 

36  In  re  Hull,  18  N.  B.  R.  1,  14  ss  in  re  Hammond,  98  F.  R.  845; 
Blatch.  257,  F.  C.  6857.  In   re  Francis-Valentine  Co.,  1  N. 

37  Bear  v.  Chase,  99  F.  R.  920,  B.  N.  529,  2  A.  B.  R.  522,  94  F.  R. 
3  A.  B.  R.  746;  In  re  Franks,  2  A.  793;  s.  c.  1  N.  B.  N.  532,  2  A.  B.  R. 

B.  R.  634,  95  F.  R.  635;  In  re  Ken-  188,  93  F.  R.  953;  Reed  v.  Bulling- 
ney,  2  N.  B.  N.  R.  140,  3  A.  B.  R.  ton,  11  N.  B.  R.  408;  Morris  v. 
353,  97  F.  R.  554;  In  re  Francis-  Davidson,  11  N.  B.  R.  454;  In  re 
Valentine  Co.,  1  N.  B.  N.  529,  2  A.  Preston,  6  N.  B.  R.  545,  F.  C. 
B.  R.  522,  94  F.  R.  793;  s.  c.  1  N.  11394;  In  re  Houseberger.  2  N.  B. 
B.  N.  532,  2  A.  B.  R.  188,  93  F.  R.  R.  33,  2  Ben.  504,  F.  C.  6734. 
953;  Reese  v.  Vinton,  1  N.  B.  N. 


784  THB  NATIONAL  BANKRUPTCY  LAW.  Ch.  70 

sion.39  The  court  may  receive  from  one  indebted  to  the  bank- 
rupt the  amount  of  such  debt,  although  garnisheed  within  four 
months  of  the  adjudication  in  bankruptcy,  the  judgment  there- 
for being  entered  in  a  state  court,  and  may  make  such  order 
as  may  be  necessary  to  protect  the  garnishee.'**^ 

The  trustee  can  take  advantage  of  any  remedy  open  to  a 
subsequent  attaching  creditor  in  an  attachment  suit,  since  he 
represents  creditors  as  well  as  bankrupt  ;'*i  but  the  trustee 
may  intervene  in  such  suit  and  apply  to  the  state  court  for 
an  order  directing  such  officer  or  person  to  turn  the  property 
or  its  value  over  to  him,'*^  The  state  court  may  first,  however, 
charge  the  assets  with  the  payment  of  the  costs  and  expenses 
incurred  in  bringing  the  same  into  the  state  court,  before 
requiring  the  delivery  to  be  made  to  the  trustee.'*^ 

The  trustee  may  summarily  recover  by  proceedings  in  the 
bankruptcy  court,  goods  replevied  from  the  trustee,'*^  Whiie 
he  cannot  attack  collaterally  a  sale  under  attachment  of  prop- 
erty in  the  sheriff's  possession  before  the  filing  of  the  petition, 
he  may  intervene  and  claim  the  property  ;^^  or  he  may  sue  to 
enjoin  the  sheriff  from  paying  over  to  a  creditor  the  proceeds 
of  a  sale  under  the  attachment  and  ask  that  they  be  paid  to 
him,^*^  or  he  may  proceed  in  the  bankruptcy  court  if  the  lien 
is  avoided  by  the  law. 

§  1213. As  to  collateral.— The  trustee  can  recover  pos- 

39  In  re  Ashley,  19  N.  B.  R.  237,  793;  In  re  Kenney,  2  N.  B.  N.  R. 
F.  C.  581.  140,  3  A.  B.  R.  353,  97  F.  R.  554; 

40  In  re  McCartney,  109  F.  R.  Richardson  v.  New  Orleans  Deb. 
621,  6  A.  B.  R.  367.  Redemp.  Co.,  102  F.  R.  781;   same 

41  Beers  v.  Place,  4  N.  B.  R.  150,  v.  New  Orleans  Coffee  Co.,  Id.  785; 
F.  C.  1233.  In  re  Tyler,  104  F.  R.  778;   In  re 

42  In  re  Frank,  95  F.  R.  635,  2  A.  Lengert  Wagon  Co.,  110  F.  R.  927, 
B.  R.  634;  In  re  Price,  1  N.  B.  N.  6  A.  B.  R.  535;  Wilson  v.  Parr,  8 
240,  92  F.  R.  987,  1  A.  B.  R.  606;  A.  B.  R.  320. 

In  re  Lesser,  2  N.  B.  N.  R.  599,  ICO  "  Wilson  v.  Parr,  8  A.  B.  R.  230. 

F,  R.  433,  3  A.  B.  R.  815;   In  re  44  White  v.   Schloerb,  178  U.   S. 

Klein,  1  N.  B.  N.  486;   3  A.  B.  R.  E42,  2  N.  B.  N.  R.  721,  4  A.  B.  R. 

174,  97  F.  R.  31;   Conor  v.  Long,  178;   In  re  Russell,  101  F.  R.  248, 

104  U.  S.  288;  Johnson  v.  Bishop,  3  A.  B.  R.  658;   In  re  Vogel,  3  N. 

8    N.   B.    R.    533,   F.   C.    7373;    see  B.  R.  49,  7  Blatch.  18,  F.  C.  16982. 

Metcalf  V.  Barker,  187  U.  S.  165,  9  45  Valliant  v.  Childress,  11  N.  B. 

A.  B.  R.  36;  Contra,  In  re  Francis-  R.  217. 

Valentine  Co.,  1  N.  B.  N.  532,  2  A.        46  Pennington    v.    Lowenstein,   1 

B.  R.  188,  93  F.  R.  953,  aff'd  1  N.     N.  B.  R.  157,  F.  C.  10938. 
B.  N.  529,  2  A.  B.  R.  522,  94  F.  R. 


Ch.  70  TRUSTEE'S  RIGHT  TO  PROPERTY.  785 

session  of  property  in  the  possession  of  any  one  as  collateral 
subject  to  any  valid  lien  such  person  might  have  on  the  pro- 
ceeds of  such  property.^'^ 

§  1214. As  to  fraudulent  conveyances.— As  all  convey- 
ances, or  transfers,  made  by  a  debtor  subsequent  to  the  pas- 
sage of  the  act,  and  within  four  months  prior  to  the  filing  of 
the  petition,  with  the  intent  and  purpose  to  hinder,  delay  or 
defraud  his  creditors  ar«  null  and  void,  except  as  to  purchases 
in  good  faith,  and  for  a  present  fair  consideration,  the  prop- 
erty so  affected  becomes  a  part  of  the  assets  of  the  estate  and 
the  trustee  may  proceed  to  enforce  his  rights  thereto,  either 
in  the  court  of  bankruptcy  or  a  state  court.  While  the  trustee 
stands  in  the  bankrupt's  shoes,  and  is  not  strictly  a  judgment 
creditor,  he  may,  nevertheless,  bring  any  action  which  a  judg- 
ment creditor  might  have  brought  before  bankruptcy,  espe- 
cially since  the  passage  of  this  subdivision,'*^  thus,  where  under 
the  state  law  only  judgment  creditors  could  maintain  an  action 
to  declare  a  creditor's  chattel  mortgage  invalid  for  want  of 
re-filing,  the  trustee  may  institute  proceedings  to  have  such 
mortgage  so  declared  for  the  benefit  of  the  estate.^*^  A  fraudu- 
lent transfer  being  absolutely  void,^^  a  suit  in  the  nature  of 
trover  may  be  brought  by  the  trustee  without  alleging  and 
proving  a  demand  for  and  refusal  to  restore  the  property 
transferred,  notwithstanding  bankrupt  has  been  discharged.^"*^ 
Whether  such  suit  should  be  for  the  goods  or  their  value  is 
optional,  subject  to  the  direction  of  the  court,  though,  in  a 
proper  case,  it  should  be  for  the  value  instead  of  for  the  goods, 
especially  if  the  transferee  were  a  party  to  the  fraud.  If  the 
creditor  benefited  by  such  fraud  agrees  to  restore  to  the  trustee 
the  money  value  of  such  property  or  to  purchase  any  rights 
of  action  which  may  exist  against  him  in  favor  of  the  trustee, 

47  In  re  Cobb,  1  N.  B.  N.  557,  3  1  N.  B.  N.  420,  2  A.  B.  R.  805;  Bost- 
A.  B.  R.  129,  96  F.  R.  821.  wick  v.  Foster,  18  N.  B.  R.  123,  14 

48  Sec.  70e,  act  of  1898;  In  re  Blatch.  436,  F.  C.  1G82;  Contra,  In 
McNamara,  2  N.  B.  N.  R.  341;  In  re  Bozeman,  2  A.  B.  R.  809,  1  N.  B. 
re  Tollett,  2  N.  B.  N.  R.  1096.  N.    479;    In   re  Ohio   Co-op.   Shear 

49  In  re  Harrison,  2  N.  B.  N.  R.  Co.,  2  A.  B.  R.  775,  1  N.  B.  N.  477; 
541;  In  re  Booth,  2  N.  B.  N.  R.  In  re  McKay,  1  A.  B.  R.  292,  1  N. 
377,  98  F.  R.  975;    In  re  Leigh,  1  B.  N.  133. 

N.  B.  N.  526,  96  F.  R    806,  s.  c.  1         5o  Sec.  67e,  act  of  1898. 

N.  B.  N.  425,  2  A.  B.  R.  606;  In  re         si  in   re  Pierce,  103   F.  R.   64.   2 

Yukon  Woolen   Co.,   96  F.  R.  326,     N.  B.  N.  R.  984,  4  A.  B.  R.  554. 

50 


786  THE  NATIONAL  BANKRUPTCY  LAW.  Cu.  70 

suit  to  recover  the  property  fraudulently  conveyed  should  not 
be  brought,  if,  in  the  court's  judgment,  it  is  likely  to  net  the 
estate  less  than  the  amount  offered  in  settlement.^^ 

A  trustee  seeking  to  set  aside  and  annul  a  bill  of  sale  and 
transfer  of  property,  previously  made  by  the  bankrupt,  alleged 
to  have  been  fraudulent  under  the  bankruptcy  law  and  as 
against  creditors,  may  appropriately  proceed  by  bill  in  equity, 
and  will  not  be  required  to  seek  his  r.emedy  at  law.'^^  Where 
an  insolvent  fraudulently  assigned  a  lease,  the  trustee  can 
enforce  the  resulting  trust  in  creditors'  favor  in  the  hands  of 
subsequent  transferees  with  notice  ;^^  or  may  sue  a  debtor 
who  pays  money  under  his  creditor's  order  to  a  third  person, 
intending  thereby  to  enable  his  creditor  to  prefer  such  third 
person,  as  such  debtor  will  be  deemed  still  to  hold  such 
money  ;^^  or  for  damages  for  injury  or  detention  of  goods  by 
a  party  to  whom  the  bankrupt  transferred  them  contrary  to 
the  law.^<^ 

If,  for  any  reason,  title  of  property  affected  by  a  fraudulent 
conveyance  revests  in  the  bankrupt  at  the  time  of  filing  a 
petition,  it  will  pass  to  the  trustee  f"^  or  if  such  conveyance  is 
declared  fraudulent  and  void  by  a  state  court,  he  may  claim 
the  property  subject  to  any  valid  liens  against  it.^^  The  trus- 
tee cannot  have  a  conveyance  set  aside  as  fraudulent  against 
creditors,  if  it  appears  that  there  are  no  provable  debts.^'^ 

See  also  Fraudulent  Transfers  or  Conveyances,  ante,  §  1104. 

§  1215. As  to  funds  in  bank.— A  trustee  may  have  set 

aside  any  conveyance  to  a  bank  in  fraud  of  creditors,  and 
deposits  made  by  one  subsequently  becoming  bankrupt  be- 
come a  part  of  the  assets  of  the  estate  and  will  be  turned 
over  to  the  trustee.  Hence,  where  a  sheriff  having  made  a 
levy  and  sale  of  the  bankrupt's  property  after  the  title  had 
passed  to  the  trustee,  deposited  the  proceeds  with  the  judgment 

52  In  re  Phelps,   2   N.   B.   N.   R.  "  in  re  Brown,  91  F.  R.  358,  1 

484,  3  A.   B.  R.  396;    Southard  v.  N.  B.  N.  240,  1  A.  B.  R.  107;    see 

Benner,  19  N.  B.  R.  124.  In  re  Tollett,  105  F.  R.  425,  5  A. 

C3  Wall  V.  Coxe,  101  F.  R.  403.  B.  R.  305. 

54  Jones  V.  Lawson,  33  F.  R.  632.  ss  in  re  Lesser,  100  F.  R.  433,  2 

55  Coxe  V.  Gardner,  12  N.  B.  R.  N.  B.  N.  R.  599,  3  A.  B.  R.  815. 
137,  21  Wall.  475.  bo  Nicholas  v.  Murray,  18  N.  B, 

56  Shumann   v.    Fleckenstein,    15  R.  469,  F.   C.  10223. 
N.   B.  R.  324,   4   Sawy.  174,  F.  C. 

12826. 


Ch.  70  STOCKHOLDER'S  LIABILITY.  787 

creditor,  a  bank,  and  received  a  certificate  of  deposit  instead 
of  a  receipt,  or  where  a  bank  as  creditor,  collects  money  due 
the  bankrupt,  and  gives  the  same  to  the  sheriff  who  applies  it 
on  the  bank's  judgment,  it  constitutes  a  fraudulent  preference 
and  may  be  recovered  by  the  trustee.^*^  Where  a  bank  receives 
a  deposit  after  it  is  insolvent,  of  which  fact  its  officers  have 
knowledge,  the  fraud  avoids  the  implied  contract  and  prevents 
the  money  becoming  the  bank's  property  and  the  trustee  is 
entitled  to  it;*^^  and  the  same  is  true  of  drafts  and  checks 
deposited  for  collection,  but  which  had  not  been  collected  when 
the  bank  closed  its  doors,  notwithstanding  they  were  endorsed 
to  the  bank  without  qualification ;  or  that  on  the  day  of  such 
deposits  drafts  equal  to  the  whole  deposit  were  purchased, 
which  were  subsequently  returned  unpaid,  as  such  purchase 
formed  a  separate  transaction,'^-  and  the  deposit  might  there- 
fore he  reclaimed.  But  the  original  pledgor  of  a  certificate  of 
stock,  wrongfully  deposited  as  collateral  by  a  pledgee,  may 
follow  the  fund  received  by  the  bank  into  the  hands  of  the 
trustee  of  the  pledgee,  and  recover  the  proceeds  of  his  stock, 
less  his  indebtedness  to  the  bankrupt.^^ 

§1216. Stockholders'    liability.— The    extent    of    the 

stockholders'  statutory  liability  and  the  character  of  that 
liability  depend  upon  and  are  determined  by  the  charter  of  the 
corporation  or  the  statute  of  the  state  which  created  it.*^^  The 
capital  stock  of  the  corporation,  especially  its  unpaid  subscrip- 
tions, is  a  trust  fund  for  the  benefit  of  the  general  creditors  of 
the  corporation.^^ 

There  are  various  methods  by  which  stockholders  may  seek 
to  avoid  their  liability  to  corporate  creditors;  as,  first,  by  a 
cancellation  or  withdrawal  from  the  contract;  second,  by  a 
release  from  their  obligation  to  pay  the  full  par  value  of  the 
stock ;  third,  by  a  transfer  of  the  stock.    In  each  of  these  cases, 

60  Traders'  Nat.  Bk.  v.  Campbell,  64  Cook  on  Corp.,  §  223 ;  Hale  v. 
6  N.  B.  R.  353,  14  Wall.  87.  Harden,  95  F.  R.  747;  Hale  v.  Tay- 

61  Richardson  v.  New  Orleans  lor,  104  F.  R.  757;  Hale  v.  Allison, 
Deb.  Redemp.  Co.,  102  F.  R.  780;  102  F.  R.  790. 

same   v.   New   Orleans  Coffee   Co.,        65  cook  on  Corp.,  §  199;  Sawyer 

Id.  785.  V.   Hoag,   17  Wall.   610-620;    In  re 

62  Richardson  v.  New  Orleans  Miller  Electrical  Maintenance  Co., 
Coffee  Co.,  102  "F.  R.  785.  Ill  F.  R.  515,  6  A.  B.  R.  701. 

63  In   re    Hutchinson,    113   F.   R. 
202;  In  re  Swift,  108  F.  R.  212. 


788  THE  NATIONAL  BANKRUPTCY  LAW.  Ch.  70 

however,  a  court  of  equity  does  its  utmost  to  protect  the  cor- 
porate creditors,  and  a  rigid  scrutiny  will  be  made  in  the  in- 
terest of  creditors  into  every  transaction  of  such  a  nature.'^® 
A  stockholder  cannot,  after  a  company  has  become  insolvent, 
avoid  his  liability  on  the  ground  that  it  was  falsely  repre- 
sented to  him  that  no  assessment  could  be  made  on  his  stock.^'^ 

The  court  of  bankruptcy  may  levy  an  assessment  upon  the 
stockholders  of  a  bankrupt  corporation  as  fully  as  the  stock- 
holders or  directors  could  have  done.^^  While  the  unpaid 
subscriptions  constitute  a  trust  fund  for  the  benefit  of  creditors 
yet  such  unpaid  balances  are  not  the  primary  or  regular  fund 
for  the  payment  of  corporate  debts.^^  Ordinarily  corporate 
creditors'  suit  to  enforce  payment  of  unpaid  subscriptions  can- 
not be  brought  until  after  judgment  at  law  has  been  obtained 
against  the  corporation  and  execution  returned  unsatisfied. 
This  remedy  against  the  corporation  need  not  be  first  ex- 
hausted where  it  has  been  adjudged  bankrupt  and  a  dissolu- 
tion has  in  this  way  been  brought  about,  but  the  trustee  may 
proceed  directly  against  the  stockholders.'^'* 

When  the  assets  of  a  bankrupt  corporation  are  insufficient 
to  pay  its  debts,  the  trustee,  under  the  direction  of  the  court 
of  bankruptcy,  has  authority  to  call  upon  its  stockholders  to 
pay  enough  of  the  unpaid  balance  of  their  stock  subscriptions 
as  will  meet  the  deficiency  of  the  other  assets.  The  fact  that 
its  directors  have  incurred  a  statutory  liability  by  contracting 
excessive  debts  or  by  paying  dividends  when  the  corporation 
was  insolvent,  or  by  which  it  became  insolvent,  will  not  prevent 
such  call,  as  the  original  liability  remains,  the  statutory  lia- 
bility being  added  thereto,  and  the  creditor  is  not  obliged  to 
exhaust  that  remedy,  nor  has  the  corporation,  or  its  trustee 
any  right  to  pursue  it.  It  is  not  an  asset  of  the  corporation, 
but  security  for  the  creditors,  who  may  follow  it  or  not,  at 
their  pleasure,  with  all  other  securities,  till  they  are  paid  in 
full.^i 

66  Cook  on  Corp.,  §  199.  to  Cook  on  Corp.,  §  200;    States 

67  Upton  V.  Hansbrough,  10  N.  B.  Savings  Association  v.  Kellogg,  52 
R.   368,    3   Biss.   417,  F.   C.   16801;     Mo.  583. 

Farrar  v.  Walker,  13  N.  B.  R.  82,  ^i  in  re  Crystal  Spring  Bottling 

3  Dill.  506,  note,  F.  C.  4679.  Co.,  96  F.  R.  945,  3  A.  B.  R.  194; 

68  Upton  V.  Hansbrough,  post.  citing  Institution    v.    Sprague,   43 

69  See  Diitcher  v.  Bk.,  11  N.  B  Vt.  502;  Merrill,  173  U.  S.  131;  see 
R.  457,  12  Blatchf.  435,  F.  C.  4203.  Myers  v.   Leely,   10  N.   B.  R.   411. 


Ch.  70  TITLE  OF  TRUSTEE.  789 

The  trustee  may  recover  against  a  transferee  of  stock,'^^* 
although  record  of  the  transfer  was  not  made  but  waived/^ 
the  same  as  if  an  assessment  had  been  ordered  by  the  corpora- 
tion before  bankruptcy,  and  an  order  of  the  court  requiring 
payment  of  such  sum  by  a  certain  date  is  conclusive  of  the 
trustee's  right  to  sue;^^  but  he  cannot  recover  from  one  who 
refused  to  accept.  He  may  sue  for  the  balance  due  on  a  stock 
subscription  from  one  who  has  assigned  shares  not  fully  paid 
up,  and  concerning  some  of  which  the  transfer  has  not  been 
noted  on  the  bank's  books,  where  a  by-law  makes  invalid  a 
transfer  of  stock  by  one  indebted  to  the  bank;"^  or  for  the 
balance  due  upon  stock-notes,  as  in  the  case  of  a  mutual  fire 
insurance  company  where  the  stockholders  pay  part  cash  and 
give  their  notes  for  the  balance  of  the  stock,  and  a  portion 
remains  unpaid  on  the  company's  bankruptcy  and  there  are 
losses  unsettledJ^ 

§  1217. As  to  usury.— Unless  there  is  a  law  limiting  the 

rate  of  interest  that  may  be  exacted  for  the  use  of  money 
there  can  be  no  usury.  If  the  parties  had  in  contemplation  a 
loan,  it  makes  no  difference  however  disguised,  the  contract 
will  be  usurious  if  it  be  so  in  other  respects,  and  a  note  void 
for  usury  in  its  inception  cannot  be  enforced  by  an  innocent 
purchaser  for  value.  The  rate  of  interest  to  govern  will  be 
that  of  the  state  in  which  the  contract  is  made,  though  it  has 
been  held  that  parties  may  contract  for  interest  according  to 
the  place  of  performance.'^'^  Accordingly,  the  trustee  in  bank- 
ruptcy has  the  same  right  with  reference  to  the  recovery  of 
usurious  interest  and  the  like,  as  is  given  by  the  state  law  to 
any  other  person.'''^  In  the  case  of  a  National  bank  the  rate 
of  interest  is  fixed  by  Federal  law,'^^  and  if  an  excessive  rate 
is  charged  it  is  subject  to  the  penalty  provided  by  the  Federal 

F.   C.   9994;    Michener  v.    Payson,  ts  in   re  Bachman,   12  N.   B.   R. 

13  N.  B.  R.  49,  F.  C.  9524.  223,  F.   C.   707. 

72  Wilbur  V.  Stockholders,  18  N.  t6  See  Jenkins  v.  Armour,  14  N. 
B.  R.  178,  F.  C.  17636;  Pullman  v.  B.  R.  276,  6  Biss.  312,  F.  C.  7260. 
Upton,  17  N.  B.  R.  489,  96  U.  S.  77  Miller  v.  Tiffany,  1  Wall.  298; 
328.  Andrews  v.  Pond,  13  Pet.  77. 

73  Upton  V.  Burnham,  8  N.  B.  R.  78  wheelock  v.  Lee,  10  N.  B.  R. 
22,  3  Biss.  431,  F.  C.  16798.  363,  17  Id.  563;   In  re  Kellogg,  113 

74  Sanger  v.  Upton,  13  N.  B.  R.  F,  R.  120,  7  A.  B.  R.  623. 

226,  91  U.  S.  56.  7o  u.  S.  Rev.  Stat.,  §§  5197,  5198. 


790  THE  NATIONAL  BANKRUPTCY  LAW.  Ch.  70 

law,  which  is  exclusive  of  any  state  penalty,^"  and  twice  the 
amount  of  the  interest  may  be  recovered  in  an  action  in  the 
nature  of  an  action  of  debt,  provided  such  action  be  com- 
menced within  two  years  of  the  time  when  such  usurious 
transaction  oeeurred.^^  Creditors  who  are  given  the  right  by 
statute  to  attack  the  validity  of  a  mortgage  given  by  their 
debtor  to  another  creditor  on  the  ground  of  usury  are  under 
no  equity  which  requires  them  to  pay  the  debt  of  such  other 
creditor  as  a  condition  precedent  to  the  existence  of  such  right. 
The  court  may  enjoin  a  sale  of  the  property  pending  a  determi- 
nation of  the  validity  of  the  mortgage,^^ 

§  1218. As  to  bona  fide  purchasers.— The  filing  of  a 

petition  is  notice  to  all  the  world,  and  all  persons  dealing  with 
the  bankrupt  thereafter  do  so  at  their  peril,  although  it  may 
be  bona  fide  and  without  knowledge  of  the  bankruptcy  pro- 
ceedings;^^ hence  a  purchaser  of  negotiable  paper,  after  such 
filing,  is  not  a  bona  fide  holder  without  notice.^'*  The  pur- 
chaser from  a  first  vendee  must,  in  order  to  invalidate  his  title, 
be  affected  by  notice  of  or  participation  in  the  original  fraud; 
that  is,  must  have  been  a  purchaser  without  valuable  considera- 
tion or  mala  fide  f^  and  a  purchaser  with  notice,  who  acquires 
title  from  a  purchaser  who  formerly  acquired  the  property  by 
fraud,  takes  no  better  title  than  his  vendor  had.^^ 

See  also  Bona  Fide  Liens  for  a  Present  Consideration,  ante, 
§  1088. 

§  1219. Stoppage  in  transitu.— The  right  of  stoppage 

in  transitu  which  is  an  equitable  extension  of  the  seller's  lien 
for  the  price  of  goods  of  which  the  buyer  has  acquired  the 
property  but  not  the  possession,  recognized  by  the  courts  of 
common  law,  is  also  recognized  in  the  courts  of  bankruptcy. 
Hence,  if  a  purchaser  becomes  bankrupt  previous  to  the  receipt 
of  the  goods,  or  is  insolvent  at  the  time  of  their  purchase  and 
has  actually  filed  his  petition  prior  to  their  receipt  f"^  or  while 
insolvent  actually  employed  counsel  in  contemplation  of  bank- 
so  Farmers  &  Mechanics  Nat.  Bk.  ss  Babbitt  v.  Walbrum,  6  N.  B. 
V.  Bearing,  91  U.  S.  29.  R.  359,  P.  C.  695. 

81  U.  S.  Rev.  Stat.,  §  5198;  Darby        se  Harrell  v.  Beall,  9  N.  B.  R.  49, 
V.  Inst.,  4  N.  B.  R.  195,  F.  C.  3571.     17  Wall.  490;  see  Beall  v.  Harrell, 
&2  In  re  Miller,  118  F.  R.  360.  7  N.  B.  R.  400,  F.  C.  1163. 

83  Opin.    Attorney-General,    9   N.         st  in  re  Christensen,  2  N.  B.  N. 
B.  R.  117.  R.    670;    In   re  Foot,    11  N.   B.  R. 

84  In  re  Lake,  6  N.  B.  R.  542,  3     158,  11  Blatch.  530. 
Biss.   204,   F.   C.   7992. 


Ch.  70  TITLE  ON   CONFIRMING   COMPOSITION.  791 

ruptcy  proceedings,  and  then  purchased  and  had  delivered  to 
him  goods,  no  title  can  be  considered  to  have  passed  and  the 
seller  may  retake  them;^^  or  if  goods  are  ordered  upon  false 
representations  and  are  received  shortly  before  the  purchaser's 
bankruptcy,  the  sale  may  be  rescinded  as  fraudulent.^''  AVhere 
a  bankrupt  bought  wine  (to  arrive)  and  it  was  stored  in  bond 
in  the  seller's  name,  a  part  being  withdrawn  with  the  seller's 
consent  prior  to  the  bankruptcy,  the  remainder  was  held  to  be 
stored  subject  to  the  right  of  stoppage  in  transitu.^^  Materials 
brought  by  a  contractor  upon  the  owner's  premises  and  ap- 
propriated to  the  building  contracted  for,  are  to  be  considered 
as  so  far  delivered  into  the  possession  of  the  owner  as  to  make 
them  security  for  advances  made  by  him  on  the  contract,  and 
to  vest  in  him  a  qualified  right  of  property  in  the  same,  con- 
sistent with  the  right  of  the  owner  to  use  them  in  the  fulfill- 
ment of  his  contract.^i 

§  1220.  Claims  against  the  United  States.— There  is  consid- 
erable distinction  between  the  character  of  the  various  claims 
which  arise  against  the  Government,  which  distinction  neces- 
sarily determines  whether  they  do  or  do  not  pass  to  the  trustee 
in  bankruptcy.  In  the  first  place,  such  claims  as  are  choses 
in  action  upon  which  a  suit  can  be  maintained  as  a  matter  of 
legal  right  and  which  arise  out  of  a  contract,  express  or  im- 
plied, and  for  which  the  Government  is  liable,  if  there  be  a 
jurisdiction  to  hear  and  determine  the  same,  and  in  which 
there  is  no  element  of  a  donation  in  the  payment  ultimately 
made,^-  pass  in  bankruptcy  and  may  be  prosecuted  by  the 
trustee  or  by  the  purchaser  in  bankruptcy  proceedings.^^ 

Secondly,  the  title  to  what  is  known  as  abandoned  and  cap- 
tured property  not  having  been  divested  by  capture,  and  being 
a  claim  for  the  proceeds  in  the  treasury  ;^^  or  a  right  to  recover 

88  In  re  McPeck,  2  N.  B.  N.  R.  so  in  re  Beams,  18  N.  B.  R.  500, 
172;    Donaldson  v.  Farwell,  15   N.     F.  C.  1191. 

B.  R.  277;   Stewart  v.  Emerson,  8  oi  Duplan    Silk    Co.   v.    Spencer, 

N.  B.  R.  462;  In  re  Alsberg,  16  N.  115  F.  R.  689,  8  A.  B.  R.  367. 

B.  R.  116,  F.  C.  261;  In  re  Rogers,  02  Phelps  v.  McDonald,  99  U.  S. 

3  N.  B.  R.  139,  1  Lowell  123,  F.  C.  298. 

12001.  93  McKay's    Case,    27    C.    Cls.    R. 

89  In  re  Weil,  111  F.  R.  897,  7  A.  422;     Burk's     Case,     13     Id.     241; 
B.   R.   90,  and   cases  there   cited;  Campbell's  Case,  28  Id.  512. 
Bloomingdale    v.    Empire    Rubber  n^  Klein  v.  U.  S.,  13  Wall.  128; 
Mfg.  Co.,  114  F.  R.  1016,  8  A.  B.  R.  Erwin  v.  U.  S.,  97  U.  S.  392. 

74. 


792  THE  NATIONAL  BANKRUPTCY  LAW.  Ch.  70 

a  portion  of  the  sum  awarded  by  the  tribunal  of  arbitration 
at  Geneva  when  paid,  which  constituted  a  national  fund,  in 
which  there  was  a  moral  obligation  on  the  part  of  the  Govern- 
ment to  do  justice  to  those  who  had  suffered  in  property,^'"'  or 
a  claim  for  a  part  of  the  award  made  by  the  Spanish  and 
American  Claims  Commission,  or  for  property  taken  by  the 
army  in  states  which  had  not  seceded,  but  for  which  there 
would  be  a  right  of  action,  if  brought  within  the  statutory 
period,  are  causes  of  action  which  pass  to  the  trustee,  although 
no  jurisdiction  existed  at  the  time  in  which  such  claims  could 
be  prosecuted. 

Third.  A  mere  expectancy,  such  as  a  claim  founded  on  no 
legal  right  known  to  courts  of  law  or  equity,  but  which  is  an 
appeal  to  the  clemency  of  Congress  for  the  redress  of  an  in- 
jury, where  there  is  no  obligation  on  the  part  of  the  Govern- 
ment, and  the  granting  of  relief  is  purely  a  matter  of  legisla- 
tive discretion,  cannot  be  regarded  as  property  and  does  not 
pass  in  bankruptcy.^^ 

By  the  Federal  law  all  transfers  and  assignments  made  of 
any  claim  upon  the  United  States,  or  of  any  part  or  share 
thereof,  or  interest  therein,  whether  absolute  or  conditional, 
and  all  powers  of  attorney,  or  orders,  for  receiving  payment 
of  any  such  claim  or  of  any  part  or  share  thereof,  are  abso- 
lutely null  and  void,  unless  executed  after  the  allowance  of 
such  claim,  the  ascertainment  of  the  amount  due,  and  the  issu- 
ing of  a  warrant  for  the  payment  thereof.^^  Although,  there- 
fore, a  claim  against  the  Government  is  not  assignable,  it  will 
pass  to  the  trustee,  if  of  one  of  the  classes  indicated  above,  the 
bankruptcy  proceedings  constituting  an  assignment  by  law 
which  is  valid.^^. 

§  1221.     'f.   Title  on  confirmation  of  composition.— Upon  the 

'confirmation  of  a  composition  offered  by  a  bankrupt,  the  title 
'to  his  property  shall  thereupon  revest  in  him.' 

95  Williams  v.  Heard,  140  U.  S.  Estate  of  Moore,  26  C.  Cls.  R.  254; 
529.  Heirs  of  Emerson  v.  Hall,  13  Pet- 

96  Campbell's  Case,  28  C.  Cls.  R     ers  R.  409,  415. 

512;  Dockery's  Case,  26  C.  Cls.  R.  st  u.  S.  Rev.  Stat.  3477. 

148;    Heard  v.   Sturgis,  146   Mass.  as  Phelps  v.  McDonald,  16  N.  B. 

545;    Taft   v.    Marisly,    120    N.    Y.  R.  217,  99  U.  S.  298;  s.  c.  19  N.  B. 

474;  Brooks  v.  Ahrens,  68  Md.  212;  R.  187;  Erwin  v.  U.  S.,  19  N.  B.  R. 

Kingsbury  v.  Mattocks,  81  Me.  310;  172,  97  U.  S.  392. 


Ch.  70  TITLE     ON    CONFIRMING     COMPOSITION.  793 

§  1222.  Effect  of  confirmation  of  composition.— After  a  com- 
position is  accepted  and  confirmed,  creditors  cease  to  have  any 
interest  in  the  estate,  and  it  is  the  duty  of  the  trustee  to  pay 
the  balance  in  his  hands  to  the  bankrupt.^^  A  certified  copy 
of  the  order  confirming  a  composition  constitutes  evidence  of 
the  revesting  of  bankrupt's  title  in  his  property,  and  if  re- 
corded imparts  the  same  notice  that  a  deed  from  the  trustee 
to  the  bankrupt,  if  recorded,  would  impart,^ 

99  In  re  August,  19  N.  B.  R.  161,        i  Sec.  21g,  act  Of  1898. 
F.  C.  645. 


CHAPTER   LXXI. 


TIME  WHEN  ACT  WENT  INTO  EFFECT. 


§1223.   (71a)  Time  of  taking  effect 
— filing  petitions. 

1224.  Act  took  effect  July  1,  1898. 

1225.  Supersedes    jurisdiction    ac- 

quired by  state  courts. 

1226.  Effect    on    common-law    as- 

signments. 


1227.  b.  Pending  state  insolvency 

proceedings. 

1228.  When     proceedings     under 

state  insolvency  laws  par- 
amount. 


§  1223.     '  (Sec.  71a)    Time  of  taking  effect— filing  petitions. 

' — This  act  shall  go  into  full  force  and  effect  upon  its  passage: 
'  Provided,  however,  That  no  petition  for  voluntary  bankruptcy 
'  shall  be  filed  within  one  month  of  the  passage  thereof,  and  no 
'petition  for  involuntary  bankruptcy  shall  be  filed  within  four 
'months  of  the  passage  thereof. 'i 

§  1224.  Act  took  effect  July  1,  1898.— The  present  law  went 
into  effect  with  the  first  moment  of  the  first  day  of  July,  1898, 
the  date  it  was  signed  by  the  President.^  While  it  took  effect 
from  that  time  no  proceedings  thereunder  for  involuntary 
bankruptcy  could  by  its  terms  be  commenced  for  four  months 
thereafter  but  the  relation  of  debtor  and  creditor  and  those 
between  creditors  was  governed  by  its  provisions  from  that 
time.  An  act  of  bankruptcy  committed  after  that  date  entitled 
every  creditor  to  the  rights  given  by  the  act,  and  to  invoke  the 
aid  of  the  court  in  preserving  such  rights  until  enforceable. 


1  Analogous  provision  of  Act  of 
1867.  "Sec.  50.  That  this  act  shall 
commence  and  take  effect  as  to 
the  appointment  of  the  officers 
created  hereby,  and  the  promulga- 
tion of  rules  and  general  orders, 
from  and  after  the  date  of  its  ap- 
proval; Provided,  That  no  petition 
or  other  proceeding  under  this 
act  shall  be  filed,  received,  or  com- 
menced before  the  first  day  of 
June,  Anno  Domini,  eighteen  hun- 
dred and  sixty-seven." 

2  Leidigh  Car   Co.  v.   Stengel,   1 


N.  B.  N.  296,  387,  2  A.  B.  R.  383, 
95  F.  R.  637;  Parmenter  Mfg.  Co. 
v.  Hamilton,  1  N.  B.  N.  8,  1  A.  B. 
R.  39;  In  re  Bruss-Ritter  Co.,  1  N. 
B.  N.  39,  1  A.  B.  R.  58,  90  F.  R. 
651;  In  re  Curtis,  1  N.  B.  N.  163,  1 
A.  B.  R.  440,  91  F.  R.  737;  In  re 
Rouse,  Hazard  &  Co.,  1  A.  B.  R. 
234;  Blake  v.  Francis-Valentine 
Co.,  1  N.  B.  N.  47,  1  A.  B.  R.  372. 
89  F.  R.  691. 

For  date  when  amendments  took 
effect  see  post,  §  1233. 


"94 


Ch.  71  STATE  INSOLVENCY  PROCEEDINGS.  795 

Since  a  petition  in  involuntary  bankruptcy  could  not  be  filed 
until  the  expiration  of  four  months  from  the  passage  of  the 
act,  and  transfers  and  liens  affected  by  an  adjudication  in 
bankruptcy  are  such  only  as  were  made  or  obtained  within 
four  months  prior  to  the  filing  of  the  petition,  no  transfer  of 
property,  lien  or  incumbrance  is  avoided  by  an  adjudication 
in  involuntary  bankruptcy,  unless  made  or  created  subsequent 
to  the  passage  of  the  act.^ 

§1225.  Supersedes  prior  acquired  jurisdiction  of  state 
courts.— The  fact  that  a  state  court  has  taken  possession  of 
the  property  of  an  insolvent  cannot  defeat  the  execution  of 
the  bankruptcy  law.^ 

§  1226.  Effect  on  common-law  assignments.— A  common-law 
assignment  is  not  rendered  void  by  the  existence  of  a  bank- 
ruptcy law,  ipso  facto  ;^  upon  the  institution  of  bankruptcy 
proceedings,  however,  such  assignments  and  all  proceedings 
thereunder  in  the  state  court  are  rendered  null  and  void.*' 

§  1227.     'b.     Pending   state    insolvency    proceedings.— Pro- 

*ceedings  commenced  under  state  insolvency  laws  before  the 
'passage  of  this  act  shall  not  be  affected  by  it.' 

§  1228.  When  proceedings  under  state  insolvency  laws  para- 
mount.— Where  insolvency  proceedings  were  instituted  under 
a  state  law  prior  to  the  passage  of  the  bankrupt  law  and  the 
bankrupt's  assets  had  become  vested  in  the  assignee  in  in- 
solvency, the  trustee  in  bankruptcy  is  only  entitled  to  such 
property  as  was  acquired  or  owned  by  the  bankrupt  between 
the  institution  of  the  insolvency  proceedings  and  the  filing  of 

3  Blaise  V.  Francis-Valentine  Co.,  237;  In  re  Curtis,  1  N.  B.  N.  163,  1 
1  N.  B.  N.  47,  1  A.  B.  R.  372,  89  F.  A.  B.  R.  440,  91  F.  R.  737;  In  re 
R.  691;  In  re  Brown,  1  A.  B.  R.  Etheridge  Furn.  Co.,  1  N.  B.  N.  39, 
107,  91  F.  R.  358.  1  A.  B.  R.  112,  92  F.  R.  329;  In  re 

4  Lea  V.  Geo.  M.  West  Co.,  1  N.  Gutwillig,  1  N.  B.  N.  554,  92  F.  R. 
B.  N.  79,  409,  1  A.  B.  R.  261,  91  F.  337,  1  A.  B.  R.  388,  1  N.  B.  N.  40. 
R.  237,  174  U.  S.  590;  In  re  Safe  90  F.  R.  475,  1  A.  B.  R.  78;  In  r^ 
Dep.  &  Sav.  Inst.,  7  N.  B.  R.  392,  Sievers,  1  N.  B.  N.  68,  91  F.  R. 
F.  C.  12211.  366,  1  A.  B.  R.  117,  s.  c.  as  Davis 

5  Cook  V.  Rogers,  13  N.  B.  R.  97;  v.  Bohle,  1  N.  B.  N.  216,  92  F.  R. 
see  In  re  Scholtz,  106  F.  R.  834,  5  325,  1  A.  B.  R.  412;    Leidigh  Car. 

A.  B.  R.  782.  Co.  v.  Stengel,  95  F.  R.  637,  1  N.  B. 

6  Lea  V.  Geo.  M.  West  Co.,  174  N.  367,  2  A.  B.  R.  263;  In  re  Smith. 
U.  S.  590,  2  A.  B.  R.  463,  aff'g  IN.     IN.  B.  N.  356,  2  A.  B.  R.  9,  92  F. 

B.  N.  79,  1  A.  B.  R.  261,  91  F.  R.     R.  135. 


796  THE  NATIONAL  BANKRUPTCY  LAW.  Ch.  71 

the  petition  in  bankruptcy^  The  state  courts  are  not  divested 
of  jurisdiction  over  insolvent  proceedings  pending  at  the  time 
of  the  adoption  of  the  act  of  1898;^  nor  does  that  act  affect 
suits  brought  prior  thereto;  nor  suspend  proceedings  under 
the  state  law  in  such  cases/^  Although  proceedings  begun  in 
a  state  court  prior  to  the  passage  of  the  bankruptcy  law  are 
unaffected,  yet  if  they  were  begun  long  prior  thereto  and  no 
discharge  has  been  granted  or  applied  for  therein,  and  the 
parties  consent  to  a  settlement  of  the  estate  under  a  petition  in 
bankruptcy,  there  is  no  reason  why  the  estate  may  not  be  so 
administered.^^ 

While  the  statute  does  not  expressly  say  so,  all  state  laws 
in  regard  to  insolvency  are  nevertheless  suspended  or  super- 
seded by  the  present  bankruptcy  law  which  is  paramount  and 
exclusive  of  all  other  laws  relating  to  the  same  subject  mat- 
ter.ii 

7  In  re  Mussey,  2  N.  B.  N.  R.  113,  Crowninshield,  4  Wheat.  122;  In 
99  F.  R.  71,  3  A.  B.  R.  592.  re  Macon  Sash,  Door    &    Lumber 

8  Lavender  v.  Gosnell,  12  N.  B.  Co.,  112  F.  R.  323,  7  A.  B.  R.  66; 
R.  282.  In  re   Storck  Lumber  Co.,  114  F. 

9  Snyder  v.  Simon,  1  N.  B.  N.  12.  R.  360,  8  A.  B.  R.  86;   Carling  v. 

10  In  re  Bates,  100  F.  R.  263,  4  Seymour  Lufaber  Co.,  8  A.  B.  R. 
A.  B.  R.  56.  29;   Littlefield  v.  Gray,  8  A.  B.  R. 

11  Parmenter  Mfg.  Co.  v.  Hamil-  409;  In  re  Richard,  2  A.  B.  R.  506; 
ton,  1  N.  B.  N.  8,  1  A.  B.  R.  39,  172  see  Herron  Co.  v.  Superior  Court, 
Mass.  178;  In  re  Bruss  Ritter  Co.,  8  A.  B.  R.  492;  Hanover  Nat.  Bank 
90  F.  R.  651,  1  N.  B.  N.  39,  1  A.  B.  v.  Moyses,  186  U.  S.  181,  8  A.  B.  R. 
R.  58;   In  re  Anderson,  110  F.  R.  1;  also  ante,  §  16. 

141,   6   A.   B.   R.   555;    Sturgis   v. 


CHAPTER  LXXII. 
CLERKS    TO    KEEP    INDEXES. 

§  1229.  *  (Sec.  71)  Indexes  to  be  kept.— That  the  clerks  of 
'the  several  district  courts  of  the  United  States  shall  prepare 
'and  keep  in  their  respective  offices  complete  and  convenient 
'indexes  of  all  petitions  and  discharges  in  bankruptcy  hereto- 
'fore  or  hereafter  filed  in  the  said  courts,  and  shall,  when  re- 
'  quested  so  to  do,  issue  certificates  of  search  certifying  as  to 
'whether  or  not  any  such  petitions  or  discharges  have  been 
'filed;  and  said  clerks  shall  be  entitled  to  receive  for  such 
'certificates  the  same  fees  as  now  allowed  by  law  for  certifi- 
'cates  as  to  judgments  in  said  courts:  Provided,  That  said 
'bankruptcy  indexes  and  dockets  shall  at  all  times  be  open  to 
'inspection  and  examination  by  all  persons  or  corporations 
'without  any  fee  or  charge  therefor.' 

§  1230.  The  indexes  to  be  prepared  by  the  clerk  are  to  cover 
all  petitions  in  bankruptcy  filed  as  well  as  all  discharges 
granted  since  the  enactment  of  the  act  of  July  1,  1898.  Peti- 
tions and  discharges  hereafter  granted  should  likewise  be  regu- 
larly recorded. 


797 


CHAPTER  LXXIII. 

LIMIT  TO  COMPENSATION    OF  REFEREE   AND  TRUSTEE. 

§1231.  '(Sec.  72)  Compensation  limited.— That  neither 
'the  referee  nor  the  trustee  shall  in  any  form  or  guise  receive, 
'nor  shall  the  court  allow  them,  any  other  or  further  compen- 
'sation  for  their  services  than  that  expressly  authorized  and 
'prescribed  in  this  act.' 

§  1232.  This  provision  is  a  clear  and  explicit  limitation  upon 
the  charges  of  the  referee  and  trustee  for  services,  and  the 
charges  allowed  are  in  full  for  the  services  rendered.  The 
use  of  the  expression  ' '  for  their  services "  is  an  evident  indica- 
tion that  Congress  meant  services  rendered  by  the  referee  or 
trustee  as  such.  Accordingly  services  rendered  by  a  referee 
Avhen  sitting  as  a  special  master  in  the  hearing  of  objections  to 
a  discharge  and  the  like,  or  services  rendered  by  the  trustee  in 
the  capacity  of  an  attorney-at-law  in  connection  with  the  bank- 
ruptcy proceedings,  would  not  be  comprehended  by  this  pro- 
vision and  compensation  may  be  allowed  therefor,  since  in 
neither  case  is  the  service  rendered  in  the  capacity  of  referee 
or  trustee. 


798 


CHAPTER  LXXIV. 

TIME  WHEN  AMENDMENTS  TOOK   EFFECT. 

§1233.  '(Sec.  19)  When  amendments  take  effect.— That 
'the  provisions  of  this  amendatory  act  shall  not  apply  to  bank- 
'ruptey  cases  pending  when  this  act  takes  effect,  but  such 
'cases  shall  be  adjudicated  and  disposed  of  conformably  to 
'the  provisions  of  the  said  act  of  July  first,  eighteen  hundred 
'and  ninety-eight.' 

§  1234.  The  amendments  of  the  law  took  effect  with  the 
first  moment  of  the  fifth  day  of  February,  1903,  the  date  the 
amendatory  act  was  signed  by  the  President.  All  cases  filed 
prior  thereto  are  to  be  adjudicated  and  disposed  of  in  accord- 
ance with  the  act  of  July  1,  1898,  while  all  petitions  filed  on 
February  5,  1903,  and  thereafter,  are  to  be  disposed  of  in 
accordance  with  the  amendments. 

The  fact  that  the  statute  uses  the  expression  "bankruptcy 
cases  pending"  instead  of  "petitions  which  were  filed  when 
this  act  takes  effect,"  would  seem  to  indicate  a  purpose  on  the 
part  of  Congress  to  make  a  distinction  between  a  pending  and 
a  closed  case.  Accordingly  a  case  which  was  closed  prior  to 
the  amendment,  but  reopened  thereafter,  not  being  a  pending 
case  on  February  5,  1903,  would  be  controlled  by  the  act  as 
amended. 


799 


TITLE  III. 

RULES,  FORMS  AND  ORDERS  PROMULGATED  BY  THE 
SUPREME  COURT  OF  THE  UNITED  STATES,  NO- 
VEMBER 28,  1898. 


§  1235. 

In  pursuance  of  the  powers  conferred  by  the  Constitution 
and  laws  upon  the  Supreme  Court  of  the  United  States,  and 
particularly  by  the  act  of  Congress  approved  July  1,  1898, 
entitled  "  An  act  to  establish  a  uniform  system  of  bankruptcy 
throughout  the  United  States,"  it  is  ordered,  on  this  28th  day 
of  November,  1898,  that  the  following  rules  be  adopted  and 
established  as  general  orders  in  bankruptcy,  to  take  effect 
on  the  first  Monday,  being  the  second  day,  of  January,  1899. 
And  it  is  further  ordered  that  all  proceedings  in  bankruptcy 
had  before  that  day,  in  accordance  with  the  act  last  afore- 
said, and  being  in  substantial  conformity  either  with  the 
provisions  of  these  general  orders,  or  else  with  the  general 
orders  established  by  this  court  under  the  bankrupt  act  of 
1867  and  with  any  general  rules  or  special  orders  of  the 
courts  in  bankruptcy,  stand  good,  subject,  however,  to  such 
further  regulation  by  rule  or  order  of  those  courts  as  may 
be  necessary  or  proper  to  carry  into  force  and  effect  the 
bankrupt  act  of  1898  and  the  general  orders  of  this  court. 

L 

§  1236.  DOCKET. 

The  clerk  shall  keep  a  docket,  in  which  the  cases  shall  be  entered  and 
numbered  in  the  order  in  which  they  are  commenced.  It  shall  contain 
a  memorandum  of  the  filing  of  the  petition  and  of  the  action  of  the 
court  thereon,  of  the  reference  of  the  case  to  the  referee,  and  of  the  trans- 
mission by  him  to  the  clerk  of  his  certified  record  of  the  proceedings, 
with  the  dates  thereof,  and  a  memorandima  of  all  proceedings  in  the 

bOl 


802  LAW   OF    BANKRUPTOT. 

case  except  those  duly  entered  on  the  referee's  certified  record  afore- 
said. The  docket  shall  be  arranged  in  a  manner  convenient  for  refer- 
ence, and  shall  at  all  times  be  open  to  publio  inspection. 

IL 

§  1237.  FILING  OF  PAPERS. 

The  clerk  or  the  referee  shall  indorse  on  each  paper  filed  with  him  the 
day  and  hour  of  filing,  and  a  brief  statement  of  its  character. 

IIL 
§  1238.  PROCESS. 

All  process,  summons  and  subpoenas  shall  issue  out  of  the  court,  under 
the  seal  thereof,  and  be  tested  by  the  clerk;  and  blanks,  with  the  signa- 
ture of  the  clerk  and  seal  of  the  court,  may,  upon  application,  be  fur- 
nished to  the  refereea 

IV. 

§  1239.  CONDUCT  OF  PROCEEDINGS. 

Proceedings  in  bankruptcy  may  be  conducted  by  the  bankrupt  in  per- 
son in  his  own  behalf,  or  by  a  petitioning  or  opposing  creditor;  but  a 
creditor  will  only  be  allowed  to  manage  before  the  court  his  individual 
interest.  Every  party  may  appear  and  conduct  the  proceedings  by  at- 
torney, who  shall  be  an  attorney  or  counselor  authorized  to  practice  in 
the  circuit  or  district  court.  The  name  of  the  attorney  or  covinselor, 
with  his  place  of  business,  shall  be  entered  upon  the  docket,  with  the 
date  of  the  entry.  All  papers  or  proceedings  offered  by  an  attorney  to 
be  filed  shall  be  indorsed  as  above  required,  and  orders  granted  on  mo- 
tion shall  contain  the  name  of  the  party  or  attorney  making  the  motion. 
Notices  and  orders  which  are  not,  by  the  act  or  by  these  general  orders, 
required  to  be  served  on  the  party  personally  may  be  served  upon  his 
attorney. 

V. 

^5  1240.  FRAME  OP  PETITIONa 

All  petitions  and  schedules  filed  therewith  shall  be  printed  or  written 
out  plainly,  without  abbreviation  or  interlineation,  except  where  such 
abbreviation  and  interlineation  may  be  for  the  purpose  of  reference^ 

VI 

§  1241.  PETITIONS  IN  DIFFERENT  DISTRICTS. 

In  case  two  or  more  petitions  shall  be  filed  against  the  same  individ- 
ual in  different  districts,  the  first  hearing  shall  be  had  in  the  district  in 
which  the  debtor  has  his  domicil,  and  the  petition  may  be  amended  by 


RULES,  FORMS    AND    ORDERS.  803 

inserting  an  allegation  of  an  act  of  bankruptcy  committed  at  an  earlier 
date  than  that  first  alleged,  if  such  earlier  act  is  charged  in  either  of 
the  other  petitions;  and  in  case  of  two  or  more  petitions  against  the 
same  partnership  in  different  courts,  each  having  jurisdiction  over  the 
case,  the  petition  first  filed  shall  be  first  heard,  and  may  be  amended  by 
the  insertion  of  an  allegation  of  an  earlier  act  of  bankruptcy  than  tliat 
first  alleged,  if  such  earlier  act  is  charged  in  either  of  the  other  peti- 
tions; and,  in  either  case,  the  proceedings  upon  the  other  petitions  may 
be  stayed  until  an  adjudication  is  made  upon  the  petition  first  heard; 
and  the  court  which  makes  the  first  adjudication  of  bankruptcy  shall 
retain  jurisdiction  over  all  proceedings  therein  until  the  same  shall  be 
closed.  In  case  two  or  more  petitions  shall  be  filed  in  different  districts 
by  different  members  of  the  same  partnership  for  an  adjudication  of 
the  bankruptcy  of  said  partnership,  the  court  in  which  the  petition  is 
first  filed,  having  jurisdiction,  shall  take  and  retain  jurisdiction  over  all 
proceedings  in  such  bankruptcy  until  the  same  shall  be  closed;  and  if 
such  petitions  shall  be  filed  in  the  same  district,  action  shall  be  first 
had  upon  the  one  first  filed.  But  the  court  so  retaining  jurisdiction 
shall,  if  satisfied  that  it  is  for  the  greatest  convenience  of  parties  iu  in- 
terest that  another  of  said  courts  should  proceed  with  the  cases,  order 
them  to  be  transferred  to  that  court  » 

VIL 

§  1242.  PRIORITY  OF   PETITIONS. 

Whenever  two  or  more  petitions  shall  be  filed  by  creditors  against  a 
common  debtor,  alleging  separate  acts  of  bankruptcy  committed  by 
said  debtor  on  different  days  within  four  months  prior  to  the  filing  of 
said  petitions,  and  the  debtor  shall  appear  and  show  cause  against  an 
adjudication  of  bankruptcy  against  him  on  the  petitions,  that  petition 
shall  be  first  heard  and  tried  which  alleges  the  commission  of  the  earli- 
est act  of  bankruptcy ;  and  in  case  the  several  acts  of  bankruptcy  are 
alleged  in  the  different  petitions  to  have  been  committed  on  the  same 
day,  the  court  before  which  the  same  are  pending  may  order  them  to 
be  consolidated,  and  proceed  to  a  hearing  as  upon  one  petition;  and  if 
an  adjudication  of  bankruptcy  be  made  upon  either  petition,  or  for  the 
commission  of  a  single  act  of  bankruptcy,  it  shall  not  be  necessary  to 
proceed  to  a  hearing  upon  the  remaining  petitions,  unless  proceedings 
be  taken  by  the  debtor  for  the  purpose  of  causing  such  adjudication  to 
be  annulled  or  vacated, 

VIIL 

§  1243.  PROCEEDINGS  IN  PARTNERSHIP  CASES. 

Any  member  of  a  partnership,  who  refuses  to  join  in  a  petition  to 
have  the  partnership  declared  bankrupt,  shall  be  entitled  to  resist  the 
prayer  of  the  petition  in  the  same  manner  as  if  the  petition  had  been 


804  LAW    OF    BANKRUPTCY. 

filed  by  a  creditor  of  the  partnership,  and  notice  of  the  filing  of  the  pe- 
tition shall  be  given  to  him  in  the  same  manner  as  provided  by  law  and 
bv  these  rules  in  the  case  of  a  debtor  petitioned  against;  and  he  shall 
have  the  right  to  appear  at  the  time  fixed  by  the  court  for  the  hearing 
of  the  petition,  and  to  make  proof,  if  he  can,  that  the  partnership  is  not 
insolvent  or  has  not  committed  an  act  of  bankruptcy,  and  to  make  all 
defenses  which  any  debtor  proceeded  against  is  entitled  to  take  by  the 
provisions  of  the  act;  and  in  case  an  adjudication  of  bankruptcy  is 
made  upon  the  petition,  such  partner  shall  be  required  to  file  a  schedule 
of  his  debts  and  an  inventory  of  his  property  in  the  same  manner  as  is 
required  by  the  act  in  cases  of  debtors  against  whom  adjudication  of 
bankruptcy  shall  be  made. 

IX. 

§  1244.  SCHEDULE  IN  INVOLUNTARY   BANKRUPTCY. 

In  all  cases  of  involuntary  bankruptcy  in  which  the  bankrupt  la  ab- 
sent or  cannot  be  found,  it  shall  be  the  duty  of  the  petitioning  creditor 
to  file,  within  five  days  after  the  date  of  the  adjudication,  a  schedule 
giving  the  names  and  places  of  residence  of  all  the  creditors  of  the 
bankrupt,  according  to  the  best  information  of  the  petitioning  cred- 
itor. If  the  debtor  is  found,  and  is  served  with  notice  to  furnish  a  sched- 
ule of  his  creditors  and  fails  to  do  so,  the  petitioning  creditor  may 
apply  for  an  attachment  against  the  debtor,  or  may  himself  furnish 
such  schedule  as  aforesaid. 

X. 

§  1245.  INDEMNITY    FOR   EXPENSES. 

Before  incurring  any  expense  in  publishing  or  mailing  notices,  or  in 
travelling,  or  in  procuring  the  attendance  of  witnesses,  or  in  perpetuat- 
ing testimony,  the  clerk,  marshal  or  referee  may  require,  from  the 
bankrupt  or  other  person  in  whose  behalf  the  duty  is  to  be  performed, 
indemnity  for  such  expense.  Money  advanced  for  this  purpose  by  the 
bankrupt  or  other  person  sliall  be  repaid  him  out  of  the  estate  as  part 
of  the  cost  of  administering  the  same. 

XL 

§  1246.  AMENDMENTS. 

The  court  may  allow  amendments  to  the  petition  and  schedules  on  ap- 
plication of  the  petitioner.  Amendments  shall  be  printed  or  written, 
signed  and  verified,  like  original  petitions  and  schedules.  If  amend- 
ments are  made  to  separate  schedules,  the  same  must  be  made  separately, 
with  proper  references.  In  the  application  for  leave  to  amend,  the  pe- 
titioner shall  state  the  cause  of  the  error  in  the  paper  originally  filed. 


EULES,  FORMS   AND   0RDEE8.  805 

XIL 

§  1247.  DUTIES  OP  REFEREE. 

1.  The  order  referring  a  case  to  a  referee  shall  name  a  day  upon  which 
the  bankrupt  shall  attend  before  the  referee;  and  from  that  day  the 
bankrupt  shall  be  subject  to  the  orders  of  the  court  in  all  matters  relat- 
ing to  his  bankruptcy,  and  may  receive  from  the  referee  a  protection 
against  arrest,  to  continue  until  the  final  adjudication  on  his  applica- 
tion for  a  discharge,  unless  suspended  or  vacated  by  order  of  the  court. 
A  copy  of  the  order  shall  forthwith  be  sent  by  mail  to  the  referee,  or  be 
delivered  to  him  personally  by  the  clerk  or  other  oflBcer  of  the  court. 
And  thereafter  all  the  proceedings,  except  such  as  are  required  by  the 
act  or  by  these  general  orders  to  be  had  before  the  judge,  shall  be  had 
before  the  referea 

2.  The  time  when  and  the  place  where  the  referees  shall  act  upon  the 
matters  arising  under  the  several  cases  referred  to  them  shall  be  fixed 
by  special  order  of  the  judge,  or  by  the  referee;  and  at  such  times  and 
places  the  referees  may  perform  the  duties  which  they  are  empowered 
by  the  act  to  perform. 

3.  Applications  for  a  discharge,  or  for  the  approval  of  a  composition, 
or  for  an  injunction  to  stay  proceedings  of  a  court  or  officer  of  the 
United  States  or  of  a  State,  sliall  be  heard  and  decided  by  the  judge. 
But  he  may  refer  such  an  application,  or  any  specified  issue  arising 
thereon,  to  the  referee  to  ascertain  and  report  the  facts. 

XIIL 

§  1248.  APPOINTMENT  AND  REMOVAL  OF  TRUSTEE. 

The  appointment  of  a  trustee  by  the  creditors  shall  be  subject  to  be 
approved  or  disapproved  by  the  referee  or  by  the  judge;  and  he  shall 
be  removable  by  the  judge  only. 

XIV. 

§  1249.  NO  OFFICIAL  OR  GENERAL  TRUSTEE. 

No  official  trustee  shall  be  appointed  by  the  court,  nor  any  general 
trustee  to  act  in  classes  of  cases. 

XV. 

§  1250.  TRUSTEE  NOT   APPOINTED  IN   CERTAIN  CASES, 

If  the  schedule  of  a  voluntary  bankrupt  discloses  no  assets,  and  if  no 
creditor  appears  at  the  first  meeting,  the  court  may,  by  order  setting 
out  the  facts,  direct  that  no  trustee  be  appointed;  but  at  any  time  there- 
after a  trustee  may  be  appointed,  if  the  court  shall  deem  it  desirable. 
If  no  trustee  is  appointed  as  aforesaid,  the  court  may  order  that  no 
meeting  of  the  creditors  other  than  the  first  meeting  shall  be  called. 


80G  i^"^   OF    BANKEDPTOT. 

XVL 

§  1251.  NOTICE  TO  TRUSTEE  OF  HIS  APPOINTMENT. 

It  shall  be  the  duty  of  the  referee,  immediately  upon  the  appointment 
and  approval  of  the  trustee,  to  notify  him  in  person  or  by  mail  of  hia 
appointment;  and  the  notice  shall  require  the  trustee  forthwith  to  no- 
tify the  referee  of  his  acceptance  or  rejection  of  the  trust,  and  shall  con- 
tain a  statement  of  the  penal  sum  of  the  trustee's  bond- 

XVIL 

§  1252.  DUTIES  OF  TRUSTEE. 

The  trustee  shall,  immediately  upon  entering  upon  his  duties,  prepare 
a  complete  inventory  of  all  the  property  of  the  bankrupt  that  comes  into 
his  possession.  The  trustee  shall  make  report  to  the  court,  vrithin  twenty 
days  after  receiving  the  notice  of  his  appointment,  of  the  articles  set 
off  to  the  bankrupt  by  him,  according  to  the  provisions  of  the  forty- 
seventh  section  of  the  act,  with  the  estimated  value  of  each  article,  and 
any  creditor  may  take  exceptions  to  the  determination  of  the  trustee 
within  tw^enty  days  after  the  filing  of  the  report.  The  referee  may  r^ 
quire  the  exceptions  to  be  arg-ued  before  him,  and  shall  certify  them  to 
the  court  for  final  determination  at  the  request  of  either  party.  In  case 
the  trustee  shall  neglect  to  file  any  report  or  statement  which  it  is  made 
his  duty  to  file  or  make  by  the  act,  or  by  any  general  order  in  bank- 
ruptcy, within  five  days  after  the  same  shall  be  due,  it  shall  be  the  duty 
of  the  referee  to  make  an  order  requiring  the  trustee  to  show  cause  be- 
fore the  judge,  at  a  time  specified  in  the  order,  why  he  should  not 
be  removed  from  office.  The  referee  shall  cause  a  copy  of  the  order  to 
be  served  upon  the  trustee  at  least  seven  days  before  the  time  fixed  for 
the  hearing,  and  proof  of  the  service  thereof  to  be  delivered  to  the  clerk. 
All  accounts  of  trustees  shall  be  referred  as  of  course  to  the  referee  for 
audit,  vmless  otherwise  specially  ordered  by  the  court. 

XVIII. 

§  1253.  SALE  OP  PROPERTY. 

L  All  sales  shall  be  by  public  auction  unless  otherwise  ordered  by  the 
coiirt. 

2.  Upon  application  to  the  court,  and  for  good  cause  shown,  the  trustee 
may  be  authorized  to  sell  any  specified  portion  of  the  bankrupt's  estate 
at  private  sale;  in  which  case  he  shall  keep  an  accurate  account  of  each 
article  sold,  and  the  price  received  therefor,  and  to  whom  sold;  which 
account  he  shall  file  at  once  with  the  referea 

3.  Upon  petition  by  a  bankrupt,  creditor,  receiver  or  trustee,  setting 
forth  that  a  part  or  the  whole  of  the  bankrupt's  estate  is  perishable,  the 
nature  and  location  of  such  perishable  estate,  and  that  there  will  be  loss 


KULES,   FORMS    AND   ORDERS.  807 

if  the  same  Is  not  sold  immediately,  the  court,  if  satisfied  of  the  facts 
stated  and  that  the  sale  is  required  in  the  interest  of  tlie  estate,  may 
order  the  same  to  be  sold,  with  or  without  notice  to  the  creditors,  and 
the  proceeds  to  be  deposited  in  court. 

XIX. 

§  1254.  ACCOUNTS  OF  MARSHAI* 

The  marshal  shall  make  return,  under  oath,  of  his  actual  and  neces- 
sary expenses  in  the  service  of  every  warrant  addressed  to  him,  and  for 
custody  of  property,  and  other  services,  and  other  actual  and  necessary 
expenses  paid  by  him,  with  vouchers  therefor  whenever  practicable,  and 
also  with  a  statement  that  the  amounts  charged  by  him  are  just  and 
reasonable. 

XX 

§  1255.  PAPERS   FILED   AFTER  REFERENCE. 

Proofs  of  claims  and  other  papers  filed  subsequently  to  the  reference, 
except  such  as  call  for  action  by  the  judge,  may  be  filed  either  with  the 
referee  or  with  the  clerk. 

XXL 

§  1256.  PROOF  OF   DEBTS. 

1.  Depositions  to  prove  claims  against  a  bankrupt's  estate  shall  be 
correctly  entitled  in  the  court  and  in  the  cause.  When  made  to  prove 
a  debt  due  to  a  partnership,  it  must  appear  on  oath  that  the  deponent  is 
a  member  of  the  partnei'ship;  wlien  made  by  an  agent,  the  reason  the 
deposition  is  not  made  by  the  claimant  in  person  must  be  stated;  and 
when  made  to  prove  a  debt  due  to  a  corpoi-ation,  the  deposition  shall  be 
made  by  the  treasurer,  or,  if  the  corporation  has  no  treasurer,  by  the 
officer  whose  duties  most  nearly  correspond  to  those  of  treasurer.  Depo- 
sitions to  prove  debts  existing  in  open  account  shall  state  when  the  debt 
became  or  will  become  due;  and  if  it  consists  of  items  maturing  at  dif- 
ferent dates  the  average  due  date  shall  be  stated,  in  default  of  which  it 
shall  not  be  necessary  to  compute  interest  upon  it.  All  such  depositions 
shall  contain  an  averment  that  no  note  has  been  received  for  such  ac- 
count, nor  any  judgment  rendered  thereon.  Proofs  of  debt  received 
by  any  trustee  shall  be  delivered  to  the  referee  to  whom  the  cause  is 
referred. 

2.  Any  creditor  may  file  with  the  referee  a  request  that  all  notices  to 
which  he  may  be  entitled  shall  be  addressed  to  him  at  any  place,  to  be 
designated  by  the  post-office  box  or  street  number,  as  he  may  appoint; 
and  thereafter,  and  until  some  other  designation  shall  be  made  by  such 
creditor,  all  notices  shall  be  so  addressed;  and  in  other  cases  notices  shall 
be  addressed  as  specified  in  the  proof  of  debt. 


808  LAW   OF   BANKKUPTOY, 

8.  Claims  which  have  been  assigned  before  proof  shall  be  supported  by 
a  deposition  of  the  owner  at  the  time  of  the  commencement  of  proceed- 
ings, setting  forth  the  true  consideration  of  the  debt  and  that  it  is  en- 
tirely xmsecured,  or  if  secured,  the  security,  as  is  required  in  proving 
secured  claims.  Upon  the  filing  of  satisfactory  proof  of  the  assignment 
of  a  claim  proved  and  entered  on  the  referee's  docket,  the  referee  shall 
immediately  give  notice  by  mail  to  the  original  claimant  of  the  tiling  of 
such  proof  of  assignment;  and,  if  no  objection  be  entered  within  ten 
days,  or  within  further  time  allowed  by  the  referee,  he  shall  make  an 
order  subrogating  the  assignee  to  the  original  claimant.  If  objection  be 
made,  he  shall  proceed  to  hear  and  determine  the  matter. 

4.  The  claims  of  persons  contingently  liable  for  the  bankrupt  may  be 
proved  in  the  name  of  the  creditor  when  known  by  the  party  contin- 
gently liable.  When  the  name  of  the  creditor  is  unknown,  such  claim 
maybe  proved  in  the  name  of  the  party  contingently  liable;  but  no 
dividend  shall  be  paid  upon  such  claim,  except  upon  satisfactory  proof 
that  it  will  diminish  pro  tanto  the  original  debt. 

5.  The  execution  of  any  letter  of  attorney  to  represent  a  creditor,  or 
of  an  assignment  of  claim  after  proof,  may  be  proved  or  acknowledged 
before  a  referee,  or  a  United  States  commissioner,  or  a  notary  public. 
When  executed  on  behalf  of  a  partnership  or  of  a  corporation,  the  per- 
son executing  the  instrument  shall  make  oath  that  he  is  a  member  of 
the  partnership,  or  a  duly  authorized  officer  of  the  corporation  on  whose 
behalf  he  acts.  When  the  person  executing  is  not  personally  known  to 
the  officer  taking  the  proof  or  acknowledgment,  his  identity  shall  be 
established  by  satisfactory  proof. 

6.  When  the  trustee  or  any  creditor  shall  desire  the  re-examination  of 
any  claim  filed  against  the  bankrupt's  estate,  he  may  apply  by  petition 
to  the  referee  to  whom  the  case  is  referred  for  an  order  for  such  re- 
examination, and  thereupon  the  referee  shall  make  an  order  fixing  a 
time  for  hearing  the  petition,  of  which  due  notice  shall  be  given  by 
mail  addressed  to  the  creditor.  At  the  time  appointed  the  referee  shall 
take  the  examination  of  the  creditor,  and  of  any  witnesses  that  may  be 
jailed  by  either  party,  and  if  it  shall  appear  from  such  examination  that 
the  claim  ought  to  be  expunged  or  diminished,  the  referee  may  order 
accordingly. 

XXII. 

§  1257.  TAKma  op  testimony. 

The  examination  of  witnesses  before  the  referee  may  be  conducted  by 
the  party  in  person  or  by  his  counsel  or  attorney,  and  the  witnesses  shall 
be  subject  to  examination  and  cross-examination,  which  shall  be  had  in 
conformity  with  the  mode  now  adopted  in  courts  of  law.  A  deposition 
taken  upon  an  examination  before  a  referee  shall  be  taken  down  in 
writing  by  him,  or  under  his  direction,  in  the  form  of  narrative,  unless 


RULES,  FORMS   AND   ORDERS.  SOO 

he  determines  that  the  examination  shall  be  by  question  and  answer. 
When  completed  it  shall  be  read  over  to  the  witness  and  signed  by  him 
in  the  presence  of  the  referee.  The  referee  shall  note  upon  the  deposi- 
tion any  question  objected  to,  with  his  decision  thereon ;  and  the  court 
shall  have  power  to  deal  with  the  costs  of  incompetent,  immaterial,  or 
irrelevant  depositions,  or  parts  of  them,  as  may  be  just 

XXIIL 

§  1258.  ORDERS  OF  REFEREE. 

In  all  orders  made  by  a  referee,  it  shall  be  recited,  according  as  the 
fact  may  be,  that  notice  was  given  and  the  manner  thereof;  or  that  the 
order  was  made  by  consent;  or  that  no  adverse  interest  was  represented 
at  the  hearing;  or  that  the  order  was  made  after  hearing  adverse  in- 
terests. 

XXIV. 

§  1259.     TRANSMISSION  OF  PROVED  CLAIMS  TO  CLERK. 

The  referee  shall  forthwith  transmit  to  the  clerk  a  list  of  the  claims 
proved  against  an  estate,  with  the  names  and  addresses  of  the  proving 
creditora 

XXV. 

§  1260.  SPECIAL  MEETING  OP  CREDITORS. 

Whenever,  by  reason  of  a  vacancy  in  the  office  of  trustee,  or  for  any 
other  cause,  it  becomes  necessary  to  call  a  special  meeting  of  the  credit- 
ors in  order  to  carry  out  the  purposes  of  the  act,  the  court  may  call  such 
a  meeting,  specifying  in  the  notice  the  purpose  for  which  it  is  called. 

XXVL 

§  1261.  ACCOUNTS  OF  REFEREE. 

Every  referee  shall  keep  an  accurate  account  of  his  traveling  and  in- 
cidental expenses,  and  of  those  of  any  clerk  or  other  officer  attending 
him  in  the  performance  of  his  duties  in  any  case  which  may  be  referred 
to  him;  and  shaU  make  return  of  the  same  under  oath  to  the  judge,  with 
proper  vouchers  when  vouchers  can  be  procured,  on  the  first  Tuesday  in 
each  month. 

XXVIL 

§  1262.  REVIEW  BY  JUDGE. 

When  a  bankrupt,  creditor,  trustee,  or  other  person  shall  desire  a  re- 
view by  the  judge  of  any  order  made  by  the  referee,  he  shall  file  with 
the  referee  his  petition  therefor,  setting  out  the  en-or  complained  of; 
and  the  referee  shall  forthwith  certify  to  the  judge  the  question  pre- 
sented, a  summary  of  the  evidence  relating  thereto,  and  the  finding  and 
order  of  the  referee  thereon. 


^10  LAW   OF    BANKRUPTCY. 

§  1263.  ^^^'n- 

REDEMPTION   OF  PROPERTY   AND  COMPOUNDING  OF  CLAIMS. 

Whenever  it  may  be  deemed  for  the  benefit  of  the  estate  of  a  bank- 
rupt to  redeem  and  discharge  any  mortgage  or  other  pledge,  or  deposit 
or  lien,  upon  any  property,  real  or  pei'sonal,  or  to  relieve  said  property 
from  any  conditional  contract,  and  to  tender  performance  of  the  condi- 
tions thereof,  or  to  compound  and  settle  any  debts  or  other  claims  due 
or  belonging  to  the  estate  of  the  bankrupt,  the  trustee,  or  the  bankrupt, 
or  any  creditor  who  has  proved  his  debt,  may  file  his  petition  therefor; 
and  thereupon  the  court  shall  appoint  a  suitable  time  and  place  for  the 
hearing  thereof,  notice  of  which  shall  be  given  as  the  court  shall  direct, 
so  that  all  creditors  and  other  persons  interested  may  appear  and  show 
cause,  if  any  they  have,  why  an  order  should  not  be  passed  by  the  court 
upon  the  petition  authorizing  such  act  on  the  part  of  the  trustea 

XXIX. 

§  1264.  PAYMENT  OF  MONEYS  DEPOSITED. 

No  moneys  deposited  as  required  by  the  act  shall  be  drawn  from  the 
depository  unless  by  check  or  warrant,  signed  by  the  clerk  of  the  court, 
or  by  a  trustee,  and  countersigned  by  the  judge  of  the  covirt,  or  by  a 
referee  designated  for  that  purpose,  or  by  the  clerk  or  his  assistant  under 
an  order  made  by  the  judge,  stating  the  date,  the  sum,  and  the  account 
for  which  it  is  drawn;  and  an  entry  of  the  substance  of  such  check  or 
warrant,  with  the  date  thereof,  the  sum  drawn  for,  and  the  account  for 
which  it  is  drawn,  shall  be  forthwith  made  in  a  book  kept  for  that  pur- 
pose by  the  trustee  or  his  clerk;  and  all  checks  and  drafts  shall  be  en- 
tered in  the  order  of  time  in  which  they  are  drawn,  and  shall  be 
numbered  in  the  case  of  each  estate.  A  copy  of  this  general  order  shall 
be  furnished  to  the  depository,  and  also  the  name  of  any  referee  or  clerk 
authorized  to  countersign  said  checks. 

XXX 

S  1265.  IMPRISONED  DEBTOR. 

If,  at  the  time  of  preferring  his  petition,  the  debtor  shall  be  imprisoned, 
the  covirt,  upon  application,  may  order  him  to  be  produced  upon  habeas 
corpus,  by  the  jailor  or  any  officer  in  whose  custody  he  may  be,  before 
the  referee,  for  the  purpose  of  testifying  in  any  matter  relating  to  his 
bankruptcy;  and,  if  committed  after  the  filing  of  his  petition  upon  pro- 
cess in  any  civil  action  founded  upon  a  claim  provable  in  bankruptcy, 
the  court  may,  upon  like  application,  discharge  him  from  such' imprison- 
ment. If  the  petitioner,  during  the  pendency  of  the  proceedings  in 
bankruptcy,  be  arrested  or  imprisoned  upon  process  in  any  civil  action, 
the  district  court,  upon  his  application,  may  issue  a  writ  of  habeas  corpus 


EDLES,  FOEMS   AND   ORDERS.  811 

to  bring  him  before  the  court  to  ascertain  whether  such  process  has  been 
issued  for  the  collection  of  any  claim  provable  in  bankruptcy,  and  if  so 
provable  he  shall  be  discharged;  if  not,  he  shall  be  remanded  to  the 
custody  in  which  he  may  lawfully  be.  Before  granting  the  order  for 
discharge  the  court  shall  cause  notice  to  be  served  upon  the  creditor  or 
his  attorney,  so  as  to  give  him  an  opportunity  of  appearing  and  being 
heard  before  the  granting  of  the  order. 

XXXL 

§  1266.  PETITION   FOR   DISCHARGE. 

The  petition  of  a  bankrupt  for  a  discharge  shall  state  concisely,  in  ac- 
cordance with  the  provisions  of  the  act  and  the  orders  of  the  court,  the 
proceedings  in  the  case  and  the  acts  of  the  bankrupt 

XXXIL 

§  1267.  OPPOSITION  TO   DISCHARGE  OR  COMPOSITION. 

A  creditor  opposing  the  application  of  a  bankrupt  for  his  discharge,  or 
for  the  confirmation  of  a  composition,  shall  enter  his  appearance  in  op- 
position thereto  on  the  day  when  the  creditors  are  required  to  show 
cause,  and  shall  file  a  specification  in  writing  of  the  grounds  of  his  oj> 
position  within  ten  days  thereafter,  unless  the  time  shall  be  enlarged  by 
special  order  of  the  judge. 

XXXIIL 

§  1268.  ARBITRATION. 

Whenever  a  trustee  shall  make  application  to  the  court  for  authority 
to  submit  a  controversy  arising  in  the  settlement  of  a  demand  against  a 
bankrupt's  estate,  or  for  a  debt  due  to  it,  to  the  determination  of  arbi- 
trators, or  for  authority  to  compound  and  settle  such  controversy  by 
agreement  with  the  other  party,  the  application  shall  clearly  and  dis- 
tinctly set  forth  the  subject-matter  of  the  controversy,  and  the  reasons 
why  the  trustee  thinks  it  proper  and  most  for  the  interest  of  the  estate 
that  the  controversy  should  be  settled  by  arbitration  or  otherwise. 

XXXIV. 

§  1269.  COSTS   IN  CONTESTED  ADJUDICATIONS. 

In  cases  of  involuntary  bankruptcy,  when  the  debtor  resists  an  adjudi- 
cation, and  the  court,  after  hearing,  adjudges  the  debtor  a  bankrupt,  the 
petitioning  creditor  shall  recover,  and  be  paid  out  of  the  estate,  the 
same  costs  that  are  allowed  to  a  party  recovering  in  a  suit  in  equity; 
and  if  the  petition  is  dismissed,  the  debtor  shall  recover  like  costs  against 
the  petitioner. 


312  LAW   OF   BANKRUPTCY. 

XXXV. 

§  1270.  COMPENSATION  OF  CLERKS,  REFEREES  AND  TRUSTEES. 

1.  The  fees  allowed  by  the  act  to  clerks  shall  be  in  full  compensation 
for  all  services  performed  by  them  in  regard  to  filing  petitions  or  other 
papers  required  by  the  act  to  be  filed  with  them,  or  in  certifying  or  de- 
livering papers  or  copies  of  records  to  referees  or  other  oflBcers,  or  in  re- 
ceiving or  paying  out  money;  but  shall  not  include  copies  furnished  to 
other  persons,  or  expenses  necessarily  incurred  in  publishing  or  mailing 
notices  or  other  papers. 

2.  The  compensation  of  referees,  prescribed  by  the  act,  shall  be  in  full 
compensation  for  all  services  performed  by  them  under  the  act,  or  under 
these  general  orders ;  but  shall  not  include  expenses  necessarily  incurred 
by  them  in  publishing  or  mailing  notices,  in  traveling,  or  in  perpetuat- 
ing testimony,  or  other  expenses  necessarily  incurred  in  the  performance 
of  their  duties  under  the  act  and  allowed  by  special  order  of  the  judge. 

3.  The  compensation  allowed  to  trustees  by  the  act  shall  be  in  full 
compensation  for  the  services  performed  by  them ;  but  shall  not  include 
expenses  necessarily  incurred  in  the  performance  of  their  duties  and 
allowed  upon  the  settlement  of  their  accounts. 

4.  In  any  case  in  which  the  fees  of  the  clerk,  referee  and  trustee  are 
not  required  by  the  act  to  be  paid  by  a  debtor  before  filing  his  petition 
to  be  adjudged  a  bankrupt,  the  judge,  at  any  time  during  the  pendency 
of  the  proceedings  in  bankruptcy,  may  order  those  fees  to  be  paid  out 
of  the  estate;  or  may,  after  notice  to  the  bankrupt,  and  satisfactory 
proof  that  he  then  has  or  can  obtain  the  money  with  which  to  pay  those 
fees,  order  him  to  pay  them  within  a  time  specified,  and,  if  he  fails  to 
do  so,  may  order  his  petition  to  be  dismissed. 

XXXVL 

§  1271.  APPEALS. 

L  Appeals  from  a  court  of  bankruptcy  to  a  circuit  court  of  appeals,  or 
to  the  supreme  court  of  a  Territory,  shall  be  allowed  by  a  judge  of  the 
court  appealed  from  or  of  the  court  appealed  to,  and  shall  be  regulated, 
except  as  otherwise  provided  in  the  act,  by  the  rules  governing  appeals 
in  equity  in  the  courts  of  the  United  States. 

2.  Appeals  under  the  act  to  the  Supreme  Court  of  the  United  States 
from  a  circuit  court  of  appeals,  or  from  the  supreme  court  of  a  Territory, 
or  from  the  supreme  coxui;  of  the  District  of  Columbia,  or  from  any 
court  of  bankruptcy  whatever,  shall  be  taken  within  thirty  days  after 
the  judgment  or  decree,  and  shall  be  allowed  by  a  judge  of  the  court 
appealed  from,  or  by  a  justice  of  the  Supreme  Court  of  the  United 
States. 

S.  In  every  case  in  which  either  party  is  entitled  by  the  act  to  take 
an  appeal  to  the  Supreme  Court  of  the  United  States,  the  court  from 


RULES,  FORMS    AUD   ORDERS.  813 

which  the  appeal  lies  shall,  at  or  before  the  time  of  entering  its  judg- 
ment or  decree,  make  and  file  a  finding  of  the  facts,  and  its  conclusions 
of  law  thereon,  stated  separately;  and  the  record  transmitted  to  the 
Supreme  CJourt  of  the  United  States  on  such  an  appeal  sliall  consist  only 
of  the  pleadings,  the  judgment  or  decree,  the  finding  of  facts,  and  tbs 
conclusions  of  law. 

XXXVIL 

§  1272.  GENERAL  PROVISIONS. 

In  proceedings  in  equity,  instituted  for  the  purpose  of  carrying  into 
effect  the  provisions  of  the  act,  or  for  enforcing  the  rights  and  remedies 
given  by  it,  the  rules  of  eqviity  practice  established  by  the  Supreme 
Court  of  the  United  States  shall  be  followed  as  nearly  as  may  ba  In 
proceedings  at  law,  instituted  for  the  same  purpose,  the  practice  and 
procedure  in  cases  at  law  shall  be  followed  as  nearly  as  may  ba  But 
the  judge  may,  by  special  order  in  any  case,  vary  the  time  allowed  for 
return  of  process,  for  appearance  and  pleading,  and  for  taking  testimony 
and  publication,  and  may  otherwise  modify  the  rules  for  the  preparation 
of  any  particular  case  so  as  to  facilitate  a  speedy  hearing. 

XXXVIIL 

§  1273.  FORMS. 

The  several  forms  annexed  to  these  general  orders  shall  be  observed 
and  used,  with  such  alterations  as  may  be  necessary  to  suit  the  circum- 
stances of  any  particular  casa 


oft 


814  LAW    OF    BAJJiKRUPTOY. 


FOKMS  IN  BANKRUrXCY. 

[N.  B.— Oaths  required  by  the  act,  except  upon  hearings  in  court,  may 
be  administered  by  referees  and  by  officers  authorized  to  administer 
oaths  in  proceedings  before  the  courts  of  the  United  States,  or  under  the 
laws  of  the  State  where  the  same  are  to  be  taken.  Bankrupt  Act  of 
1898,  o.  4,  §  20.] 

[Form  No.  1.] 

§  1274.  Debtor's  Petition. 

To  the  Honorable ,  Judge  of  the  District  Ck)urt  of  the  United 

States  for  the District  of : 

The  petition  of ,  of ,  in  the  county  of and  district 

and  State  of , [state  occupation],  respectfully  represents: 

That  he  has  had  his  principal  place  of  business  [or  has  resided,  or  has 
had  his  domicil]  for  the  greater  portion  of  six  months  next  immediately 

preceding  the  filing  of  this  petition  at ,  within  said  judicial  district; 

that  he  owes  debts  which  he  is  unable  to  pay  in  full ;  that  he  is  willing  to 
surrender  all  his  property  for  the  benefit  of  his  creditors  except  such  as 
is  exempt  by  law,  and  desires  to  obtain  the  benefit  of  the  acts  of  Con- 
gress relating  to  bankruptcy. 

That  the  schedule  hereto  annexed,  marked  A,  and  verified  by  your 
petitioner's  oath,  contains  a  full  and  true  statement  of  all  his  debts,  and 
(so  far  as  it  is  possible  to  ascertain)  the  names  and  places  of  residence  of 
his  creditors,  and  such  further  statements  concerning  said  debts  as  are 
required  by  the  provisions  of  said  acts: 

That  the  schedule  hereto  annexed,  marked  B,  and  verified  by  your 
petitioner's  oath,  contains  an  accurate  inventory  of  all  his  property,  both 
real  and  personal,  and  such  further  statements  concerning  said  property 
as  are  required  by  the  provisions  of  said  acts: 

Wherefore  your  petitioner  prays  that  he  may  be  adjudged  by  the  court 
to  be  a  bankrupt  within  the  purview  of  said  acts. . 

,  Attorney. 

United  States  op  America,  District  of ,  ss: 

I, ,  the  petitioning  debtor  mentioned  and  described  in  the 

foregoing  petition,  do  hereby  make  solemn  oath  that  the  statements  con- 
tained therein  are  true  according  to  the  best  of  my  knowledge,  informa- 
tion, and  belief.  ,  Petitioner. 

Subscribed  and  sworn  to  before  me  this day  of ,  A.  D.  18 — . 


[Official  character.] 


F0EM8   IN   BANKRUPTCY. 


815 


SCHEDULE  A.—  STATEMENT  OF  ALL  DEBTS  OF  BANKRUPT. 

§  1275.  Schedule  A,  (1) 

Statement  of  all  creditors  who  are  to  be  paid  in  full,  or  to  wturm  pri- 
ority is  secured  by  law. 


Claims  which  havk  pri- 
ority. 


<1) 

Taxes  and  debts  due    and 

owing  to  the  United  States 

(2) 
Taxes  due  and  owing  to  the 

State  of  ,  or  to  any 

county,  district  or,  munici- 
paUty  thereof 


(3) 
Wages  due  workmen,  clerks, 
or  servants,  to  an  amount 
not  exceeding  $300  each, 
earned  within  three 
months  before  filing  the 
petition 


(4) 

Other  debts  having  priority 

by  law . . 


•3 


3S  u 


:.a8 

.     Oq. 

sg 
4) !-  a 

a  9  o 

c3  cd  > 

S8^ 


Total 


Amount. 


§  1276. 


Schedule  A.  (2) 
Creditors  holding  securities. 


-,  Petitioner. 


[N.  B.—  Particulars  of  securities  held,  with  dates  of  same,  and  when  they  were  given, 
to  be  stated  under  the  names  of  the  several  creditors,  and  also  particulars  concerning 
each  debt,  as  required  by  acts  of  Congress  relating  to  bankruptcy,  and  whether  con- 
tracted as  partner  or  joint  contractor  with  any  other  person;  and  if  so,  with  whom.] 


O 

■t 

1 

O 

§ 

1 

4 

S 

9.  •-* 

^ 

0)5 

II 

w 

1 

is  3 

o 

gJaa 

Too 

M 

©  > 

i 

§5 

fi  ^ 

3 

■a 

1 

K 

(5 

a 

Q 

^ 

> 

9 

e. 

Total.. 

-,  Petitioner. 


81fi 


LAW    OF    BANKRUPTCY. 


§  1277.  Schedule  A.  (3) 

Creditors  whose  claims  are  unsecured, 

[N.  B.—  When  the  name  and  residence  (or  either)  of  any  drawer,  maker,  indorser,  or 
bolder  of  any  bill  or  note,  etc.,  are  unknown,  the  fact  must  be  stated,  and  also  the  name 
and  residence  of  the  last  holder  known  to  the  debtor.  The  debt  due  to  each  creditor 
must  be  stated  in  full,  and  any  claim  by  way  of  set-oflf  stated  in  the  schedule  of  property.] 


1 

II 

i 
s 

w 
o 

2  9 

a 

8 

J3 

h 

a  a 

0)  g 

Nature  and  consideration 
of  the  debt,  and  whether 
any  judgment,  bond,  bill 
of  exchange,  promissory 
note,  etc.,  and  whether 
contracted  as  partner  or 
joint  contractor  with  any 
other  person;  and,  if  bo, 
with  whom. 

Amount 

$ 

e. 

... .. 

Total 

Petitioner. 


§  1278. 


Schedule  A.  (4) 


Liabilities  on  notes  or  bills  discounted  which  ought  to  be  paid  by  the 
drawers,  viakers,  acceptors,  or  indorsers. 

[N.  B. —  The  dates  of  the  notes  or  bills,  and  when  due,  with  the  names,  residences,  and 
the  business  or  occupation  of  the  drawers,  makers,  or  acceptors  thereof,  are  to  be  set 
forth  under  the  names  of  the  holders.  If  the  names  of  the  holders  are  not  known,  the 
name  of  the  last  holder  known  to  the  debtor  shall  be  stated,  and  his  business  and  place 
of  residence.  The  same  particulars  as  to  notes  or  biUs  on  which  the  debtor  is  liable  as 
Indorser.] 


& 

S 

i^ 

3  IS  03  8  as -a 

1 

s 

E 

"4 
1 

c  J5   . 

1 

f      liabi 

same 
ed   as   p 
joint 
or  with 
rson;  an 
whom. 

Amount 

2i 

•S5 

f-o 

ature     c 
whether 
contract 
ner    or 
tractor, 
other  pe 
so,  with 

H  3 

S  ,j  n 

2  "d 

0)  ■*-*  CB 

a 

U 

Oh 

55 

% 

e. 

Total 

illl 

-,  Petitioner, 


FORMS    IN    PANKRUrTCY. 


817 


1279. 


Schedule  A-  (5) 


Accommodation  paper, 

[N.  B.—  The  dates  of  the  notes  or  bills,  and  when  due,  with  the  names  and  residences 
of  the  drawers,  makers,  and  acceptors  thereof,  are  to  be  set  forth  under  the  names  of 
the  holders;  if  the  bankrupt  be  liable  tis  drawer,  maker,  ticceptor,  or  indorser  thereof, 
it  is  to  be  stated  accordingly.  If  the  names  of  the  holders  are  not  known,  the  name  of 
the  last  holder  known  to  the  debtor  should  be  stated,  with  his  residence.  Same  particu- 
lars as  to  other  commercial  paper.] 


9  U 

an 

^  s 


"  te-u 


3  o-o 


„  a 


AmoUBt 


Total 


,  Petitioner. 


Oath  to  Schedule  A. 


United  States  of  America,  District  of ,  ss: 

On  this day  of ,  A.  D.  18 — ,  before  me  personally  came 

,  the  person  mentioned  in  and  who  subscribed  to  the  foregoing 

schedule,  and  who,  being  by  me  first  duly  sworn,  did  declare  the  said 
schedule  to  be  a  statement  of  all  his  debts,  in  accordance  with  the  acts 
of  Congress  relating  to  bankruptcy. 

Subscribed  and  sworn  to  before  me  this day  of ,  A-  D.  18 — . 


[Offlcial  character.] 


818 


LAW    OF    BANKRUPTCY. 


SCHEDULE  B.— STATEMENT  OF  ALL  PROPERTY  OF  BANKRUPT. 
§  1280.  Schedule  a  (1) 

Real  estate. 


5^ 

3  Q 

t-3 

Location  Aim 

OWNED 

DESCRIPTION 
BT  DEBTOR  OB 

OF  ALL    REAL    ESTATE 
HELD  BT  HIU. 

a 

5    ® 
|.5 

OH 

Estimated 
value. 

1 

c 

Total .... 

^^ 

ij  1281. 


Schedule  R  (2) 
Personal  property. 


-,  Petitioner. 


a.  Cash  on  hand 

b.  Bills  of  exchange,  promissory  notes,  or  securities 

of  any  description  (each  to  be  set  out  separately) 

c.  Stock  in  trade,  in  —  business  of ,  at ,  of 

the  value  of 

d.  Household  goods  and  furniture,  household  stores, 

wearing  apparel  and  ornaments  of  the  person,  viz. 

e.  Books,  prints,  and  pictures,  viz 

/.   Horses,  cows,  sheep,  and  other  animals  (with  num- 
ber of  each),  viz 

a.  Carriages  and  other  vehicles,  viz 

h.  Farming  stock  and  implements  of  husbandry,  viz . 

t.    Shipping,  and  shares  m  vessels,  viz 

fc.   Machinery,  fixtures,  apparatus,  and  tools  used  in 
business,  with  the  place  where  each  is  situated, 


Patents,  copyrights,  and  trade-marks,  viz 

.  Goods  or  personal  property  of  any  other  descrip- 
tion, with  the  place  where  each  is  situate  viz. . 


Total , 


Petitioner. 


FOKMS    IN    BANKBUPTOT. 


819 


1282. 


Schedule  B.  (8) 
Choses  in  action. 


Dollars. 

Centa. 

a.  Debts  due  petitioner  on  open  account 

6.  Stocks  in  inconwrated  companies,  interest  in  joint 
stocl£  companies,  and  negotiable  bonds 

c.  Policies  of  insurance 

d.  Unliquidated  claims  of  every  nature,  with  their  es- 

timated value 

...     ., 

e.  Deposits  of  money  in  banking  institutions  and  else- 
where ... 

Total 

-,  Petitioner. 


§  1283. 


Schedule  B.  (4) 


Property  in  reversion,  remainder,  or  expectancy,  including  property  held 
in  trust  for  the  debtor  or  subject  to  any  power  or  right  to  dispose  of 
or  to  charge. 

[N.  B.—  A  particular  description  of  each  Interest  must  be  entered.  If  all  or  any  of 
the  debtor's  iproperty  has  been  conveyed  by  deed  of  assignment,  or  otherwise,  for  the 
benefit  of  creditors,  the  date  of  such  deed  should  be  stated,  the  name  and  address  of  the 
person  to  whom  the  property  was  conveyed,  the  amount  realized  from  the  proceeds 
thereof,  and  <Jie  disposal  of  the  same,  as  far  as  known  to  the  debtor.] 


General  interest. 

Particular 
description. 

Supposed  value  of 
my  interest. 

$ 

e 

Personal  property 

Property  in  money,  stock,  shares,  bonds,  annuities. 

Total 

Property  hereto/ore  conveyed  foiM>enefit  of  creditors. 

Amount    realized 
from    proceeds 
of  property  con- 
veyed. 

What  portion  of  debtor's  property  has  been  conveyed 
by  deed  of  assignment,  or  otherwise,  for  benefit  of 
creditors;  date  of  such  deed,  name  and  address  of 
party  to  whom  conveyed;  amount  realized  there- 
from, and  disposal   of  same,  so  far  as  known  to 

1 

e. 

What  sum  or  sums  have  been  paid  to  counsel,  and  to 
whom,  for  services  rendered  or  to  be  rendered  in 

Total 

-,  Petitioner. 


820 


LAW    OF    BANKEDI'TCY. 


§  1284.  Schedule  B.  (5) 

A  particular  statement  of  the  property  claimed  as  exempted  from  tfu 
operation  of  the  acts  of  Congress  relating  to  bankruptcy,  giving  each 
item  of  property  and  its  valuation;  and,  if  any  portion  of  it  is  real 
estate,  its  location,  description,  and  present  use. 


Valuation. 

< 

c. 

•-operty  claimed  to  be  exempted  bv  State  laws;  its 
valuation;  whether  real  or  personal;  its  description 
and  present  use;  and  reference  given  to  the  statute 

Total 

-,  Petitioner. 


1285. 


Schedule  B.  (6) 


BOOKS,  PAPERS,  DEEDS,  AND  WRITINGS  RELATING  TO  BANKRUPT'S  BUSINESS 

AND   ESTATE. 

The  following  Is  a  true  list  of  all  books,  papers,  deeds,  and  writings  relating  to  my 
trade,  business,  dealings,  estate,  and  effects,  or  any  part  thereof,  which,  at  the  date  of 
this  petition,  are  in  my  possession  or  under  my  custody  and  control,  or  which  are  in  the 
lK)ssession  or  custody  of  any  person  in  trust  for  me,  or  for  my  use,  benefit,  or  advantage : 
and  also  of  all  others  which  have  been  heretofore,  at  any  time,  in  my  possession,  or 
under  my  custody  or  control,  and  which  are  now  held  by  the  parties  whose  names  aie 
hereinafter  aet  forth,  with  the  reason  for  their  custody  of  the  same. 


Books  

DeedB. 

Papen 

— ,  Petitioner. 


Oath  to  Schedule  B. 


United  States  of  America,  District  of ,  ss: 

On  this day  of ,  A.  D.  18 — ,  before  me  personally -came 

,  the  person  mentioned  in  and  who  subscribed  to  the  foregoing 

schedule,  and  who,  being  by  me  first  duly  sworn,  did  declare  the  said 
schedule  to  be  a  statement  of  all  his  estate,  both  real  and  personal,  ir 
accordance  with  the  acts  of  Congress  relating  to  bankruptcy. 


[Official  character.i 


FORMS    IN    BANKRUPTCY. 


821 


55 1286.  Summary  of  Debts  and  Asset* 

[From  the  statements  of  the  bankrupt  In  Schedules  A  and  B.] 


Schedule  A. 


Schedule  A. 
Schedule  A. 
Schedule  A. 

Schedule  A. 


Schedule  B . 
Schedule  B . 


Schedule  B 


Schedule  B  . 
Schedule  B . 
Schedule  B . 


1  (1)  Taxes  and  debts  due  United  States 

1  (2)  Taxes  due  States,   counties,  districts,  and 

municipalities  .. ..  

1  (3)  Wages 

1  (4)  Other  debts  preferred  by  law 

2  Secured  claims 

3  Unsecured  claims    , 

4  Notes  and  bills  which  ought  to  be  paid  by 

other  parties  thereto 

6       Accommodation  paper , 


Schedule  A,  total. 


1  Real  estate 

2-a  Cash  on  hand 

2-b  BiUs,  promissory  notes,  and  securities 

2-c  Stock  m  trade 

2-d  Household  goods,  etc 

2-e  Books,  prints,  and  pictures 

3-f  Horses,  cows,  and  other  animals 

2-g  Carriages  and  other  vehicles 

2-a  Farming  stock  and  implements 

2-i  Shipping  and  shares  in  vessels 

2-k  Machinery,  tools,  etc 

2-1  Patents,  copyrights,  and  trade-marks 

3-m  Other  personal  property 

3-a  Debts  due  on  open  accounts 

3-b  Stocks,  negotiable  bonds,  etc 

3-c  Policies  of  msurance 

3-d  Unliquidated  claims 

3-e  Deposits  of  money  in  banks  and  elsewhere. . 

4  Property  in  reversion,  remainder,  trust,  etc . 

5  Property  claimed  to  be  excepted 

6  Books,  deeds,  and  papers 


Schedule  B,  total. 


§  1287. 


[Form  No.  2.] 
Partnership  Petition. 


10  the  Honorable ,  Judge  of  the  District  Court  of  the  United 

States  for  the District  of : 

The  petition  of respectfully  represents: 

That  your  petitioners  and have  been  partners  under  the  firm 

name  of ,  having  their  principal  place  of  biisiness  at ,  in  the 

coimty  of ,  and  district  and  State  of ,  for  the  greater  portion  of 

the  six  months  next  immediately  preceding  the  filing  of  this  petition ; 
that  the  said  partners  owe  debts  which  they  are  unable  to  pay  in  full ; 
that  your  petitioners  are  willing  to  surrender  all  their  property  for  the 
benefit  of  their  creditors,  except  such  as  is  exempt  by  law,  and  desire  to 
obtain  the  benefit  of  the  acts  of  Congress  relating  to  bankruptcy. 

That  the  schedule  hereto  annexed,  marked  A,  and  verified  by  oath, 
contains  a  full  and  true  statement  of  all  the  debts  of  said  partners,  and, 
as  far  as  possible,  the  names  and  places  of  residence  of  their  creditors, 
and  such  further  statements  concerning  said  debts  as  are  required  by 
the  provisions  of  said  acts. 


822  LAW    OF    BANKKUPTOY. 

That  the  schedule  hereto  annexed,  marked  B,  verified  by oath, 

contains  an  accurate  inventory  of  all  the  property,  real  and  personal, 
of  said  partners,  and  such  further  statements  concerning  said  property 
as  are  required  by  the  provisions  of  said  acts. 

And  said further  states  that  the  schedule  hereto  annexed, 

marked  C,  verified  by  his  oath,  contains  a  full  and  true  statement  of  all 
his  individual  debts,  and,  as  far  as  possible,  the  names  and  places  of 
residence  of  his  creditors,  and  such  further  statements  concerning  said 
debts  as  are  required  by  the  provisions  of  said  acts;  and  that  the  sched- 
ule hereto  annexed,  marked  D,  verified  by  his  oath,  contains  an  accu- 
rate inventory  of  all  his  individual  property,  real  and  personal,  and  such 
further  statements  concerning  said  property  as  are  required  by  the  pro- 
visions of  said  acts. 

And  said further  states  that  the  schedule  hereto  annexed, 

marked  E,  verified  by  his  oath,  contains  a  full  and  true  statement  of  all 
his  individual  debts,  and,  as  far  as  possible,  the  names  and  places  of 
residence  of  his  creditors,  and  such  further  statements  concerning  said 
debts  as  are  required  by  the  provisions  of  said  acts;  and  that  the  sched- 
ule hereto  annexed,  marked  F,  verified  by  his  oath,  contains  an  accu- 
rate inventory  of  all  his  individual  property,  real  and  personal,  and  such 
further  statements  concerning  said  property  as  are  required  by  the  pro- 
visions of  said  acts. 

And  said further  states  that  the  schedule  hereto  annexed, 

marked  G,  verified  by  his  oath,  contains  a  full  and  true  statement  of  all 
his  individual  debts,  and,  as  far  as  possible,  the  names  and  places  of 
residence  of  his  creditors,  and  such  further  statements  concerning  said 
debts  as  are  required  by  the  provisions  of  said  acts ;  and  that  the  sched- 
ule hereto  annexed,  marked  H,  verified  by  his  oath,  cnntains  an  accu- 
rate inventory  of  all  his  individual  property,  real  and  personal,  and  such 
further  statements  concerning  said  property  as  are  required  by  the  pro- 
visions of  said  acta 

And  said further  states  that  the  schedule  hereto  annexed, 

marked  J,  verified  by  his  oath,  contains  a  full  and  true  statement  of  all 
his  individual  debts,  and,  as  far  as  possible,  the  names  and  places  of 
residence  of  his  creditors,  and  such  further  statements  concerning  said 
debts  as  are  required  by  the  provisions  of  said  acts;  and  that  the  sched- 
ule hereto  annexed,  marked  K,  verified  by  his  oath,  contains  an  accu- 
rate inventory  of  all  his  individual  property,  real  and  personal,  and  such 
further  statements  concerning  said  property  as  are  required  by  the  pro- 
visions of  said  acts. 

Wherefore  your  petitioners  pray  that  the  said  firm  may  be  adjudged 
by  a  decree  of  the  court  to  be  bankrupts  within  the  purview  of  said  acts. 


-,  Attorney.  Petitioners^ 


FOKMS    IN    BANKRUPTCY.  823 

,  the  petitioning  debtors  mentioned  and  described  in  the  fore- 
going petition,  do  hereby  make  solemn  oath  that  the  statements  con- 
tained therein  are  true  according  to  the  best  of  their  knowledge,  infor- 
mation, and  beliet  1 


Petitioners. 
Subscribed  and  sworn  to  before  me  thia day  of ,  A-  D.  18 — . 


[Official  charticter.] 

[Schedules  to  be  annexed  corresponding  with  soheduies  under  Form 
NaL] 


[Form  No.  3.] 

§  1288.  Creditors'  Petition. 

To  the  Honorable ,  Judge  of  the  District  Coxirt  of  the  United 

States  for  the District  of : 

The  petition  of ,  of ,  and ,  of ,  and , 

of ,  respectfully  shows: 

That ,  of ,  has  for  the  greater  portion  of  six  months  next 

preceding  the  date  of  filing  this  petition,  had  his  principal  place  of  busi- 
ness [or  resided,  or  had  his  domicil]  at ,  in  the  county  of ,  and 

State  and  district  aforesaid,  and  owes  debts  to  the  amount  of  $1,000. 

That  your  petitioners  are  creditors  of  said ,  having  provable 

claims  amounting  in  the  aggregate,  in  excess  of  securities  held  by  them, 
to  the  sum  of  $500.  That  the  nature  and  amount  of  your  petitioners' 
claims  are  as  follows:  . 

And  your  petitioners  further  represent  that  said is  insolvent, 

and  that  within  four  months  next  preceding  the  date  of  this  petition 
the  said committed  an  act  of  bankruptcy,  in  that  he  did  here- 
tofore, to  wit,  on  the day  of , . 

Wherefore  your  petitioners  pray  that  service  of  this  petition,  with  a 
subpoena,  may  be  made  upon ,  as  provided  in  the  acts  of  Con- 
gress relating  to  bankruptcy,  and  that  he  may  be  adjudged  by  the  court 
to  be  a  bankrupt  within  the  purview  of  said  acta. 


1  Attomejf.  PditianerM. 


324  ^^^^    ^^^'    liANKRUPTOY. 

United  States  of  America,  Distnot  of ,  sa : 

, , ,  being  three  of  the  petitioners  above 

named,  do  hereby  make  solemn  oath  that  the  statements  contained  in 
the  foregoing  petition,  subscribed  by  them,  are  true. 

Before  me^ ,  thia day  of ,  18 — > 


[Official  character.] 

[Schedules  to  be  annexed  corresponding  with  schedules  under  Form 
NaLJ 

[FoKM  No.  4.] 
§  1289.  OuDER  TO  Show  Cause  upon  Creditors'  Petitio!!. 

In  the  District  Court  of  the  United  States  for  the District  of » 

In  the  matter  of 


^^^'•°f[  In  Bankruptcy. 


Upon  consideration  of  the  petition  of that be  de- 
clared a  bankrupt,  it  is  ordered  that  the  said do  appear  at  this 

court,  as  a  court  of  bankruptcy,  to  be  holden  at ,  in  the  district 

aforesaid,  on  the day  of ,  at  —  o'clock  in  the noon,  and 

show  cause,  if  any  there  be,  why  the  prayer  of  said  petition  should  not 
be  granted;  and 

It  is  further  ordered  that  a  copy  of  said  petition,  together  with  a  writ 

of  subpoena,  be  served  on  said ,  by  delivering  the  same  to  him 

personally  or  by  leaving  the  same  at  his  last  usual  place  of  abode  in  said 
district,  at  least  five  days  before  the  day  aforesaid. 

Witness  the  Honorable ,  judge  of  the  said  court,  and  the  seal 

thereof,  at ,  in  said  district,  on  the day  of ,  A-  D.  18 — . 

[Seal  of  1  Clerk. 

the  court] 

[Form  No.  5.] 

§  1290.  SuBPCENA  TO  Alleged  Banerufh, 

United  States  of  America, District  of » 

To ,  in  said  district,  greeting: 

For  certain  causes  offered  before  the  District  Court  of  the  United 

States  of  America  within  and  for  the district  of ,  as  a  court 

of  bankruptcy,  we  command  and  strictly  enjoin  yovi,  laying  all  other 
matters  aside  and  notwithstanding  any  excuse,  that  you  personally  ap- 
pear before  our  said  District  Court  to  be  holden  at ,  in  said  district, 

on  the day  of ,  A.  D.  189-, to  answer  to  a  petition  filed 

by in  our  said  court,  praying  that  you  may  be  adjudged  a 


FORMS    IN    BANKRUPTCY,  825 

bankrupt;  and  to  do  furthei  and  receive  that  which  our  said  District 
Court  shall  consider  in  this  behalf.  And  this  you  are  in  no  wise  to  omit, 
under  the  pains  and  penalties  of  what  may  befall  thereon. 

Witness  the  Honorable ,  judge  of  said  court,  and  the  seal 

thereof,  at ,  this day  ol ,  A.  D.  189-i 

[Seal  of  ,  Clerk. 

the  court] 

[Form  No.  6.] 
§  1291.  Denial  op  Bankruptcy. 

In  the  District  Court  of  the  United  States  for  the District  of , 

In  the  matter  of  )  j^  Bankruptcy. 

At ,  in  said  district,  on  the day  of ,  A.  D.  18 — , 

And  now  the  said appears,  and  denies  that  he  has  committed 

the  act  of  bankruptcy  set  forth  in  said  petition,  or  that  he  is  insolvent, 
and  avers  that  he  should  not  be  declared  bankrupt  for  any  caiise  in  said 
petition  alleged;  and  this  he  prays  may  be  inquired  of  by  the  court  [or, 
he  demands  that  the  same  may  be  inquired  of  by  a  jury]. 

Subscribed  and  sworn  to  before  me  this day  of ,  A.  D.  18 — * 

[Official  character.] 

[Form  No.  7.] 
§  1292.  Order  for  Jury  Tru  i* 

In  the  District  Court  of  the  United  States  foi  the Distriot  of , 

In 


the  matter  of  |  ^^  Bankruptcy. 


At ,  in  said  district,  on  the day  of  ,  18 — . 

Upon  the  demand  in  writing  filed  by — ,  alleged  to  be  a  bank- 
rupt, that  the  fact  of  the  commission  by  him  of  an  act  of  bankruptcy, 
and  the  fact  of  his  insolvency  may  be  inquired  of  by  a  jury,  it  is  or- 
dered, that  said  issue  be  submitted  to  a  jury. 

[Seal  of  ,  Clerk. 

the  court] 

[Form  No.  P  ]      ^ 
§  1293.  Special  Warrant  to  Marshal. 

In  the  District  Court  of  the  United  States  for  the District  of » 

Inthematterof    ^    in  Bankruptcy. 

To  the  marshal  of  said  distriot  or  to  either  of  his  deputies,  greeting; 

Whereas  a  petition  for  adjudication  of  bankruptcy  was,  on  the 

day  of .  A.  D.  18 — ,  filed  against ,  of  the  covmty  of and 


,S2G  LA.W    OF    BANKKUPTOY. 

State  of ,  in  said  district,  and  said  petition  is  still  pending;  and 

whereas  it  satisfactorily  appears  that  said has  committed  an 

act  of  bankruptcy  [or  has  neglected  or  is  neglecting,  or  is  about  to  so 
neglect  his  property  that  it  has  thereby  deteriorated  or  is  thereby  dete- 
riorating or  is  about  thereby  to  deteriorate  in  value],  you  are  therefore 
authorized  and  required  to  seize  and  take  possession  of  all  the  estate,  real 

and  personal,  of  said ,  and  of  all  his  deeds,  books  of  account,  and 

papers,  and  to  hold  and  keep  the  same  safely  subject  to  the  further  order 
of  the  court. 

Witness  the  Honorable ,  judge  of  the  said  court,  and  the  seal 

thereof,  at ,  in  said  district,  on  the of  — — ,  A.  D.  189-. 

[Seal  of  ,  Clerk. 

the  court] 

RETURN  BY  MARSHAL  THEREON. 

By  virtue  of  the  within  warrant,  I  have  taken  possession  of  the  estate 

of  the  within-named ,  and  of  all  his  deeds,  books  of  account, 

and  papers  which  have  come  to  my  knowledge 

Marshal  [or  Deputy  Marshal^ 
Fees  and  expenses. 


1.  Service  of  warrant 

2.  Necessary  travel,  at  the  rate  of  six  cents  a  mile  each  way 

3.  Actual  expenses  in  custody  of  property  and  other  services  as  follows 

[Here  state  the  particulars.] 


Marshal  [or  Deputy  Marshall, 

District  of ,  A.  D.  18—. 

Personally  appeared  before  me  the  said ,  and  made  oath  that 

the  above  expenses  returned  by  him  have  been  actually  incurred  and 

paid  by  him,  and  are  just  and  reasonable.  , 

Referee  in  Bankruptcy, 

[Form  No.  9.] 
§  1294.  Bond  op  Petitionino  Creditor. 

Know  all  men  by  these  presents:  That  we, ,  as  pnncipal,  and 

,  as  sureties,  are  held  and  finnly  boiind  imto ,  in  the 

full  and  just  sum  of dollars,  to  be  paid  to  said ,  executors, 

administrators,  or  assigns,  to  which  payment,  well  and  truly  to  be  made, 
we  bind  ourselves,  our  heirs,  executors,  and  administrators,  jointly  and 
severally,  by  these  presenta 

Signed  and  sealed  this day  of ,  A.  D.  189-. 

The  condition  of  this  obligation  is  such  that  whereas  a  petition  in 


FOKMS    IN    BANKRUPTCY.  827 

bankruptcy  has  been  filed  in  the  district  court  of  the  United  States  for 

the district  of against  tJie  said ,  and  the  said 

has  applied  to  that  court  for  a  warrant  to  the  marshal  of  said  district 

directing  him  to  seize  and  hold  the  property  of  said ,  subject 

to  the  further  orders  of  said  district  court. 
Now,  therefore,  if  such  a  warrant  shall  issue  for  the  seizure  of  said 

property,  and  if  the  said shall  indemnify  the  said for 

such  damages  as  he  shall  svistaia  in  the  event  such  seizure  shall  prove 
to  have  been  wrongfully  obtained,  then  the  above  obligation  to  be  void; 
otherwise  to  remain  in  full  force  and  virtua 
Sealed  and  delivered  in  presence  of  — 

[Seal] 

[Seal] 

[Seal] 

Approved  this day  of ,  A.  D.  189-k 

— ,  District  Judge. 

[Form  No.  10.] 
§  1295.  Bond  to  Marshal. 

Know  all  men  by  these  presents  that  we, ,  as  principal,  and 

,  as  sureties,  are  held  and  firmly  bound  unto ,  marshal 

of  the  United  States  for  the district  of ,  in  the  full  and  just 

sum  of dollars,  to  be  paid  to  the  said ,  his  executors,  ad- 
ministrators, or  assigns,  to  which  payment,  well  and  truly  to  be  made, 
we  bind  ovirselves,  omi  heirs,  executors,  and  administrators,  jointly  and 
.severally,  by  these  presents. 

Signed  and  sealed  this day  of ,  A.  D.  189-^1 

The  condition  of  this  obligation  is  such  that  whereas  a  petition  in 
bankruptcy  has  been  filed  in  the  district  court  of  the  United  States  for 

the district  of ,  against  the  said ,  and  the  said  court 

has  issued  a  warrant  to  the  marshal  of  the  United  States  for  said  district, 

directing  him  to  seize  and  hold  property  of  the  said ,  subject 

to  the  further  order  of  the  court,  and  the  said  property  has  been  seized 
by  said  marshal  as  directed,  and  the  said  district  court  upon  a  petition 
of  said has  ordered  the  said  property  to  be  released  to  him. 

Now,  therefore,  if  the  said  property  shall  be  released  accordingly  to 

the  said ,  and  the  said ,  being  adjudged  a  bankrupt, 

shall  turn  over  said  property  or  pay  the  value  thereof  in  money  to  the 
trustee,  then  the  above  obligation  to  be  void;  otherwise  to  remain  in  full 
force  and  virtue. 

Sealed  and  delivered  in  the  presence  of  — 

[Seal] 

[Seal] 

[Seal} 

Approved  this day  of ,  A.  D.  18^ 

,  District  Jvdge. 


828  LAW    OF    BANKKDrXCY. 

[Form  No.  11.] 

§  1296.      Adjudicatiw  that  Debtor  is  not  Bankrupt. 

In  the  District  Court  of  the  United  States  for  the District  of » 

In  the  matter  of  ) 

y   In  Bankruptcy. 

At ,  in  said  district,  on day  of ,  A.  D.  189-,  before  the  Hon- 
orable   ,  judge  of  the district  of . 

This  cause  came  on  to  be  heard  at ,  in  said  court,  upon  the  petition 

of that be  adjudged  a  bankrupt  within  the  true  intent 

and  meaning  of  the  acts  of  Congress  relating  to  bankruptcy,  and  [Here 
state  the  proceedings,  whether  there  was  no  opposition,  or,  if  opposed, 
state  what  proceedings  were  had.] 

And  thereupon,  and  upon  consideration  of  the  proofs  in  said  cause 
[and  the  arguments  of  counsel  thereon,  if  any],  it  was  found  that  the 
facts  set  forth  in  said  petition  were  not  proved;  and  it  is  therefore  ad- 
judged that  said was  not  a  bankrupt,  and  that  said  petition  be 

dismissed,  with  costs. 

Witness  the  Honorable ,  judge  of  said  court,  and  the  seal 

thereof,  at ,  in  said  district,  on  the day  of ,  A.  D.  18 — . 

[Seal  of  1  Clerk. 

the  court] 

[Form  No.  12.] 
§  1297.                  Adjudication  of  Bankruptcy. 
In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     i 
,  Bankrupt.  \   ^  Bankruptcy. 

At ,  in  said  district,  on  the day  of ,  A.  D.  18 — ,  before  the 

Honorable ,  judge  of  said  court  in  bankruptcy,  the  petition  of 

that be  adjudged  a  bankrupt,  within  the  true  intent 

and  meaning  of  the  acts  of  Congress  relating  to  bankruptcy,  having  been 
heard  and  duly  considered,  the  said is  hereby  declared  and  ad- 
judged bankrupt  accordingly. 

Witness  the  Honorable ,  judge  of  said  court,  and  the  seal 

thereof,  at ,  in  said  district,  on  the day  of ,  A.  D.  18 — . 

[Seal  of  f  Clerk. 

the  court] 

[Form  No.  13.] 

§  1298.    Appointment,  Oath,  and  Report  of  Appraisers. 

In  the  District  CoTirt  of  the  United  States  for  the District  of . 

In  the  matter  of     i 
,  Bankrupt  \  ^  Bankruptcy. 

It  is  ordered  that ,  of , ,  of ,  and ,  of 

,  three  disinterested  persons,  be,  and  they  are  hereby,  appointed  ap- 


FORMS    IN    liANKEDPTCY.  829 

praisers  to  appraise  the  real  and  personal  property  belonging  to  the 
estate  of  the  said  bankrupt  set  out  in  the  schedules  now  on  file  in  this 
court,  and  report  their  appraisal  to  the  court,  said  appraisal  to  be  made 
as  soon  as  may  be,  and  the  appraisers  to  be  duly  sworn. 

Witness  my  hand  this day  of ,  A.  D.  18 — . 

^1 
Referee  in  Bankruptcy. 
District  of ,  ss: 

Personally  appeared  the  within  named and  severally  made 

oath  that  they  will  fully  and  fairly  appraise  the  aforesaid  real  and  per- 
sonal property  according  to  their  beat  skill  and  judgment. 


Subscribed  and  sworn  to  before  me  this day  of ,  A.  D.  18ft-. 

[Official  character.] 

We,  the  undersigned,  having  been  notified  that  we  were  appointed  to 
estimate  and  appraise  the  real  and  personal  property  aforesaid,  have  at- 
tended to  the  duties  assigned  us,  and  after  a  strict  examination  and 
careful  inquiry,  we  do  estimate  and  appraise  the  same  as  follows: 


Dollars. 


Centa 


In  witness  whereof  we  hereunto  set  our  hands,  at ,  this day 

of ,  A.  D.  18— k  . 


[Form  No.  14.] 
§  1299.                        Order  of  REFERENca 
In  the  District  Court  of  the  United  States  for  the  District  of » 

In  the  matter  of     )  ^  Bankruptcy. 
,  Bankrupt.  ' 

Whereas ,  of ,  in  the  county  of ,  and  district  afore- 
said, on  the day  of ,  A.  D.  18 — ,  was  duly  adjudged  a  bankrupt 

upon  a  petition  filed  in  this  court  by  [or,  against]  him  on  the day 

of ,  A.  D.  18 — ,  according  to  the  provisions  of  the  acts  of  Congress 

relating  to  bankruptcy. 

It  is  thereupon  ordered,  that  said  matter  be  referred  to ,  one 

57 


8,30  LAW    OF   JJANKRUPTOY. 

of  the  referees  in  bankruptcy  of  this  court,  to  take  such  further  proceed- 
ings therein  as  are  required  by  said  acts;  and  that  the  said 

shall  attend  before  said  referee  on  the  day  of ,  at ,  and 

thenceforth  sliall  submit  to  such  orders  as  may  be  made  by  said  referee 

or  by  this  court  relating  to  said bankruptcy. 

Witness  the  Honorable ,  judge  of  the  said  court,  and  the  seal 

thereof,  at ,  in  said  district,  on  the day  of ,  A.  D.  18 — . 

[Seal  of  ,  Clerk. 

the  court] 

[FoKM  No.  15.] 
§  1300.         OiiDEB  OP  Reference  in  Judge's  Absence. 

In  the  District  Court  of  the  United  States  for  the District  of * 

In  thematter  of  |  j^  Bankruptcy. 

Whereas  on  the day  of ,  A.  D.  18 — ,  a  petition  was  filed  to 

have ,  of ,  in  the  county  of ,  and  district  aforesaid,  ad- 
judged a  bankrupt  according  to  the  provisions  of  the  acts  of  Congress 
relating  to  bankruptcy;  and  whereas  the  judge  of  said  court  was  absent 
from  said  district  at  the  time  of  filing  said  petition  [or,  in  case  of  invol- 
untary bankruptcy,  on  the  next  day  after  the  last  day  on  which  plead- 
ings might  have  been  filed,  and  none  have  been  filed  by  the  bankrupt  or 
any  of  his  creditors],  it  is  thereupon  ordered  that  the  said  matter  be 

referred  to ,  one  of  the  referees  in  bankruptcy  of  this  court,  to 

consider  said  petition  and  take  such  proceedings  therein  as  are  required 

by  said  acts;  and  that  the  said shall  attend  before  said  referee 

on  the day  of ,  A.  D.  18 — ,  at . 

Witness  my  hand  and  the  seal  of  the  said  court,  at f  in  said  dis- 
trict, on  the day  of ,  A.  D.  18 — k 

[Seal  of  ^ ,  Clerk. 

the  court] 

[Form  No.  16.] 
§  1301.  Referee's  Oath  of  Office. 

I, ,  do  solemnly  swear  that  I  will  administer  justice  without 

respect  to  persons,  and  do  equal  right  to  the  poor  and  to  the  rich,  and 
that  I  will  faithfully  and  impartially  discharge  and  perform  all  the 
duties  incumbent  on  me  as  referee  in  bankruptcy,  according  to  the  best 
of  my  abilities  and  understanding,  agreeably  to  the  Constitution  and 

laws  of  the  United  States.    So  help  me  God.  . 

Subscribed  and  sworn  to  before  me  this day  of ,  A.  D.  18—. 

——        » 
District  Judge. 


fokms  in  bankruptcy.  831 

[Form  No.  17.] 
§  1302.  Bond  of  Referee. 

Know  all  men  by  these  presents:  That  we, of ,  as  princi- 
pal, and of and of ,  as  sureties,  are  held  and 

firmly  bound  to  the  United  States  of  America  in  the  sum  of dol- 
lars, lawful  money  of  the  United  States,  to  be  paid  to  the  said  United 
States,  for  the  payment  of  which,  well  and  truly  to  be  made,  we  bind  our- 
selves, our  heirs,  executors,  and  administrators,  jointly  and  severally,  by 
these  presents. 

Signed  and  sealed  this day  of ,  A.  D.  18 — . 

The  condition  of  this  obligation  iss  uch  that  whereas  the  said 

has  been  on  the day  of ,  A,  D.  18-^,  appointed  by  the  Honorable 

,  judge  of  the  district  court  of  the  United  States  for  the 

district  of ,  a  referee  in  bankruptcy,  in  and  for  the  county  of ,  in 

said  district,  under  the  acts  of  Congress  relating  to  bankruptcy. 

Now,  therefore,  if  the  said shall  well  and  faithfully  dis- 
charge and  perform  all  the  duties  pertaining  to  the  said  office  of  referee 
in  bankruptcy,  then  this  obligation  to  be  void;  otherwise  to  remain  in 
full  force  and  virtua 

Signed  and  sealed  in  the  presence  of 

.  ,[L.S.] 

-.  .[L.S.] 

,[/.&] 

Approved  this day  of ,  A.  D.  189-> 

,  District  Judge. 

[Form  No.  18.] 

§  1303.  Notice  of  First  Meeting  of  Creditor& 

In  the  District  Court  of  the  United  States  for  the District  of » 

In  Bankruptcy. 

In  the  matter  of     )  j^  Bankruptcy. 

,  Bankrupt.  > 

To  the  creditors  of ,  of ,  in  the  county  of ,  and  district 

aforesaid,  a  bankrupt: 

Notice  is  hereby  given  that  on  the day  of ,  A.  D.  18 — ,  the  said 

was  duly  adjudicated  bankrupt;  and  that  the  first  meeting  of 

his  creditors  will  be  held  at in ,  on  the day  of ,  A.  D. 

18 — ,  at o'clock  in  the noon,  at  which  time  the  said  creditors 

may  attend,  prove  their  claims,  appoint  a  trustee,  examine  the  bank- 
rupt, and  transact  such  other  business  as  may  properly  come  before  said 
meeting.  , 

,  18 — k  Eeferee  in  Bankruptcy. 


833  i'AW    OF    BANKUUl'TOT. 

[Form  No.  19.] 
^  1304.          List  of  Debts  Proved  at  First  Meetino. 
In  the  District  Court  of  the  United  States  for  the District  of , 

In  the  matter  of     [  in  Bankruptcy. 
,  Bankrupt.  > 

At ,  in  said  district,  on  the day  of ,  A.  D.  18—,  before 

,  referee  in  bankruptcy. 

The  following  is  a  list  of  creditors  who  have  this  day  proved  their 
debts: 


Names  of  creditors. 

Residence. 

Debts  proTed. 

DollR. 

eta. 

Referee  in  Bankruptcy. 

§  1305.  ^^^^  ^^-  20-] 

General  Letter  of  Attorney  m  Fact  when  Creditor  is  not  Rep- 
resented BY  Attorney  at  Law. 

In  the  District  Court  of  the  United  States  for  the District  of » 

In  the  matter  of     )  j^  Bankruptcy. 

,  Bankrupt ' 

To , 

I, ,  of ,  in  the  county  of and  State  of ,  do  hereby 

authorize  you,  or  any  one  of  you,  to  attend  the  meeting  or  meetings  of 
creditors  of  the  bankrupt  aforesaid  at  a  court  of  bankruptcy,  wherever 
advertised  or  directed  to  be  holden,  on  the  day  and  at  the  hour  appointed 
and  notified  by  said  coiirt  in  said  matter,  or  at  such  other  place  and  time 
as  may  be  appointed  by  the  court  for  holding  such  meeting  or  meetings, 
or  at  which  such  meeting  or  meetings,  or  any  adjournment  or  adjourn- 
ments thereof  may  be  held,  and  then  and  there  from  time  to  time,  and 
as  often  as  there  may  be  occasion,  for  me  and  in  my  name  to  vote  for  or 
against  any  proposal  or  resolution  that  may  be  then  submitted  imder 
the  acts  of  Congress  relating  to  bankruptcy;  and  in  the  choice  of  trustee 
or  trustees  of  the  estate  of  the  said  bankrupt,  and  for  me  to  assent  to 
such  appointment  of  trustee ;  and  with  like  powers  to  attend  and  vote 
at  any  other  meeting  or  meetings  of  creditors,  or  sitting  or  sittings  of 
the  court,  which  may  be  held  therein  for  any  of  the  purposes  aforesaid; 
also  to  accept  any  composition  proposed  by  said  bankrupt  in  satisfaction 


FORMS    IN    BANKRUPTCY.  833 

of  his  debts,  and  to  receive  payment  of  dividends  and  of  money  due  me 
under  any  composition,  and  for  any  other  purpose  in  my  interest  what- 
soever, with  full  power  of  substitution. 

In  witness  whereof  I  have  hereunto  signed  my  name  and  affixed  my 
seal  the day  of ,  A.  D.  189-.  .    [L.  S.] 

Signed,  sealed,  and  delivered  in  presence  of  — 

Acknowledged  before  me  this day  of ,  A-  D.  189-% 

[Official  character.] 

[Form  No.  21.] 

§  1306.  Special  Letter  of  Attorney  in  Fact. 

In  the  matter  of      > 
,  Bankrupt.  \  ^°  Bankruptcy. 

To , 

I  hereby  authorize  you,  or  any  one  of  you,  to  attend  the  meeting  of 

creditors  in  this  matter,  advertised  or  directed  to  be  holden  at ,  on 

the day  of ,  before ,  or  any  adjournment  thereof,  and  then 

and  there for and  in name  to  vote  for  or  against  any  pro- 
posal or  resolution  that  may  be  lawfully  made  or  passed  at  such  mee^ 
ing  or  adjourned  meeting,  and  in  the  choice  of  trustee  or  trustees  of  the 
estate  of  the  said  bankrupt  .    [L.  S.] 

In  witness  whereof  I  have  hereunto  signed  my  name  and  affixed  my 
seal  the day  of ,  A.  D.  189-. 

Signed,  sealed,  and  delivered  in  presence  of  — 

Acknowledged  before  me  this day  of  - — ,  A  D.  189-. 

[Official  character.l 

[Form  No.  22.] 
§  1307.           Appointment  of  Trustee  by  Creditors. 
In  the  District  Court  of  the  United  States  for  the Uistnot  of , 

In  the  matter  of     j 
,  Bankrupt.  \  ^  Bankruptcy. 

At  ,  in  said  district,  on  the  day  of  ,  A  D.  18 — ,  before 

,  referee  in  bankruptcy. 

This  being  the  day  appointed  by  the  court  for  the  first  meeting  of 
creditors  in  the  above  bankruptcy,  and  of  wliich  due  notice  has  been 
given  in  the  [here  insert  the  names  of  the  nevsjxqiers  in  which  notice 
was  published],  we,  whose  names  are  hereunder  written,  being  tlie  ma 


834:  LAW    OK    DANKRUPTOY. 

jority  in  number  and  in  amount  of  claims  of  the  creditors  of  the  said 
bankrupt,  whose  claims  have  been  allowed,  and  who  are  present  at  this 

meeting,  do  hereby  appoint ,  of ,  in  the  county  of and 

State  of ,  to  be  the  trustee  of  the  said  bankrupt's  estate  and  effects 


Signatures  of  creditors. 

Residences  of  the  name. 

Amount  of  debt. 

Dolls. 

Cts. 

Ordered  that  the  above  appointment  of  trustee  be,  and  the  same  ia 

hereby,  approved.  > 

Referee  in  Bankruptcy. 

[Form  No.  23.] 
^  1308.             Appointment  of  Trustee  by  Referer 
In  the  District  Ck)urt  of  the  United  States  for  the District  of . 

In  the  matter  of     )  j^  Bankruptcy. 
,  Bankrupt.  » 

At ,  in  said  district,  on  the  day  of  ,  A.  D.  18 — ,  before 

,  referee  in  bankruptcy. 

This  being  the  day  appointed  by  the  court  for  the  first  meeting  of 
creditors  under  the  said  bankruptcy,  and  of  which  due  notice  has  been 
given  in  the  [here  insert  the  names  of  the  newspapers  in  which  notice 
was  published],  I,  the  undersigned  referee  of  the  said  court  in  bank- 
ruptcy, sat  at  the  time  and  place  above  mentioned,  pursuant  to  such 
notice,  to  take  the  proof  of  debts  and  for  the  choice  of  trustee  under  the 
said  bankruptcy ;  and  I  do  hereby  certify  that  the  creditors  whose  claims 
had  been  allowed  and  were  present,  or  duly  represented,  failed  to  make 
choice  of  a  trustee  of  said  bankrupt's  estate,  and  therefore  I  do  hereby 

appoint ,  of  ,  in  the  county  of and  State  of ,  as 

trustee  of  the  same.  , 

Referee  in  Bankruptcy. 

[Form  No.  24.] 
§  1309.           Notice  to  Trustee  of  his  Appointment. 
In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     Un  Bankruptcy. 

,  Bankrupt,  > 

To ,  of ,  in  the  county  of ,  and  district  aforesaid: 

I  hereby  notify  you  that  you  were  duly  appointed  trustee  [or  one  of 
the  trustees]  of  the  estate  of  the  above-named  bankrupt  at  the  first  meet- 
ing of  the  creditors,  on  the day  of ,  A.  D.  18 — ,  and  I  have  ap 


FORMS    IN    BANKRUPTCY.  835 

proved  said  appointment.     The  penal  sum  of  your  bond  as  such  trustee 

has  been  fixed  at dollars.     You  are  required  to  notify  me  forthwith 

of  your  acceptance  or  rejection  of  the  trust 
Dated  at the day  of ,  A.  D.  18 — . 

Referee  in  Bankruptcy, 

[Form  No.  25.] 
§  1310.  Bond  of  Trustee. 

Know  all  men  by  these  presents:  That  we, ,  of ,  as  prin- 
cipal, and ,  of ,  and ,  of  ,  as  S'Ureties,  are  held 

and  firmly  bound  unto  the  United  States  of  America  in  the  sum  of 

dollars,  in  lawful  money  of  the  United  States,  to  be  paid  to  the  said 
United  States,  for  which  payment,  well  and  truly  to  be  made,  we  bind 
om'selves  and  our  heirs,  executors,  and  administrators,  jointly  and  sev- 
erally, by  these  presents. 

Signed  and  sealed  this day  of ,  A.  D.  189-. 

The  condition  of  this  obligation  is  such,  that  whereas  the  above  named 

was,  on  the day  of ,  A.  D.  189-,  appointed  trustee  in 

the  case  pending  in  bankruptcy  in  said  court,  wherein is  the 

bankrupt,  and  he,  the  said ,  has  accepted  said  trust  with  all  the 

duties  and  obligations  pertaining  thereunto: 

Now,  therefore,  if  the  said ,  trustee  as  aforesaid,  shall  obey 

such  orders  as  said  court  may  make  in  relation  to  said  trust,  and  shall 
faithfully  and  truly  account  for  all  the  moneys,  assets,  and  effects  of  the 
estate  of  said  bankrupt  which  shall  come  into  his  hands  and  possession, 
and  shall  in  all  respects  faithfully  perform  all  his  ofiicial  duties  as  said 
trustee,  then  this  obligation  to  be  void;  otherwise,  to  remain  in  full 
force  and  virtue. 

Signed  and  sealed  in  presence  of 

,  [Seal] 

,  [Seal] 

,  [Seal] 

[Form  No.  26.] 

^  1311.  Order  AppROviNa  Trustee's  Bond. 

At  a  court  of  bankruptcy,  held  in  and  for  the District  of ,  at 

, ,  this day  of ,  189-. 

Before ,  referee  in  bankruptcy,  in  the  District  Court  of  the 

United  States  for  the District  of . 


[  In  Bankruptcy. 


In  the  matter  of 
,  Bankrupt. 

It  appearing  to  the  Court  that ,  of ,  and  in  said  district,  haa 

been  duly  appointed  trustee  of  the  estate  of  the  above-named  bankrupt, 


836  LAW    OF    JiANKKUPTCY. 

aud  has  given  a  bond  with  sureties  for  the  faithful  performance  of  his 
official  duties,  in  the  amount  fixed  by  the  creditors  [or  by  order  of  the 

court],  to  wit,  in  the  sum  of dollars,  it  is  ordered  that  the  said  bond 

be,  and  the  same  is  hereby,  approved,  , 

Referee  in  Bankruptcy. 

[Form  No.  27.] 
§  1312.          Order  that  no  Trustee  be  Appointed. 
In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of      ) 
,  Bankrupt]   I^  Bankruptcy. 

It  appearing  that  the  schedule  of  the  bankrupt  discloses  no  assets,  and 
that  no  creditor  has  appeared  at  the  first  meeting,  and  that  the  appoint- 
ment of  a  trustee  of  the  bankrupt's  estate  is  not  now  desirable,  it  is 
hereby  ordered  that,  until  further  order  of  the  court,  no  trustee  be  ap 
pointed  and  no  other  meeting  of  the  creditors  be  called. 

» 
Referee  in  Bankruptcy, 

[Form  No.  28.] 

§  1313.  Order  for  Examination  of  Bankrupt, 

In  the  matter  of     i 
,  Bankrupt.  \   ^°  Bankruptcy. 

At ,  on  the day  of ,  A.  D.  18 — . 

Upon  the  application  of ,  trustee  of  said  bankrupt  [or  cred- 
itor of  said  bankrupt],  it  is  ordered  that  said  bankrupt  attend  before 

,  one  of  the  referees  in  bankruptcy  of  this  court,  at ,  on  the 

day  of ,  at  —  o'clock  in  the noon,  to  submit  to  examination 

under  the  acts  of  Congress  relating  to  bankruptcy,  and  that  a  copy  of 
this  order  be  delivered  to  him,  the  said  bankrupt,  forthwith. 

Referee  in  Bankruptcy. 

[Form  No.  29.] 
§  1314.            Examination  of  Bankrupt  or  Witness. 
In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     [  in  Bankruptcy. 
,  Bankrupt.  ' 

At  ,  in  said  district,  on  the  day  of  ,  A.  D.  18 — ,  before 

,  one  of  the  referees  in  bankruptcy  of  said  court. 


FORMS    IN    BANKKUPTCY.  837 

,  of ,  in  the  county  of ,  and  State  of ,  being  duly 

sworn  and  examined  at  the  time  and  place  above  mentioned,  upon  his 
oath  says:  [Here  insert  substance  of  examination  of  party.] 

Referee  in  Bankruptcy. 
[Form  :N'o.  30.] 
§  1315.                            Summons  to  Witness. 
In  the  District  Court  of  the  United  States  for  the  District  of . 

In  the  matter  of     I  j^  Bankruptcy. 

,  Bankrupt.  ' 

To : 

Whereas ,  of  ,  in  the  county  of ,  and  State  of , 

has  been  duly  adjudged  baniirupt,  and  the  proceeding  in  bankruptcy  is 

pending  in  the  District  Court  of  the  United  States  for  the District 

of , 

These  are  to  require  you,  to  whom  this  summons  is  directed,  person- 
ally to  be  and  appear  before ,  one  of  the  referees  in  bankruptcy 

of  the  said  court,  at  ,  on  the day  ,  at  —  o'clock  in  the 

noon,  then  and  there,  to  be  examined  in  relation  to  said  bankruptcy. 

Witness  the  Honorable ,  judge  of  said  court,  and  the  seal 

thereof,  at ,  this day  of ,  A.  D.  189- ,  Clerk. 

§  1316.  Return  of  Summons  to  Witness. 

In  the  District  Court  of  the  United  States  for  the District  of * 

In  the  matter  of     /  ^^  Bankruptcy. 
,  Bankrupt.  > 

On  this day  of ,  A.  D.  18 — ,  before  me  came ,  of , 

in  the  county  of and  State  of ,  and  makes  oath,  and  says  that 

he  did,  on  ,  the  day  of ,  A.  D.  189-,  personally  serve  

,  of ,  in  the  county  of and  State  of ,  with  a  true  copy  of 

the  summons  hereto  annexed,  by  delivering  the  same  to  him;  and  he 
further  makes  oath,  and  says  that  he  is  not  interested  in  the  proceeding 
in  bankruptcy  named  in  said  summons.  * 

Subscribed  and  sworn  to  before  me  this day  of  - — ,  A.  D.  18 — * 

[Form  No.  31.] 
§  1317.                      Proof  of  Unsecured  Debt. 
In  the  District  Court  of  the  United  States  for  the District  of k 


In  the  matter  of       [  j^  Bankruptcy. 
,  Bankmpt.    ) 


At ,  in  said  district  of  ,  on  the  day  of  .  A.  D.  18^, 

came .  of ,  in  the  county  of ,  in  said  district  of .  and 

made  oath,  and  says  that ,  the  person  by  \or  against]  whom  a 


cS38  LAW    OF    UANKRUPTOY. 

petition  for  adjudication  of  bankruptcy  has  been  filed,  was,  at  and  before 
the  filinj^  of  said  petition,  and  still  is,  justly  and  truly  indebted  to  said 

deponent  in  the  sum  of dollars;  that  the  consideration  of  said  debt 

is  as  follows: ;  that  no  part  of  said  debt  has  been  paid  [except ]; 

that  there  are  no  set-offs  or  counter-claims  to  the  same  [except ];  and 

that  deponent  has  not,  nor  has  any  person  by  his  order,  or  to  his  knowl- 
edge or  belief,  for  his  use,  had  or  received  any  manner  of  security  for 

said  debt  whatever.  ,  Creditor. 

Subscribed  and  sworn  to  before  me  this day  of ,  A-  D.  18 — , 

> 
[Official  character.} 

[Form  No.  32.] 

^  1318.  Proof  of  Secured  Debt. 

[n  the  District  C!ourt  of  the  United  States  for  the District  of » 

In  the  matter  of       >  ^^  Bankruptcy. 
,  Bankrupt.    > 

At ,  in  said  district  of  ,  on  the  day  of ,  A.  D.  189-,  came 

,  of ,  in  the  county  of ,  in  said  district  of ,  and  made 

oath,  and  says  that ,  the  person  by  [or  against]  whom  a  petition 

for  adjudication  of  bankruptcy  has  been  filed,  was,  at  and  before  the 
filing  of  said  petition,  and  still  is,  justly  and  truly  indebted  to  said  de- 
ponent, in  the  sum  of dollars;  that  the  consideration  of  said  debt  is 

as  follows:  ;  that  no  part  of  said  debt  has  been  paid  [except ]; 

that  there  are  no  set-offs  or  counter-claims  to  the  same  [except ];  and 

that  the  only  securities  held  by  this  deponent  for  said  debt  are  the  fol- 
lowing:   .  ,  Creditor. 

Subscribed  and  sworn  to  before  me  this day  of ,  A.  D.  18 — . 

[Official  character.] 

[Form  No.  33.] 
§  1319.                Proof  of  Debt  Due  Corporation. 
In  the  District  Court  of  the  United  States  for  the District  of • 

In  the  matter  of     }  j^  Bankruptcy. 
,  Bankrupt.  ' 

At ,  in  said  district  of  ,  on  the  day  of  ,  A.  D.  189-, 

came ,  of  ,  in  the  county  of  and  State  of ,  and 

made  oath  and  says  that  he  is of  the ,  a  corporation  incorpo- 
rated by  and  under  the  laws  of  the  State  of ,  and  carrying  on  busi- 
ness at ,  in  the  county  of and  State  of ,  and  that  he  is  duly 

authorized  to  make  this  proof,  and  says  that  the  said ,  the  per- 
son by  [or  against]  whom  a  petition  for  adjudication  of  bankruptcy  hap 


FORMS    IN    BANKRUPTCY.  839 

been  filed,  was  at  and  before  the  tiling  of  the  said  petition,  and  still  is, 

justly  and  truly  indebted  to  said  corporation  in  the  sum  of dollars; 

that  the  consideration  of  said  debt  is  as  follows:  ;  that  no  part  of 

said  debt  has  been  paid  [except ];  that  there  are  no  set-offs  or  coiinter- 

claims  to  the  same  [except ] ;  and  that  said  corporation  has  not,  nor 

has  any  person  by  its  order,  or  to  the  knowledge  or  belief  of  said  de- 
ponent, for  its  use,  had  or  received  any  manner  of  security  for  said  debt 

whatever.  , 

of  said  Corporation. 

Subscribed  and  sworn  to  before  me  this day  of ,  A,  D.  18 — . 

[Official  character.] 
[Form  No.  34.] 
§  1320.                  Proof  of  Debt  by  Partnership. 
In  the  District  Court  of  the  United  States  for  the District  of . 


In  the  matter  of 
,  Bankrupt. 


t  In  Bankruptcy. 


At ,  in  said  district  of ,  on  the day  of ,  A.  D.  189-; 

came ,  of ,  in  the  county  of ,  in  said  district  of , 

and  made  oath  and  says  that  he  is  one  of  the  firm  of ,  consisting 

of  himself  and ,  of ,  in  the  county  of and  State  of ; 

that  the  said ,  the  person  by  [or  against]  whom  a  petition  for 

adjudication  of  bankruptcy  has  been  filed,  was  at  and  before  the  filing 
of  said  petition,  and  still  is,  justly  and  truly  indebted  to  this  deponent's 

said  firm  in  the  sum  of dollars;  that  tlie  consideration  of  said  debt 

is  as  follows: ;  that  no  part  of  said  debt  has  been  paid  [except ]; 

that  there  are  no  set-offs  or  counter-claims  to  the  same  [except ];  and 

this  deponent  has  not,  nor  has  his  said  firm,  nor  has  any  person  by  their 
order,  or  to  this  deponent's  knowledge  or  belief,  for  their  use,  had  or  re- 
ceived any  manner  of  security  for  said  debt  whatever. 

,  Creditor. 

Subscribed  and  sworn  to  before  me  this day  of ,  A  D.  18 — . 

> 
[Official  character.] 

[Form  No.  35.] 

§  1321.  Proof  of  Debt  by  Agent  or  Attorney. 

In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     (  i^  Bankruptcy. 
,  Bankrupt.  ' 

At ,  in  said  district  of ,  on  the day  of ,  A  D.  189-,  came 

,  of ,  in  the  county  of .  and  State  of ,  attorney  [or 


HIO  LA\\f    Ofi"   BANliKUl'TcY. 

authorized  agent]  of ,  in  the  county  of ,  and  State  of ,  and 

made  oatii  and  says  that ,  tlie  person  by  [or  against]  vvliora  a 

petition  for  adjudication  of  bankruptcy  has  been  filed,  was  at  and  before 
tlie  filing  of  said  petition,  and  still  is,  justly  and  truly  indebted  to  the 

said ,  in  the  sum  of dollars;  that  the  consideration  of  said 

debt  is  as  follows:  ;  that  no  part  of  said  debt  has  been  paid  [except 

] ;  and  that  this  deponent  has  not,  nor  has  any  person  by  his  order, 

or  to  this  deponent's  knowledge  or  belief,  for  his  use  had  or  received  any 
manner  of  security  for  said  debt  wliatever.  And  this  deponent  further 
says,  that  this  deposition  can  not  be  made  by  the  claimant  in  person  be- 
cause   ;  and  that  he  is  duly  authorized  by  his  principal  to  make  this 

affidavit,  and  that  it  is  within  his  knowledge  that  the  aforesaid  debt 
was  incurred  as  and  for  the  consideration  above  stated,  and  that  such 
debt,  to  the  best  of  his  knowledge  and  belief,  still  remains  unpaid  and 

unsatisfied,  > 

Subscribed  and  sworn  to  before  me  this day  of ,  A.  D.  18 — . 

» 
[Official  character.] 


[Form  No.  36.] 
^  1322.  Proof  of  Secured  Debt  by  Agent. 

In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     [  i^  Bankruptcy. 
,  Bankrupt.  ' 

At ,  in  said  district  of  ,  on  the  day  of ,  A.  D.  189-, 

came ,  of ,  in  the  county  of ,  and  State  of ,  attorney 

[or,  authorized  agent]  of ,  in  the  county  of ,  and  State  of , 

and  made  oath,  and  says  that ,  the  person  by  [or,  against]  wlioni 

a  petition  for  adjudication  of  bankruptcy  has  been  filed,  was,  at  and  be- 
fore the  filing  of  said  petition,  and  still  is,  justly  and  truly  indebted  to 

the  said in  the  sum  of dollars;  that  the  consideration  of 

said  debt  is  as  follows:  ;  that  no  part  of  said  debt  has  been  paid 

[except  ];  that  there  are  no  set-offs  or  counter-claims  to  the  same 

[except ];  and  that  the  only  securities  held  by  said for  said 

debt  are  tlie  following:  ;  and  this  deponent  further  says  that  this 

deposition  cannot  be  matle  by  the  claimant  in  person  because ;  and 

that  he  is  duly  authorized  by  his  principal  to  make  this  deposition,  and 
that  it  is  within  his  knowledge  that  the  aforesaid  debt  was  incurred  as 
and  for  the  consideration  above  stated.  . 

Subscribed  and  sworn  to  before  me  this day  of ,  A.  D.  18 — . 

f 
[Offl^al  character.] 


foums  in  bankruptcy.  841 

[Form  No.  37.] 

§  1323.  Affidavit  of  Lost  Bill,  or  Note. 

In  the  District  Court  of  tlie  United  States  for  the District  of . 

In  the  matter  of     > 
,  Bankrupt  \  ^"^  Bankruptcy. 

On  this day  of ,  A.  D.  18 — ,  at ,  came ,  of ,  in 

the  county  of ,  and  State  of ,  and  makes  oath  and  says  that  the 

bill  of  exchange  [or  note],  the  particulars  whereof  are  underwritten,  has 

been  lost  under  the  following  circumstances,  to  wit, ;  and  that  he, 

this  deponent,  has  not  been  able  to  find  the  same ;  and  this  deponent  fur- 
ther says  that  he  has  not,  nor  has  the  said ,  or  any  person  or 

persons  to  their  use,  to  this  deponent's  knowledge  or  belief,  negotiated 
the  said  bill  [or  note],  nor  in  any  manner  parted  with  or  assigned  the 
legal  or  beneficial  interest  therein,  or  any  part  thereof;  and  that  he,  this 
deponent,  is  the  person  now  legally  and  beneficially  interested  in  the 
same. 

Bill  or  note  above  referred  to. 


Date. 

Drawer  or  maker. 

Acceptor. 

Sum. 

Subscribed  and  sworn  to  before  me  this day  of ,  A,  D.  18 — . 

[Official  character.] 

[Form  No.  38.] 

§  1324.  Order  Reducing  Claim. 

In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     i 
,  Bankrupt]   1°  Bankruptcy. 

At ,  in  said  district,  on  the day  of ,  A.  D.  18 — . 

Upon  the  evidence  submitted  to  this  court  upon  the  claim  of 

against  said  estate  [and,  if  the  fact  he  so,  upon  hearing  counsel  thereon], 
it  is  ordered,  that  the  amount  of  said  claim  be  reduced  from  the  sum  of 

,  as  set  forth  in  the  affidavit  in  proof  of  claim  filed  by  said  creditor 

in  said  case,  to  the  sum  of ,  and  that  the  latter-named  sum  be  en- 
tered upon  the  books  of  the  trustee  as  the  true  sum  upon  which  a  divi- 
dend shall  be  computed  [if  vrith  interest,  with  interest  thereon  from  the 

day  of ,  A.  D.  18—].  , 

Referee  xn  Bankruptcy. 


<S4'3 


LAW    OF    BANKRUPTCY. 


>■  In  Bankruptcy. 


[Form  No.  39.] 
§  1325.                        Order  Expunging  Claim. 
In  the  District  Court  of  the  United  States  for  the District  of 

In  the  matter  of 

,  Bankrupt. 

At ,  in  said  district,  on  the day  of ,  A,  D.  18 — k 

Upon  the  evidence  submitted  to  the  court  upon  the  claim  of 

against  said  estate  [and  if  the  fact  be  so,  upon  hearing  counsel  thereon], 
it  is  ordered,  that  said  claim  be  disallowed  and  expunged  from  the  list 
of  claims  upon  the  trustee's  record  in  said  casa 

~~~~         » 
Referee  in  Bankruptcy. 

§  1326.  [Form  No.  40.] 

List  of  Claims  and  Dividends  to  be  Recorded  by  Referee  and  by 
HIM  Delivered  to  Trustee. 

In  the  District  Court  of  the  United  States  for  the District  of b 

In  the  matter  of 

,  Bankrupt. 

At ,  in  said  district,  on  the day  of ,  A.  D.  18 — * 


>  In  Bankruptcy. 


A  list  of  debts  proved  and  claimed  under  the  bankruptcy  of , 

ivith  dividend  at  the  rate  of per  cent,  this  day  declared 

thereon  by ,  a  referee  in  bankruptcy. 


No. 

Creditors. 

[To  be  placed  alphabetically,  and  the  names 
of  all  thejparties  to  the  proof  to  be  care- 
fully set  forth.] 

Sum  proved. 

Dividend. 

Dollars. 

Cents. 

Dollars. 

Cents. 

Referee  in  Bankruptcy. 

[Form  No.  41.] 

§  1327.  Notice  of  Dividend. 

In  the  Dibtriot  Court  of  the  United  States  for  the District  of ■ 

:n  the  matter  of     [  m  Bankruptcy. 

,  Bankrupt.  ' 

At  —  ,  on  the day  of ,  A.  D.  18—% 

To , 

Creditor  of ,  bankrupt : 

I  hereby  inform  you  that  you  may,  on  application  at  my  office, . 

on  the day  of ,  or  on  any  day  thereafter,  between  the  hours  nf 


FORMS    IN    BANKRUPTCY.  843 

— — ,  receive  a  warrant  for  the dividend  due  to  you  out  of  the  above 

estate.  If  you  cannot  personally  attend,  the  warrant  will  be  delivered 
to  your  order  on  your  filling  up  and  signing  the  subjoined  letter. 

,  Trustee. 

Creditor's  Letter  to  Trustee. 

To ,  Trustee  in  bankruptcy  of  the  estate  of ,  bankrupt: 

Please  deliver  to the  warrant  for  dividend  payable  out  of 

the  said  estate  to  me.  ,  Creditor. 

§1328.  [Form  No.  42.] 

Petition  and  Order  for  Sale  by  auction  of  Real  Estate. 
In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     )  j^  Bankruptcy. 
,  Bankrupt.  ' 

Respectfully  represents ,  trustee  of  the  estate  of  said  bank- 
rupt, that  it  would  be  for  the  benefit  of  said  estate  that  a  certain  portion 
of  the  real  estate  of  said  bankrupt,  to  wit:  {here  describe  it  and  its  esti- 
mated value\  should  be  sold  by  auction,  in  lots  or  parcels,  and  upon  terms 

and  conditions,  as  follows: .    Wherefore  he  prays  that  he  maybe 

authorized  to  make  sale  by  auction  of  said  real  estate  as  aforesaid. 

Dated  this day  of ,  A,  D,  18 — . ,  Trustee. 

The  foregoing  petition  having  been  duly  filed,  and  having  come  on  for 
a  hearing  before  me,  of  which  hearing  ten  days'  notice  was  given  by 
mail  to  creditors  of  said  bankrupt,  now,  after  due  hearing,  no  adverse 

interest  being  represented  thereat  [or  after  hearing in  favor  of 

said  petition  and in  opposition  thereto],  it  is  ordered  that  the 

said  trustee  be  authorized  to  sell  the  portion  of  the  bankrupt's  real  es- 
tate specified  in  the  foregoing  petition,  by  auction,  keeping  an  accurate 
account  of  each  lot  or  parcel  sold  and  the  price  received  therefor  and  to 
whom  sold;  which  said  account  he  shall  file  at  once  with  the  referea 

Witness  my  hand  this day  of ,  A.  D.  189-. 

> 
Referee  in  Bankruptcy. 

§1329.  [Form  No.  43.] 

Petition  and  Order  for  Redemption  op  Property  from  Lien. 
In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     i 
,  Bankrupt.]    In  Bankruptcy. 

Respectfully  represents ,  trustee  of  the  estate  of  said  bank- 
rupt, tlrnt  a  certain  portion  of  said  bankrupt's  estate,  to  wit:  [here  do 


844  i^AW    OP    liANKIiUl'TCY. 

acribe  the  estate  or  property  audits  estimated  value]  is  subject  to  a  mort- 
gage [describe  the  mortgage],  or  to  a  conditional  contract  [describing  it], 
or  to  a  lien  [describe  the  origin  and  nature  of  the  lien],  [or,  if  the  prop- 
erty be  personal  property,  has  been  pledged  or  deposited  and  is  subject 
to  a  lien]  for  [describe  the  nature  of  the  lien],  and  that  it  would  be  for 
the  benefit  of  the  estate  that  said  property  should  be  redeemed  and  dis- 
charged from  the  lien  thereon.  Wherefore  he  prays  that  he  may  be 
empowered  to  pay  out  of  the  assets  of  said  estate  in  his  hands  the  sum 

of ,  being  the  amount  of  said  lien,  in  order  to  redeem  said  property 

therefrom. 

Dated  this day  of ,  A.  D.  18—. ,  Trustee. 

The  foregoing  petition  having  been  duly  filed  and  having  come  on  for 
a  hearing  before  me,  of  which  hearing  ten  days'  notice  was  given  by 
mail  to  creditors  of  said  bankrupt,  now,  after  due  hearing,  no  adverse 

interest  being  represented  thereat  [or  after  hearing in  favor  of 

said  petition  and in  opposition  thereto],  it  is  ordered  that  the 

said  trustee  be  authorized  to  pay  out  of  the  assets  of  the  bankrupt's  es- 
tate specified  in  the  foregoing  petition  the  sum  of ,  being  the  amount 

of  the  lien,  in  order  to  redeem  the  property  therefrom. 

Witness  my  hand  this day  of ,  A.  D.  189-. 

Referee  in  Bankruptcy. 

[Form  No.  44.] 
§  1330.     Petition  and  Order  for  Sale  Subject  to  Lien. 
In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     Un  Bankruptcy. 
,  Bankrupt.  > 

Respectfully  represents ,  trustee  of  the  estate  of  said  bank- 
rupt, that  a  certain  portion  of  said  bankrupt's  estate,  to  wit:  [here  de- 
scribe the  estate  or  property  and  its  estimated  value]  is  subject  to  a 
mortgage  [describe  mortgage],  or  to  a  conditional  contract  [describe  it], 
or  to  a  lien  [describe  the  origin  and  nature  of  the  lien],  or  [if  the  prop- 
erty be  personal  property]  has  been  pledged  or  deposited  and  is  subject 
to  a  lien  for  [describe  the  nature  of  the  lien],  and  that  it  would  be  for 
the  benefit  of  the  said  estate  that  said  property  should  be  sold,  subject  to 
said  mortgage,  lien,  or  other  incumbrance.  Wlierefore  he  prays  that 
he  may  be  authorized  to  make  sale  of  said  property,  subject  to  the  in- 
cumbrance thereon. 

Dated  this day  of ,  A.  D.  189-. ,  Trustee. 

The  foregoing  petition  having  been  duly  filed  and  having  come  on  for 
a  hearing  before  me,  of  which  hearing  ten  days'  notice  was  given  by 
mail  to  creditors  of  said  bankrupt,  now,  after  due  hearing,  no  adverse 
interest  being  represented  thereat  [or  after  hearing in  favor 


FORMS    IN    BANKRUPTOT.  845 

of  said  petition  and in  opposition  thereto],  it  is  ordered  that 

the  said  trustee  be  authorized  to  sell  the  portion  of  the  bankrupt's  es- 
tate specified  in  the  foregoing  petition,  by  auction  [or,  at  private  sale], 
keeping  an  accurate  account  of  the  property  sold  and  the  price  received 
therefor  and  to  whom  sold;  which  said  account  he  shall  file  at  once 
with  the  referee. 
Witness  my  hand  this day  of ,  A-  D.  189-. 

» 
Referee  in  Bankruptcy. 

[Form  No.  45.] 

§  1331.  Petition  and  Order  for  Private  Sale. 

In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     i 
,  Bankncpt.  \  ^  Bankruptcy. 

Respectfully  represents ,  duly  appointed  trustee  of  the  estate 

of  the  aforesaid  bankrupt. 

That  for  the  following  reasons,  to  wit, ,  it  is  desirable  and  for  tlie 

best  interest  of  the  estate  to  sell  at  private  sale  a  certain  portion  of  tlie 
said  estate,  to  wit:  . 

Wherefore  he  prays  that  he  may  be  authorized  to  sell  the  said  prop- 
erty at  private  sale. 

Dated  this day  of ,  A.  D.  189- ,  Tnistee. 

The  foregoing  petition  having  been  duly  filed  and  having  come  on  for 
a  hearing  before  me,  of  which  hearing  ten  days'  notice  was  given  by 
mail  to  creditors  of  said  bankrupt,  now,  after  due  hearing,  no  adverse 

interest  being  repi'esented  thereat  [or  after  hearing in  favor 

of  said  petition  and in  opposition  thereto],  it  is  ordered  that  the 

said  trustee  be  authorized  to  sell  the  portion  of  the  bankrupt's  estate 
specified  in  the  foregoing  petition,  at  private  sale,  keeping  an  accurate 
accoimt  of  each  article  sold  and  the  price  received  therefor  and  to  whom 
sold;  which  said  account  he  shall  file  at  once  with  the  referea 

Witness  my  hand  this day  of ,  A.  D.  189-. 

Referee  in  Bankruptcy. 

§  1332.  [Form  No.  46.] 

Petition  and  Order  for  Sale  of  Perishable  Property. 

In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of      > 
,  Bankrupt  \  ^"  bankruptcy. 

Respectfully  represents ,  the  said  bankrupt  [or,  a  creditor,  or 

the  receiver,  or  the  trustee  of  the  said  bankrupt's  estate]. 

58 


846 


LAW    OF    BANKRUPTOT. 


That  a  part  of  the  said  estate,  to  wit, ,  now  in ,  is  perishable, 

and  that  there  will  be  loss  if  the  same  is  not  sold  immediately. 

Wherefore  he  prays  the  court  to  order  that  the  same  be  sold  imme- 
diately as  aforesaid. 

Dated  this day  of ,  A.  D.  189-.  . 

The  foregoing  petition  having  been  duly  filed  and  having  come  on  for 
a  hearing  before  me,  of  which  hearing  ten  days'  notice  was  given  by 
mail  to  the  creditors  of  the  said  bankrupt  [or,  without  notice  to  the 
creditors],  now,  after  due  hearing,  no  adverse  interest  being  represented 

thereat  [or  after  hearing in  favor  of  said  petition  and 

in  opposition  thereto],  I  find  that  the  facts  are  as  above  stated,  and  that 
the  same  is  required  in  the  interest  of  the  estate,  and  it  is  therefore  or- 
dered that  the  same  be  sold  forthwith  and  the  proceeds  thereof  deposited 
in  court. 

Witness  my  hand  this day  of ,  A.  D.  189-. 


§  1333. 


Referee  in  Bankruptcy. 
[Form  No.  47.] 
Trustee's  Report  of  Exempted  Property. 


[  In  Bankruptcy. 


In  the  District  Court  of  the  United  States  for  the District  of  - 

In  the  matter  of 
,  Bankrupt. 

At ,  on  the day  of ,  18 — . 

The  following  is  a  schedule  of  property  designated  and  set  apart  to  be 
retained  by  the  bankrupt  aforesaid,  as  his  own  property,  under  the  pro- 
visions of  the  acts  of  Congress  relating  to  bankruptcy: 


General  head. 

Particular  description. 

Value. 

Military    uniform,    arms,    and 

Dolls. 

Cts. 

Property    exempted    by    State 

-,  Trustee. 


§  1334. 


[Form  No.  48.] 
Trustee's  Return  op  no  AssETa 


In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     [  j^  Bankruptcy. 
,  Bankrupt.  ) 

At ,  in  said  district,  on  the day  of ,  A.  D.  18 — -. 

On  the  day  aforesaid,  before  me  comes ,  of ,  in  the  county 

of and  State  of ,  and  makes  oath,  and  says  that  he,  as  trustee  of 


FOKMS    IN    BANKKOPTOY.  847 

the  estate  and  effects  of  the  above-named  bankrupt,  neither  received  nor 
paid  any  moneys  on  account  of  the  estate. 

Subscribed  and  sworn  to  before  me  at ,  this day  of ,  A.  D. 

18-.  , 

Referee  in  Bankruptcy. 


[Form  No.  49.] 

§  1335.  Account  op  Trustee. 

The  estate  of — -,  bankrupt,  in  account  unth ,  trustee. 

Dr.  Cr. 


Dolls.  Cts.  Dolls.  Cts. 


Dolls.  Cts.  Dolls,  eta. 


[Form  No.  50.] 
§  1336.             Oath  to  Final  Account  of  Trustee. 
In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     )  j^  Bankruptcy. 
,  BanJcrupt.  ) 

On  this day  of ,  A.  D.  18 — ,  before  me  comes ,  of , 

in  the  county  of and  State  of ,  and  makes  oath,  and  says  that 

he  was,  on  the  day  of ,  A.  D.  18 — ,  appointed  trustee  of  the  es- 
tate and  effects  of  the  above-named  bankrupt,  and  that  as  such  trustee 
he  has  conducted  the  settlement  of  the  said  estate.    That  the  account 

hereto  annexed  containing sheets  of  paper,  the  first  sheet  whereof  is 

marked  with  the  letter [reference  may  here  also  be  made  to  any 

prior  account  filed  by  said  trustee],  is  true,  and  such  account  contains 
entries  of  every  sum  of  money  received  by  said  trustee  on  account  of 
the  estate  and  effects  of  the  above-named  bankrupt,  and  that  the  pay- 
ments purporting  in  such  account  to  have  been  made  by  said  trustee 
have  been  so  made  by  him.  And  he  asks  to  be  allowed  for  said  pay- 
ments and  for  commissions  and  expenses  as  charged  in  said  accounts. 

,  Trustee, 

Subscribed  and  sworn  to  before  me  at ,  in  said district  of 1 

this day  of ,  A  D.  1&-^  , 

[Official  cJiarax^er.] 


848  LAW    OF    BANKBUPTOT. 

^  J337  [Form  No.  51.] 

Order  Allowing  Account  and  Discharging  TRUSTEa 

In  the  District  Court  of  the  United  States  for  the District  of • 

In  the  matter  of     hn  Bankruptcy. 

,  Bankrupt.  ) 

The  foregoing  account  having  been  presented  for  allowance,  and  hav- 
ing been  examined  and  foimd  correct,  it  is  ordered,  that  the  same  be 
allowed,  and  that  the  said  trustee  be  discharged  of  his  trust 

"^^^         » 
Referee  in  Bankruptcy. 

[Form  No.  52.] 
§  1338.               E*ETiTiON  for  Removal  of  Truster 
In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     i 

,  Bankrupt.  \  ^  Bankruptcy. 

To  the  Honorable ,  Judge  of  the  District  Court  for  the Di» 

trict  of : 

The  petition  of ,  one  of  the  creditors  of  said  bankrupt,  re- 
spectfully represents  that  it  is  for  the  interest  of  the  estate  of  said  bank- 
rupt that ,  heretofore  appointed  trustee  of  said  bankrupt's 

estate,  should  be  removed  from  his  trust,  for  the  causes  following,  to  wit: 
[Here  set  forth  the  particular  cause  or  causes  for  which  such  removal  is 
requested.] 

Wherefore pray  that  notice  may  be  served  upon  said 

,  trustee  as  aforesaid,  to  show  cause,  at  such  time  as  may  be  fixed 

by  the  court,  why  an  order  should  not  be  made  removing  him  from  said 
trust  . 

[Form  No.  53.] 

§  1339.      Notice  of  Petition  for  Removal  of  Trustee. 

In  the  District  Court  of  the  United  States  for  the Diatriot  of . 

In  the  matter  of     )  ,    ^     , 
,  Bankrupt.  \  ^^  Bankruptcy. 

At ,  on  the day  of ,  A  D.  18 — . 

To ,  Trustee  of  the  estate  of ,  bankrupt: 

You  are  hereby  notified  to  appear  before  this  court,  at ,  on  the 

day  of ,  A  D.  18 — ,  at o'clock  — .  m.,  to  show  cause  (if  any 

you  have)  why  you  should  not  be  removed  from  your  trust  as  trustee  as 
aforesaid,  according  to  the  prayer  of  the  petition  of ,  one  of  the 


FORMS    IN    BANKRUPTOr.  849 

creditors  of  said  bankrupt,  filed  in  this  court  on  the day  of , 

A.  D.  18 — ,  in  wliich  it  is  alleged  [here  insert  the  allegation  of  the  peti- 
tion].   .  Clerk. 

[Form  No.  54.] 
§  1340.                Order  for  Removal  of  Truster 
In  the  District  Court  of  the  United  States  for  the District  of » 

In  the  matter  of     }  j^  Bankruptcy. 

,  Bankrupt,  ' 

Whereas ,  of  ,  did,  on  the  day  of  ,  A.  D.  18—, 

present  his  petition  to  this  court,  praying  that  for  the  reasons  therein 

set  forth, ,  the  trustee  of  the  estate  of  said ,  bankrupt, 

might  be  removed; 

Now,  therefore,  upon  reading  the  said  petition  of  the  said 

and  the  evidence  submitted  therewith,  and  upon  hearing  counsel  on  be- 
half of  said  petitioner  and  counsel  for  the  trustee,  and  upon  the  evidence 
submitted  on  behalf  of  said  trustee, 

It  is  ordered  that  the  said be  removed  from  the  trust  as 

trustee  of  the  estate  of  said  bankrupt,  and  that  the  costs  of  the  said  pe- 
titioner incidental  to  said  petition  be  paid  by  said ,  trustee  [or, 

out  of  the  estate  of  the  said ,  subject  to  prior  charges]. 

Witness  the  Honorable ,  judge  of  the  said  court,  and  the  seal 

thereof,  at ,  in  said  district,  on  the day  of ,  A.  D.  18 — . 

[Seal  of  ,  Clerk. 

the  court] 

[Form  No.  55.] 
>j  1341.              Order  for  Choice  of  New  Trustee. 
I  ti  the  District  Court  of  the  United  States  for  the District  of  ^— * 

In  the  matter  of     )  j^  Bankruptcy. 
,  Bankrupt,  ' 

At ,  on  the day  of ,  A.  D.  18 — . 

Whereas  by  reason  of  tlie  removal  [or  the  death  or  resignation]  of 

,  heretofore  appointed  trustee  of  the  estate  of  said  bankrupt,  a 

vacancy  exists  in  the  office  of  said  trustee, 

It  is  ordered,  that  a  meeting  of  the  creditors  of  said  bankrupt  be  held 

at ,  in ,  in  said  district,  on  the day  of ,  A.  D.  18 — ,  for 

tiie  choice  of  a  new  trustee  of  said  estate. 

And  it  is  frnther  ordered  that  notice  be  given  to  said  creditors  of  the 
time,  place,  and  purpose  of  said  meeting,  by  letter  to  each,  to  be  de- 
posited in  the  mail  at  least  ten  days  before  that  day. 

» 
Referee  in  Bankruptcy. 


850  law  of  ijankruptoy. 

[Form  No.  56.] 
§  1342.  Certificate  by  Referee  to  Judge. 

In  the  District  Court  of  the  United  States  for  the District  of 

In  the  matter  of 


In  Bankruptcy. 
,  Bankrupt. 

I, ,  one  of  the  referees  of  said  court  in  bankruptcy,  do  hereby 

certify  that  in  the  course  of  the  proceedings  in  said  cause  before  me  the 
following  question  arose  pertinent  to  the  said  proceedings:  [Here  state 
the  question,  a  summary  of  the  evidence  relating  thereto,  and  the  finding 
and  order  of  the  referee  thereon.'] 
And  the  said  question  is  certified  to  the  judge  for  his  opinion  thereon- 
Dated  at ,  the day  of ,  A.  D.  18—. 

~~~"         > 
Referee  in  Bankruptcy. 

[Form  No.  57.] 

§  1343.  Bankrupt's  Petition  for  DisciiARoa 

In  the  matter  of      )  j^  Bankruptcy. 
,  Bankrupt.  ' 

To  the  Honorable ,  Judge  of  the  District  Court  of  the  United 

States  for  the  District  of : 

,  of ,  in  the  county  of and  State  of ,  in  said  dis- 
trict, respectfully  represents  that  on  the  day  of ,  last  past,  he 

was  duly  adjudged  bankrupt  under  the  acts  of  Congress  relating  to 
bankruptcy;  that  he  has  duly  surrendered  all  his  property  and  rights  of 
property,  and  has  fully  complied  with  all  the  requirements  of  said  acts 
and  of  the  orders  of  the  court  touching  his  bankruptcy. 

Wherefore  he  prays  that  he  may  be  decreed  by  the  court  to  have  a 
full  discharge  from  all  debts  provable  against  his  estate  under  said  bank- 
rupt acts,  except  such  debts  as  are  excepted  by  law  from  such  discharge. 

Dated  this day  of ,  A.  D.  189-. 

,  Bankrupt 

Order  of  Notice  Thereon. 
District  of ,  ss: 

On  this  day  of  ,  A-  D.  189-,  on  reading  the  foregoing  peti- 
tion, it  is  — 

Ordered  by  the  couit,  tliat  a  hearing  be  had  upon  the  same  on  the 

day  of ,  A.  D.  189-,  before  said  court  at  ,  in  the  said  dis 

trict,  at o'clock  in  the noon ;  and  that  notice  thereof  be  pub- 
lished in ,  a  newspaper  printed  in  said  district,  and  that  all 

known  creditors  and  other  persons  in  interest  may  appear  at  the  said 
time  and  place  and  show  cause,  if  any  they  have,  why  the  prayer  of 
the  said  petitioner  should  not  be  granted. 


F0KM8    IN    BANKRUPTCY.  851 

And  it  is  further  ordered  by  the  court,  that  the  clerk  sliall  send  by 
mail  to  all  known  creditors  copies  of  said  petition  and  this  order,  ad- 
dressed to  them  at  their  places  of  residence  as  stated. 

Witness  the  Honorable ,  judge  of  the  said  court,  and  the  seal 

thereof,  at ,  in  said  district,  on  the day  of ,  A.  D.  189- 

[Seal  of  ,  Clerk. 

the  court] 

hereby  depose,  on  oath,  that  the  foregoing  order  was  published  in 

the on  the  following days,  viz: 

On  the day  of and  on  the day  of ,  in  the  year  189-. 

District  of *  .  189-. 

Personally  appeared ,  and  made  oath  that  the  forgoing  state- 
ment by  him  subscribed  is  true. 

Before  me,  . 

[Official  character.] 

I  hereby  certify  that  I  have  on  this day  of ,  A.  D.  189-,  sent 

by  mail  copies  of  the  above  order,  as  therein  directed- 

,  Clerk. 

(?  1344_  [Form  ISTo.  58.] 

Specification  of  Grounds  of  Opposition  to  Bankrupt's  Dischaeqe. 

In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of     [  in  Bankruptcy. 
,  Bankrupt.  ) 

,  of ,  in  the  county  of and  State  of ,  a  party  in- 
terested in  the  estate  of  said ,  bankrupt,  do  hereby  oppose  the 

granting  to  him  of  a  discharge  from  his  debts,  and  for  the  grounds  of 
such  opposition  do  file  the  following  specification:  [Here  specify  the 
grounds  of  opposition.]  ,  Creditor. 

[FoKM  No.  59.] 

§  1345.  Discharge  of  Bankrupt. 

District  Court  of  the  United  States, District  of > 

Whereas, of in  said  district,  has  been  duly  adjudged  a 

bankrupt,  under  the  acts  of  Congress  relating  to  bankruptcy,  and  a|>- 
pears  to  have  conformed  to  all  the  requirements  of  law  in  that  behalf, 

it  is  therefore  ordered  by  this  court  that  said be  discharged 

from  all  debts  and  claims  which  are  made  provable  by  said  acts  against 

his  estate,  and  which  existed  on  the  day  of  ,  A.  D.  189-,  on 

which  day  the  petition  for  adjudication  was  filed him;  excepting 


852  LA.W    OK    BANKRUPTCY. 

such  debts  as  are  by  law  excepted  from  the  operation  of  a  discharge  in 
iKinkruptcy. 

Witness  the  Honorable ,  judge  of  said  district  court,  and  the 

seal  thereof,  this day  of ,  A.  D.  189-. 

[Seal  of  ,  Clerk. 

the  court.\ 

[Form  No.  60.] 

5  1346.     Petition  for  Meeting  to  Consider  Composition. 

District  Court  of  the  United  States  for  the District  of » 

bankrupt  \  ^^  Bankruptcy. 

To  the  Honorable ,  Judge  of  the  District  Court  of  the  United 

States  for  the District  of : 

The  above-named  bankrupt  respectfully  represents  that  a  composition 

of per  cent,  upon  all  unsecured  debts,  not  entitled  to  a  priority 

in  satisfaction  of debts  has  been  proposed  by to cred- 
itors, as  provided  by  the  acts  of  Congress  relating  to  bankruptcy,  and 

verily  believe  that  the  said  composition  will  be  accepted  by  a  majority 
in  number  and  in  value  of creditors  whose  claims  are  allowed. 

"Wherefore,  he  prays  that  a  meeting  of  creditors  may  be  duly 

called  to  act  upon  said  proposal  for  a  composition,  according  to  the  pro 
visions  of  said  acts  and  the  rules  of  court. ,  Bankrupt. 

[Form  No.  61.] 
§  1347.     Application  for  Confirmation  op  Composition. 
In  the  District  Court  of  the  United  States  for  the  District  of . 

In  the  matter  of     hn  Bankruptcy. 

,  Bankrupt.  ) 

To  the  Honorable ,  Judge  of  the  District  Court  of  the  United 

States  for  the District  of : 

At ,  in  said  district,  on  the day  of ,  A.  D.  189-,  now  comes 

,  the  above-named  bankrupt,  and  respectfully  represents  to  the 

court  that,  after  he  had  been  examined  in  open  court  [or  at  a  meeting 
of  his  creditors]  and  had  filed  in  court  a  schedule  of  liis  property  and  a 
list  of  his  creditors,  as  required  by  law,  he  offered  terms  of  composition 
to  his' creditors,  which  terms  have  been  accepted  in  writing  by  a  ma- 
jority in  number  of  all  creditors  whose  claims  have  been  allowed,  which 
number  represents  a  majority  in  amount  of  such  claims;  that  the  con- 
sideration to  be  paid  by  the  bankrupt  to  his  creditors,  the  money  neces- 
sary to  pay  all  debts  which  have  priority,  and  the  costs  of  the  proceed- 
ings, amounting  in  all  to  the  sum  of dollars,  has  been  deposited, 

subject  to  the  order  of  the  judge,  in   the National  Bank  of ,  a 

designated  depository  of  money  in  bankruptcy  cases. 

Wherefore  the  said respectfully  asks  that  the  said  conipo 

sition  may  be  confirmed  by  the  couit.  ,  Bankrupt. 


fokms  in  bankruptcy.  853 

[Form  No.  62.] 
j  1348.  Ordek  Confirming  Composition. 

In  the  District  Court  of  the  United  States  for  the District  of , 

In  the  matter  of  |  j^  Bankruptcy. 

An  application  for  the  confirmation  of  the  composition  offered  by  the 
bankrupt  having  been  filed  in  court,  and  it  appearing  that  the  com- 
position has  been  accepted  by  a  majority  in  number  of  creditors  whose 
claims  have  been  allowed  and  of  such  allowed  claims;  and  the  considera- 
tion and  the  money  required  by  law  to  be  deposited,  having  been  de- 
posited as  ordered,  in  such  place  as  was  designated  by  the  judge  of  said 
court,  and  subject  to  his  order;  and  it  also  appearing  that  it  is  for  the 
best  interests  of  the  creditors;  and  that  the  bankrupt  has  not  been  guilty 
of  any  of  the  acts  or  failed  to  perform  any  of  the  duties  which  would 
be  a  bar  to  his  discharge,  and  that  the  offer  and  its  acceptance  are  in 
good  faith  and  have  not  been  made  or  procured  by  any  means,  promises, 
or  acts  contrary  to  the  acts  of  Congress  relating  to  bankruptcy:  It  is 
therefore  hereby  ordered  that  the  said  composition  be,  and  it  hereby  is, 
confirmed. 

Witness  the  Honorable ,  judge  of  said  court,  and  the  seal 

thereof,  this day  of ,  A.  D.  189. 

[Seal  of  ,  Clerk. 

the  court] 

[Form  No.  63.] 

§  1349.  Ori^er  of  Distribution  on  Composition. 

United  States  of  America: 

In  the  District  Court  of  the  United  States  for  the District  of . 

In  the  matter  of      U^  Bankruptcy. 
,  Bankrupt.  ) 

The  composition  offered  by  the  above-named  bankrupt  in  this  case 
having  been  duly  confirmed  by  the  judge  of  said  court,  it  is  hereby  or- 
dered and  decreed  that  the  distribution  of  the  deposit  shall  be  made  by 
the  clerk  of  the  court  as  follows,  to  wit:  1st,  to  pay  the  several  claims 
which  have  priority;  2d,  to  pay  the  costs  of  proceedings;  3d,  to  pay,  ac- 
cording to  the  terms  of  the  composition,  the  several  claims  of  general 
creditors  which  have  been  allowed,  and  appear  upon  a  list  of  allowed 
claims,  on  the  files  in  this  case,  which  list  is  made  a  part  of  this  order. 

Witness  the  Honorable ,  judge  of  said  court,  and  the  seal 

thereof,  this day  of ,  A.  D.  18 — . 

[Seal  of  ,  Clerk. 

the  court.] 


TITLE  IV. 

BANKRUPTCY  ACT  OF  1898,  AS  AMENDED. 

An  Act  To  establish  a  uniform  system  of  bankruptcy  throughout  the 

United   States. 

Be  it  enacted  hy  the  Senate  and  House  of  Representatives  of  the 
United  States  of  America  in  Congress  assembled. 

Chapter  I. 

definitions. 

§  1350.  Section  1.  Meaning  of  Words  and  Phrases. — 
a  The  words  and  phrases  used  in  this  Act  and  in  proceedings 
pursuant  hereto  shall,  unless  the  same  be  inconsistent  with  the 
context,  be  construed  as  follows : 

(1)  "A  person  against  whom  a  petition  has  been  filed"  shall 
include  a  person  who  has  filed  a  voluntary  petition ; 

(2)  "adjudication"  shall  mean  the  date  of  the  entry  of  a 
decree  that  the  defendant,  in  a  bankruptcy  proceeding*,  is  a 
bankrupt,  or  if  such  decree  is  appealed  from,  then  the  date  when 
such  decree  is  finally  confirmed ; 

(3)  "appellate  courts"  shall  include  the  circuit  courts  of 
appeals  of  the  United  States,  the  supreme  courts  of  the  Terri- 
tories, and  the  Supreme  Court  of  the  United  States ; 

(4)  "bankrupt"  shall  include  a  person  against  whom  an 
involuntary  petition  or  an  application  to  set  a  composition 
aside  or  to  evoke  a  discharge  has  been  filed,  or  who  has  filed  a 
voluntary  petition,  or  who  has  been  adjudged  a  bankrupt ; 

(5)  "clerk"  shall  mean  the  clerk  of  a  court  of  bankruptcy; 

(6)  "corporations"  shall  mean  all  bodies  having  any  of  the 
powers  and  privileges  of  private  corporations  not  possessed  by 
individuals  or  partnerships,  and  shall  include  limited  or  other 
partnership  associations  organized  imder  laws  making  the  capi- 
tal subscribed  alone  responsible  for  the  debts  of  the  association ; 

(7)  "court"  shall  mean  the  court  of  bankruptcy  in  which  the 
proceedings  are  pending,  and  may  include  the  referee; 

(8)  "courts  of  bankruptcy"  shall  include  the  district  courts 
of  the  United  States  and  of  the  Territories,  the  supreme  court 

855 


8r)0  LAW    OF    BANKRUPTCY.  Cll.  1 

of  the  District  of  Coluinl)ia,  aiul  the  United  States  court  of  the 
Indian  Tcri'itory,  and  of  xVhiska; 

(9)  "creditor"  shall  include  anyone  wIkj  owns  a  demand  or 
claim  provable  in  bankruptcy,  and  may  include  his  duly  author- 
ized agent,  attorney,  or  proxy; 

(10)  "date  of  bankruptcy,"  or  "time  of  bankruptcy,"  or 
"commencement  of  proceedings,"  or  "bankru])tcy,"  with  refer- 
ence to  time,  shall  mean  the  date  when  the  petition  was  filed ; 

(11)  "debt"  shall  include  any  debt,  demand,  or  claim  prov- 
able in  bankruptcy; 

(12)  "discharge"  shall  mean  the  release  of  a  bankrupt  from 
all  of  his  debts  which  are  provable  in  bankruptcy,  except  such 
as  are  excepted  by  this  Act; 

(13)  "document"  shall  include  any  book,  deed,  or  instru- 
ment in  writing; 

(14)  "holiday"  shall  include  Christmas,  ilie  Fourth  of  July, 
the  Twenty-second  of  February,  and  any  day  appointed  by  the 
President  of  the  United  States  or  the  Congress  of  the  United 
States  as  a  holiday  or  as  a  day  of  public  fasting  or  thanks- 
giving; 

(15)  a  person  shall  be  deemed  insolvent  within  the  pro- 
visions of  this  Act  whenever  the  aggregate  of  his  property, 
exclusive  of  any  property  which  he  may  have  conveyed,  trans- 
ferred, concealed,  or  removed,  or  permitted  to  be  concealed  or 
removed,  with  intent  to  defraud,  hinder  or  delay  his  creditors, 
shall  not,  at  a  fair  valuation,  be  sufficient  in  amount  to  pay  his 
debts ; 

(16)  "judge"  shall  mean  a  judge  of  a  court  of  bankruptcy, 
not  including  the  referee ; 

(17)  "oath"  shall  include  affirmation; 

(18)  "officer"  shall  include  clerk,  marshal,  receiver,  referee, 
and  trustee,  and  the  imposing  of  a  duty  upon  or  the  forbidding 
of  an  act  by  any  officer  shall  include  his  successor  and  any 
person  authorized  by  law  to  perform  the  duties  of  such  officer ; 

(19)  "persons"  shall  include  corporations,  except  where 
otherwise  specified,  and  officers,  partnerships,  and  w'omen,  and 
when  used  with  reference  to  the  commission  of  acts  which  are 
herein  forbidden  shall  include  persons  who  are  participants  in 
the  forbidden  acts,  and  the  agents,  officers,  and  members  of  the 
board  of  directors  or  trustees,  or  other  similar  controlling  bodies 
or  corporations ; 

(20)  "petition"  shall  mean  a  paper  filed  in  a  court  of  bank- 
ruptcy or  with  a  clerk  or  deputy  clerk  by  a  debtor  praying  for 
the  benefits  of  this  Act,  or  by  creditors  alleging  the  commission 
of  an  act  of  bankruptcy  by  a  debtor  therein  named ; 


Ch.  2  NATIONAL    BANKRUPTCY    LAW    OF    1898.  857 

(21)  "referee"  shall  mean  the  referee  who  has  jurisdiction 
of  the  ease  or  to  whom  the  case  has  been  referred,  or  anyone 
acting  in  his  stead  ; 

(22)  "conceal"  shall  include  secrete,  falsify,  and  mutilate; 

(23)  "secured  creditor"  shall  include  a  creditor  who  has 
security  for  his  debt  upon  the  property  of  the  bankrupt  of  a 
nature  to  be  assignable  under  this  Act,  or  who  owns  such  a  debt 
for  which  some  indorser,  surety,  or  other  persons  secondarily 
liable  for  the  bankrupt  has  such  security  upon  the  bankrupt's 
assets ; 

(24)  "States"  shall  include  the  Territories,  the  Indian  Ter- 
ritory, Alaska,  and  the  District  of  Columbia ; 

(25)  "transfer"  shall  include  the  sale  and  every  other  and 
different  mode  of  disposing  of  or  parting  with  property,  or  the 
possession  of  property,  absolutely  or  conditionally,  as  a  pay- 
ment, pledge,  mortgage,  gift,  or  security ; 

(26)  "trustee"  shall  include  all  of  the  trustees  of  an  estate; 

(27)  "wage-earner"  shall  mean  an  individual  who  works  for 
wages,  salary,  or  hire,  at  a  rate  of  compensation  not  exceeding 
one  thousand  five  hundred  dollars  per  year; 

(28)  words  importing  the  masculine  gender  may  be  applied 
to  and  include  corporations,  partnerships,  and  women ; 

(29)  words  importing  the  plural  number  may  be  applied  to 
and  mean  only  a  single  person  or  thing ; 

(30)  words  importing  the  singular  number  may  be  applied 
to  and  mean  several  persons  or  things. 


Chapter  IL 

creation  of  courts  of  bankruptcy  and  their  jurisdiction. 

§  1351.     Sec.  2.     That  the  courts  of  bankruptcy  as  herein- 
before defined,  viz, 

the  district  courts  of  the  United  States  in  the  several  States, 
the  supreme  court  of  the  District  of  Columbia, 
the  district  courts  of  the  several  Territories,  and 
the  United  States  courts  in  the  Indian  Territory  and  the  Dis- 
trict of  Alaska,  are  hereby  made  courts  of  bankru])tcy,  and  are 
hereby  invested,  within  their  respective  territorial  limits  as  now 
established,  or  as  they  may  be  hereafter  changed,  with  such 
jurisdiction  at  law  and  in  equity  as  will  enable  them  to  exer- 
cise original  jurisdiction  in  bankruptcy  pi*oceedings,  in  vacation 
in  chambers  and  during  their  respective  terms,  as  they  are  now 
or  may  be  hereafter  held,  to 


858  LAW    OF    BANKRUPTCY.  Ch.  2 

(1)  adjudge  persons  bankrupt  who  have  had  their  principal 
jjhice  of  business,  resided,  or  had  their  domicile  within  their 
respective  territorial  jurisdictions  for  the  preceding  six  months, 
or  the  greater  portion  thereof,  or  who  do  not  have  their  prin- 
cipal place  of  business,  reside,  or  have  their  domicile  within 
the  United  States,  but  have  property  within  their  jurisdictions, 
or  who  have  been  adjudged  bankrupts  by  courts  of  competent 
jurisdiction  without  the  United  States  and  have  property  with- 
in their  jurisdictions; 

(2)  allow  claims,  disallow  claims,  reconsider  allowed  or  dis- 
allowed claims,  and  allow  or  disallow  them  against  bankrupt 
estates ; 

(3)  appoint  receivers  or  the  marshals,  upon  application  of 
parties  in  interest,  in  case  the  courts  shall  find  it  absolutely 
necessary  for  the  preservation  of  estates,  to  take  charge  of  the 
property  of  bankrupts  after  the  filing  of  the  petition  and  until 
it  is  dismissed  or  the  trustee  is  qualified ; 

(4)  arraign,  try,  and  punish  bankrupts,  ofiicers,  and  other 
persons,  and  the  agents,  officers,  members  of  the  board  of  direct- 
ors or  trustees,  or  other  similar  controlling  bodies,  of  corpora- 
tions for  violations  of  this  Act,  in  accordance  with  the  laws  of 
procedure  of  the  United  States  now  in  force,  or  such  as  may  be 
liereafter  enacted,  regulating  trials  for  the  alleged  violation  of 
laws  of  the  United  States ; 

"(5)  authorize  the  business  of  bankrupts  to  be  conducted  for 
limited  periods  by  receivers,  the  marshals,  or  trustees,  if  neces- 
sary in  the  best  interests  of  the  estates,  and  allow  such  officers 
additional  compensation  for  such  services,  but  not  at  a  greater 
rate  tlian  in  this  Act  allowed  trustees  for  similar  services; 

(6)  bring  in  and  substitute  additional  persons  or  parties  in 
proceedings  in  bankruptcy  when  necessary  for  the  complete 
determination  of  a  matter  in  controversy ; 

(7)  cause  the  estates  of  bankrupts  to  be  collected,  reduced 
to  money  and  distributed,  and  determine  controversies  in  rela- 
tion thereto,  except  as  herein  otherwise  provided ; 

(8)  close  estates  whenever  it  appears  that  they  have  been 
fully  administered,  by  approving  the  final  accounts  and  dis- 
charging the  trustees,  and  reopen  them  whenever  it  appears  they 
were  closed  before  being  fully  administered ; 

(9)  confirm   or  reject  compositions    between    debtors    and 

a  This  subdivision  was  amended  by  the  act  of  1903  by  the  insertion  of 
the  words  "and  allow  such  officers  additional  compensation  for  such 
services,  but  not  at  a  greater  rate  than  in  this  act  allowed  trustees  for 
similar  services." 


Ch.  3  NATIONAL   BANKRUPTCY    LAW    OF    1898.  859 

their  creditors,  aud  set  aside  compositions  and  reinstate  tlie 
cases ; 

(10)  consider  and  confirm,  modify  or  overrule,  or  return, 
with  instructions  for  further  proceedings,  records  and  findings 
certified  to  them  by  referees; 

(11)  determine  all  claims  of  bankrupts  to  their  exemptions; 

(12)  discharge  or  refuse  to  discharge  bankrupts  and  set  aside 
discharges  and  reinstate  the  cases ; 

(13)  enforce  obedience  by  bankrupts,  officers,  and  other  per- 
sons to  all  lawful  orders,  by  fine  or  imprisonment  or  fine  and 
imprisonment ; 

(14)  extradite  bankrupts  from  their  respective  districts  to 
other  districts; 

(15)  make  such  orders,  issue  such  process,  and  enter  such 
judgments  in  addition  to  those  specifically  provided  for  as  may 
be  necessary  for  the  enforcement  of  the  provisions  of  this  Act ; 

(16)  punish  persons  for  contempts  committed  before 
referees ; 

(17)  pursuant  to  the  recommendation  of  creditors,  or  when 
they  neglect  to  recommend  the  appointment  of  trustees,  appoint 
trustees,  and  upon  complaints  of  creditors,  remove  trustees  for 
cause  upon  hearings  and  after  notices  to  them; 

(18)  tax  costs,  whenever  they  are  allowed  by  law,  and  render 
judgments  therefor  against  the  unsuccessful  party,  or  the  suc- 
cessful party  for  cause,  or  in  part  against  each  of  the  parties, 
and  against  estates,  in  proceedings  in  bankruptcy ;    and 

(19)  transfer  cases  to  other  courts  of  bankruptcy. 

ISTothing  in  this  section  contained  shall  be  construed  to  de- 
prive a  court  of  bankruptcy  of  any  power  it  would  possess  were 
certain  specific  powers  not  herein  enumerated. 


Chaptee  III. 

BANKEUPTS. 

§  1352.  Sec.  3.  Acts  of  Bankruptcy. — a  Acts  of  bank- 
ruptcy by  a  person  shall  consist  of  his  having 

(1)  conveyed,  transferred,  concealed,  or  removed,  or  per- 
mitted to  be  concealed  or  removed,  any  part  of  his  property 
with  intent  to  hinder,  delay,  or  defraud  his  creditors,  or  any 
of  them ;  or 

(2)  transferred,  while  insolvent,  any  portion  of  his  property 
to  one  or  more  of  his  creditors  with  intent  to  prefer  such  cred- 
itors over  his  other  creditors ;  or 


800  LAW    OF    BANKRUPTCY.  Ch.  3 

(3)  suffered  or  perniitted,  while  insolveiit,  any  creditor  to 
obtain  a  preference  through  legal  jDroceedings,  and  not  having 
at  least  live  days  before  a  sale  or  final  disjaosition  of  any  proj)- 
erty  affected  by  such  preference  vacated  or  discharged  such 
preference;  or 

^(J^)  made  a  general  assignment  for  the  benefit  of  his  cred- 
itors, or,  being  insolvent,  applied  for  a  receiver  or  trustee  for 
liis  property  or  because  of  insolvency  a  receiver  or  trustee  Jias 
been  put  in  charge  of  his  property  under  the  laws  of  a  State, 
of  a  Territory,  or  of  the  United  States;  or 

(5)  admitted  in  writing  his  inability  to  pay  his  debts  and 
his  willingness  to  be  adjudged  a  bankrupt  on  that  ground. 

b  A  petition  may  be  filed  against  a  person  who  is  insolvent 
and  who  has  committed  an  act  of  bankruptcy  within  four 
months  after  the  commission  of  such  act.  Such  time  shall  not 
expire  until  four  months  after  (1)  the  date  of  the  recording 
or  registering  of  the  transfer  or  assignment  when  the  act  con- 
sists in  having  made  a  transfer  of  any  of  his  property  with 
intent  to  hinder,  delay,  or  defraud  his  creditors  or  for  the  pur- 
pose of  giving  a  preference  as  hereinbefore  provided,  or  a 
general  assignment  for  the  bericfit  of  his  creditors,  if  by  law 
such  recording  or  registering  is  required  or  permitted,  or,  if 
it  is  not,  from  the  date  when  the  beneficiary  takes  notorious, 
exclusive,  or  continuous  possession  of  the  property  unless  the 
petitioning  creditors  have  received  actual  notice  of  such  transfer 
or  assignment. 

c  It  shall  be  a  complete  defense  to  any  proceedings  in  bank- 
ruptcy instituted  under  the  first  subdivision  of  this  section  to 
allege  and  prove  that  the  party  proceeded  against  was  not  in- 
solvent as  defined  in  this  Act  at  the  time  of  the  filing  the  peti- 
tion against  him,  and  if  solvency  at  such  date  is  proved  by  the 
alleged  bankrupt  the  proceedings  shall  be  dismissed,  and  under 
said  subdivision  one  the  burden  of  proving  solvency  shall  be  on 
the  alleged  bankrupt. 

d  Whenever  a  person  against  whom  a  petition  has  been  filed 
as  hereinbefore  provided  under  the  second  and  third  subdi- 
visions of  this  section  takes  issue  with  and  denies  the  allegation 
of  his  insolvency,  it  shall  be  his  duty  to  appear  in  court  on  the 
hearing,  with  his  books,  papers,  and  accounts,  and  submit  to 
an  examination,  and  give  testimony  as  to  ail  matters  tending 
to  establish  solvency  or  insolvency,  and  in  case  of  his  failure 
to  so  attend  and  submit  to  examination  the  burden  of  proving 
his  solvency  shall  rest  upon  him. 

f>  This  subdivision  was  amended  by  the  insertion  of  all  the  matter 
after  the  word  "creditors." 


C'll.  3  NATIONAL    BANKRUPTCY    LAW    OF    1898.  861 

e  Whenever  a  petition  is  filed  by  any  person  for  the  purpose 
of  having  another  adjudged  a  bankrupt,  and  an  application  is 
made  to  take  charge  of  and  hold  the  proj^erty  of  the  alleged 
bankrupt,  or  any  part  of  the  same,  prior  to  the  adjudication  and 
pending  a  hearing  on  the  petition,  the  petitioner  or  applicant 
bhall  file  in  the  same  court  a  bond  with  at  least  two  good  and 
sufiicient  sureties  who  shall  reside  within  the  jurisdiction  of 
said  court,  to  be  approved  by  the  court  or  a  judge  thereof,  in 
such  sum  as  the  court  shall  direct,  conditioned  for  the  payment, 
in  case  such  petition  is  dismissed,  to  the  respondent,  his  or  her 
personal  representatives,  all  costs,  expenses,  and  damages  occa- 
sioned by  such  seizure,  taking,  and  detention  of  the  property  of 
the  alleged  bankrupt. 

If  such  petition  be  dismissed  by  the  court  or  withdrawn  by 
the  petitioner,  the  respondent  or  respondents  shall  be  allowed 
all  costs,  counsel  fees,  expenses,  and  damages  occasioned  by 
such  seizure,  taking,  or  detention  of  such  property.  Counsel 
fees,  costs,  expenses,  and  damages  shall  be  fixed  and  allowed  by 
the  court,  and  paid  by  the  obligors  in  such  bond. 

§  1353.  Sec.  4.  Who  May  Become  Bankkupts. — a  Any 
person  who  owes  debts,  except  a  corporation,  shall  be  entitled  to 
the  benefits  of  this  Act  as  a  voluntary  bankrupt. 

^b  Any  natural  person,  except  a  wage-earner,  or  a  person  en- 
gaged chiefly  in  farming  or  the  tillage  of  the  soil,  any  unincor- 
porated company,  and  wny  corporation  engaged  principally  in 
manufacturing,  trading,  printing,  publishing,  mining,  or  mer- 
cantile pursuits,  owing  debts  to  the  amount  of  one  thousand 
dollars  or  over,  may  be  adjudged  an  involuntary  bankrupt  upon, 
default  or  an  impartial  trial,  and  shall  be  subject  to  the  pro- 
visions and  entitled  to  the  benefits  of  this  Act.  Private  bankers, 
but  not  national  banks  or  banks  incorporated  under  State  or 
Territorial  laws,  may  be  adjudged  involuntary  bankrupts. 

The  bankruptcy  of  a  corporation  shall  not  release  its  officers, 

ii  Before  the  amendment  of  subdivision  b  by  the  act  of  1903,  it  read  as 
follows: 

"Any  natural  person,  except  a  wage-earner  or  a  person  engaged 
chiefly  in  farming  or  the  tillage  of  the  soil,  any  unincorporated  com- 
pany, and  any  corporation  engaged  principally  in  manufacturing,  trad- 
ing, printing,  publishing,  or  mercantile  pursuits,  owing  debts  to  the 
amount  of  one  thousand  dollars  or  over,  may  be  adjudged  an  involun- 
tary bankrupt  upon  default  or  an  impartial  trial,  and  shall  be  sub- 
ject to  the  provisions  and  entitled  to  the  benefits  of  this  Act.  Private 
bankers,  but  not  national  banks  or  banks  incorporated  under  State 
or  Territorial  laws,  may  be  adjudged  involuntary  bankrupts." 

The  provision  with  reference  to  the  release  of  liability  of  stockhold- 
ers, etc.,  is  new. 


862  LAW    OF    BANKRUPTCY.  Ch.  3 

directors,  or  stockholders,  as  sucli,  from  any  liability  under  the 
laws  of  a  State  or  Territory  or  of  the  United  States. 

§  1354.  Sec.  5.  Partners. — a  A  partnership,  during  the 
continuation  of  the  partnership  business,  or  after  its  dissolution 
and  before  the  final  settlement  thereof,  may  be  adjudged  a 
bankrujJt. 

b  The  creditors  of  the  partnership  shall  appoint  the  trustee ; 
in  other  respects  so  far  as  possible  the  estate  shall  be  admin- 
istered as  herein  provided  for  other  estates. 

c  The  court  of  bankruptcy  which  has  jurisdiction  of  one  of 
the  partners  may  have  jurisdiction  of  all  the  partners  and  of 
the  administration  of  the  partnership  and  individual  property. 

d  The  trustee  shall  keep  separate  accounts  of  the  partnership 
property  and  of  the  property  belonging  to  the  individual  part- 
ners. 

e  The  expenses  shall  be  paid  from  the  partnership  property 
and  the  individual  property  in  such  proportions  as  the  court 
shall  determine. 

f  The  net  proceeds  of  the  partnership  property  shall  be  ap- 
propriated to  the  payment  of  the  partnership  debts,  and  the  net 
proceeds  of  the  individual  estate  of  each  partner  to  the  payment 
of  his  individual  debts.  Should  any  surplus  remain  of  the 
property  of  any  partner  after  paying  his  individual  debts,  such 
surplus  shall  be  added  tO'  the  partnership  assets  and  be  applied 
to  the  payment  of  the  partnership  debts.  Should  any  surplus 
of  the  partnership  property  remain  after  paying  the  partner- 
ship debts,  such  surplus  shall  be  added  to  the  assets  of  the  indi- 
vidual partners  in  the  proportion  of  their  respective  interests  in 
the  partnership. 

g  The  court  may  permit  the  proof  of  the  claim  of  the  part- 
nership estate  against  the  individual  estates,  and  vice  versa,  and 
may  marshal  the  assets  of  the  partnership  estate  and  individual 
estates  so  as  to  prevent  preferences  and  secure  the  equitable 
distribution  of  the  property  of  the  several  estates. 

h  In  the  event  of  one  or  more  but  not  all  of  the  members  of  a 
partnership  being  adjudged  bankrupt,  the  partnership  property 
shall  not  be  administered  in  bankruptcy,  unless  by  consent  of 
the  partner  or  partners  not  adjudged  bankrupt ;  but  such  part- 
ner or  partners  not  adjudged  bankrupt  shall  settle  the  partner- 
ship business  as  expeditiously  as  its  nature  will  permit,  and 
account  for  the  interest  of  the  partner  or  partners  adjudged 
bankrupt. 

§  1355.  Sec.  6.  Exemptions  of  Bankrupts. — a  This  Act 
shall  not  affect  th?  allowance  to  bankrupts  of  the  exemptions 
which  are  prescribed  by  the  State  laws  in  force  at  the  time  of 


Ch.  3  NATIONAL    BANKRUPTCY    LAW    OF    1898.  863 

the  filing  of  the  petition  in  the  State  wherein  they  have  had 
their  domicile  for  the  six  months  or  the  greater  portion  thereof 
immediately  preceding  the  filing  of  the  petition. 

§  1356.  Sec.  T.  Duties  of  Bankrupts. — a  The  bankrupt 
shall 

(1)  attend  the  first  meeting  of  his  creditors,  if  directed  by 
the  court  or  a  judge  thereof  to  do  so,  and  the  hearing  upon  his 
application  for  a  discharge,  if  filed; 

(2)  comply  with  all  law^ful  orders  of  the  court; 

(3)  examine  the  correctness  of  all  proofs  of  claims  filed 
against  his  estate; 

(4)  execute  and  deliver  such  papers  as  shall  be  ordered  by 
the  court; 

(5)  execute  to  his  trustee  transfers  of  all  his  property  in 
foreign  countries; 

(C)  immediately  inform  his  trustee  of  any  attempt,  by  his 
creditors  or  other  persons,  to  evade  the  provisions  of  this  Act, 
coming  to  his  knowledge; 

(7)  in  case  of  any  person  having  to  his  knowledge  proved  a 
false  claim  against  his  estate,  disclose  that  fact  immediately  to 
his  trustee ; 

(8)  prepare,  make  oath  to,  and  file  in  court  within  ten  days, 
unless  further  time  is  granted,  after  the  adjudication,  if  an 
involuntary  bankrupt,  and  with  the  petition  if  a  voluntary 
bankrupt,  a  schedule  of  his  property,  showing  the  amount  and 
kind  of  property,  the  location  thereof,  its  money  value  in  detail, 
and  a  list  of  his  creditors,  showing  their  residences,  if  known, 
if  unknown,  that  fact  to  be  stated,  the  amounts  due  each  of  them, 
the  consideration  thereof,  the  security  held  by  them,  if  any,  and 
a  claim  for  such  exemptions  as  he  may  be  entitled  to,  all  in 
triplicate,  one  copy  of  each  for  the  clerk,  one  for  the  referee, 
and  one  for  the  trustee ;  and 

(9)  when  present  at  the  first  meeting  of  his  creditors,  and 
at  such  other  times  as  the  court  shall  order,  submit  to  an  exami- 
nation concerning  the  conducting  of  his  business,  the  cause  of 
his  bankruptcy,  his  dealings  with  his  creditors  and  other  per- 
sons, the  amount,  kind,  and  whereabouts  of  his  property,  and, 
in  addition,  all  matters  which  may  affect  the  administration 
and  settlement  of  his  estate ;  but  no  testimony  given  by  him 
shall  be  offered  in  evidence  against  him  in  any  criminal  pro- 
ceeding. 

Provided,  however.  That  he  shall  not  be  required  to  attend  a 
meeting  of  his  creditors,  or  at  or  for  an  examination  at  a  place 
more  than  one  hundred  and  fifty  miles  distant  from  his  home 
or  principal  place  of  business,  or  to  examine  claims  except  when 


8G4  LAW    OF    BANKRUPTCY.  Ch.  3 

presented  tx)  him,  unless  ordered  by  the  court,  or  a  judge  there- 
of, for  cause  shown,  and  the  bankrupt  shall  be  paid  his  actual 
expenses  from  the  estate  when  examined  or  required  to  attend  at 
any  place  other  than  the  city,  town,  or  village  of  his  residence. 

§  1357.  Sec.  8.  Death  or  Insanity  of  Bankrupts. — a 
The  death  or  insanity  of  a  bankrupt  shall  not  abate  the  pro- 
ceedings, but  the  same  shall  be  conducted  and  concluded  in 
the  same  manner,  so  far  as  possible,  as  though  he  had  not  died 
or  become  insane :  Provided,  Tliat  in  case  of  death  the  widow 
and  children  shall  be  entitled  to  all  rights  of  dower  and  allow- 
ance fixed  by  the  laws  of  the  State  of  the  bankrupt's  residence. 

§  1358.  Sec.  9.  Protection  and  Detention  of  Bank- 
rupts.— a  A  bankrupt  shall  be  exempt  from  arrest  upon  civil 
process  except  in  the  following  cases:  (1)  When  issued  from 
a  court  of  bankruptcy  for  contempt  or  disobedience  of  its  lawful 
orders;  (2)  when  issued  from  a  State  court  having  jurisdic- 
tion, and  served  within  such  State,  upon  a  debt  or  claim  from 
which  his  discharge  in  bankruptcy  would  not  be  a  release,  and 
in  such  case  he  shall  be  exempt  from  such  arrest  when  in  attend- 
ance upon  a  court  of  bankruptcy  or  engaged  in  the  performance 
of  a  duty  imposed  by  this  Act. 

b  The  judge  may,  at  any  time  after  the  filing  of  a  petition 
by  or  against  a  person,  and  before  the  expiration  of  one  month 
after  the  qualification  of  the  trustee,  upon  satisfactory  proof 
by  the  affidavits  of  at  least  two  persons  that  such  bankrupt  is 
about  to  leave  the  district  in  which  he  resides  or  has  his  prin- 
cipal place  of  business  to  avoid  examination,  and  that  his  de- 
parture will  defeat  the  proceedings  in  bankruptcy,  issue  a  war- 
rant to  the  marshal,  directing  him  to  bring  such  bankrupt 
forthwith  before  the  court  for  examination.  If  upon  hearing 
the  evidence  of  the  parties  it  shall  appear  to  the  court  or  a 
judge  thereof  that  the  allegations  are  true  and  tliat  it  is  neces- 
sary, he  shall  order  such  marshal  to  keep  such  bankrupt  in 
custody  not  exceeding  ten  days,  but  not  imprison  him,  until  he 
shall  be  examined  and  released  or  give  bail  conditioned  for  his 
appearance  for  examination,  from  time  to  time,  not  exceeding 
in  all  ten  days,  as  required  by  the  court,  and  for  his  obedience 
to  all  lawful  orders  made  in  reference  thereto. 

§  1359.  Sec.  10.  Extradition  of  Bankrupts. — a  When- 
ever a  warrant  for  the  apprehension  of  a  bankrupt  shall  have 
been  issued,  and  he  shall  have  been  found  within  the  jurisdic- 
tion of  a  court  other  than  the  one  issuing  the  warrant,  he  may 
be  extradited  in  the  same  manner  in  which  persons  under  in- 
dictment are  now  extradited  from  one  district  within  which  a 
district  court  has  jurisdiction  to  another. 


Ch.  3  NATIONAL   BANKRUPTCY    LAW    OF    1898.  865 

§  1360.  Sec.  11.  Suits  by  and  against  Bankrupts. — a  A 
suit  which  is  founded  upon  a  claim  from  which  a  discharge 
woukl  be  a  release,  and  which  is  pending  against  a  person  at 
the  time  of  the  filing  of  a  petition  against  him,  shall  be  stayed 
until  after  an  adjudication  or  the  dismissal  of  the  petition ;  if 
such  person  is  adjudged  a  bankrupt,  such  action  may  be  fur- 
ther stayed  until  twelve  months  after  the  date  of  such  adjudica- 
tion, or,  if  within  that  time  such  person  applies  for  a  discharge, 
then  until  the  question  of  such  discharge  is  determined. 

b  The  court  may  order  the  trustee  to  enter  his  appearance  and 
defend  any  pending  suit  against  the  bankrupt. 

c  A  trustee  may,  with  the  approval  of  the  court,  be  permitted 
to  prosecute  as  trustee  any  suit  commenced  by  the  bankrupt 
prior  to  the  adjudication,  with  like  force  and  effect  as  though 
it  had  been  commenced  by  him. 

d  Suits  shall  not  be  brought  by  or  against  a  trustee  of  a  bank- 
rupt estate  subsequent  to  two  years  after  the  estate  has  been 
closed. 

§  1361.  Sec.  12,  Compositions,  when  Confirmed. — a  A 
bankrupt  may  offer  terms  of  composition  to  his  creditors  after, 
but  not  before,  he  has  been  examined  in  open  court  or  at  a 
meeting  of  his  creditors  and  filed  in  court  the  schedule  of  his 
property  and  list  of  his  creditors,  required  to  be  filed  by  bank- 
rupts. 

b  An  application  for  the  confirmation  of  a  composition  may 
be  filed  in  the  court  of  bankruptcy  after,  but  not  before,  it  has 
been  accepted  in  writing  by  a  majority  in  number  of  all  cred- 
itors whose  claims  have  been  allowed,  which  number  must  rep- 
resent a  majority  in  amount  of  such  claims,  and  the  considera- 
tion to  be  paid  by  the  bankrupt  to  his  creditors,  and  the  money 
necessary  to  pay  all  debts  which  have  priority  and  the  cost  of 
the  proceedings,  have  been  deposited  in  such  place  as  shall  be 
designated  by  and  subject  to  the  order  of  the  judge. 

c  A  date  and  place,  with  reference  to  the  convenience  of  the 
parties  in  interest,  shall  be  fixed  for  the  hearing  upon  each 
application  for  the  confirmation  of  a  composition,  and  such 
objections  as  may  be  made  to  its  confirmation. 

d  The  judge  shall  confirm  a  composition  if  satisfied  that  (1) 
it  is  for  the  best  interests  of  the  creditors;  (2)  the  bankrupt 
has  not  been  guilty  of  any  of  the  acts  or  failed  to  perform  any 
of  the  duties  which  would  be  a  bar  to  his  discharge;  and  (3) 
the  offer  and  its  acceptance  are  in  good  faith  and  have  not  been 
made  or  procured  except  as  herein  provided,  or  by  any  means, 
promises,  or  acts  herein  forbidden. 

e  Upon  the  confirmation  of  a  composition,  the  consideration 


866  LAW    OF    BANKRUPTCY.  Ch.  3 

shall  be  distributed  as  the  judge  shall  direct,  and  the  case  dis- 
missed. Whenever  a  composition  is  not  confirmed,  the  estate 
shall  be  administered  in  bankruptcy  as  herein  provided. 

§  1362.  Sec.  13.  Compositions,  when  Set  Aside. — a  The 
judge  may,  upon  the  application  of  parties  in  interest  filed  at 
any  time  w^ithin  six  months  after  a  composition  has  been  con- 
firmed, set  the  same  aside  and  reinstate  the  case  if  it  shall  be 
made  to  appear  upon  a  trial  that  fraud  was  practiced  in  the 
procuring  of  such  composition,  and  that  the  knowledge  thereof 
has  come  to  the  i>etitioners  since  the  confirmation  of  such  com- 
position. 

§  1363.  Sec.  14.  Discharges,  when  Granted. — a  Any 
person  may,  after  the  expiration  of  one  month  and  within  the 
next  twelve  months  subsequent  to  being  adjudged  a  bankrupt, 
file  an  application  for  a  discharge  in  the  court  of  bankruptcy 
in  which  the  proceedings  are  pending;  if  it  shall  be  made  to 
appear  to  the  judge  that  the  bankrupt  was  unavoidably  pre- 
vented from  filing  it  within  such  time,  it  may  be  filed  within 
but  not  after  the  expiration  of  the  next  six  months. 

"6  The  judge  shall  hear  the  application  for  a  discharge,  and 
such  proofs  and  pleas  as  may  he  made  in  opposition  thereto  by 
parties  in  interest,  at  such  time  as  will  give  parties  in  interest 
a  reasonable  opportunity  to  be  fully  heard,  and  investigate  the 
merits  of  the  application  and  discharge  the  applicant  unless  he 
has  (1)  committed  an  offense  punishable  by  imprisonment  as 
herein  provided;  or  (2)  with  intent  to  conceal  his  financial 
condition,  destroyed,  concealed,  or  failed  to  keep  books  of  ac- 
count or  records  from  which  such  condition  might  be  ascer- 
tained; or  (S)  obtained  property  on  credit  from  any  person 
upon  a  materially  false  statement  in  writing  made  to  such  per- 
son for  the  p^irpose  of  obtaining  such  property  on  credit;  or 
(Jf.)  at  any  time  subsequent  to  the  first  day  of  the  four  months 
immediately  preceding  the  filing  of  the  petition  transferred, 
removed,  destroyed,  or  concealed,  or  permitted  to  be  removed, 

a  Prior  to  the  amendment  subdivision  "b"  provided  as  follows: 
"The  judge  shall  hear  the  application  for  a  discharge,  and  such 
proofs  and  pleas  as  may  be  made  in  opposition  thereto  by  parties  in 
interest,  at  such  time  as  will  give  parties  in  interest  a  reasonable 
opportunity  to  be  fully  heard,  and  investigate  the  merits  of  the  applica- 
tion and  discharge  the  applicant  unless  he  has  (1)  committed  an  of- 
fense punishable  by  imprisonment  as  herein  provided;  or  (2)  with 
fraudulent  intent  to  conceal  his  true  financial  condition  and  in  con- 
templation of  bankruptcy,  destroyed,  concealed,  or  failed  to  keep  books 
of  account  or  records  from  whioh  his  true  condition  might  be  ascer- 
tained." 


Ch.  3  NATIONAL    BANKRUPTCY    LAW    OF    1898.  867 

destruyed,  or  concealed  any  of  his  property  with  intent  to 
hinder,  delay,  or  defraud  his  creditors;  or  (o)  in  voluntary 
proceedings  been  granted  a  discharge  in  bankruptcy  within  six 
years;  or  (6)  in  the  course  of  the  proceedings  in  bankruptcy 
refused  to  obey  any  lawful  order  of  or  to  answer  any  material 
question  approved  by  the  court. 

c  The  confirmation  of  a  composition  shall  discharge  the  banlc- 
rupt  from  his  debts,  other  than  those  agreed  to  be  paid  by  the 
terms  of  the  composition  and  those  not  affected  by  a  discharge. 

§  1364.  Sec.  15.  Discharges,  when  Revoked. — a  The 
indge  may,  upon  the  application  of  parties  in  interest  who  have 
not  been  guilty  of  undue  laches,  filed  at  any  time  within  one 
year  after  a  discharge  shall  have  been  granted,  revoke  it  upon 
a  trial  if  it  shall  be  made  to  appear  that  it  was  obtained  through 
the  fraud  of  the  bankrupt,  and  that  the  knowledge  of  the  fraud 
has  come  to  the  petitioners  since  the  granting  of  the  discharge, 
and  that  the  actual  facts  did  not  warrant  the  discharge. 

§  1365.  Sec.  16.  Co-Debtors  of  Bankrupts. — a  The  lia- 
bility of  a  person  who  is  a  co-debtor  with,  or  guarantor  or  in 
manner  surety  for,  a  bankrupt  shall  not  be  altered  by  the  dis- 
charge of  such  bankrupt. 

§  1366.  "^Sec.  it.  Debts  not  Affected  by  a  Discharge. 
— a  A  discharge  in  bankruptcy  shall  release  a  bankrupt  from  all 
of  his  provable  debts,  except  such  as 

(1)  are  due  as  a  tax  levied  by  the  United  States,  the  State, 
county,  district,  or  municipality  in  which  he  resides; 

(2)  are  liabilities  for  obtaining  property  by  false  pi^etenses 
or  false  representations,  or  for  willful  and  malicious  injuries  to 
the  person  or  property  of  another,  or  for  alimony  due  or  to 
become  due,  or  for  maintenance  or  support  of  wife  or  child,  or 
for  seduction  of  an  unmarried  female,  or  for  criminal  conversa- 
tion ; 

(3)  have  not  been  duly  scheduled  in  iim^e  for  proof  and  al- 

a  Prior  to  the  amendment  of  1903,  this  section  provided  as  follows: 
Debts  not  Affected  by  a  Discharge. — a  A  discharge  in  bankruptcy 
shall  release  a  bankrupt  from  all  of  his  provable  debts,  except  such  as 
(1)  are  due  as  a  tax  levied  by  the  United  States,  the  State,  county, 
district,  or  municipality  in  which  he  resides;  (2)  are  judgments  in 
actions  for  frauds,  or  obtaining  property  by  false  pretenses  or  false 
representations,  or  for  willful  and  malicious  injuries  to  the  person  or 
property  of  another;  (3)  have  not  been  duly  scheduled  in  time  for 
proof  and  allowance,  with  the  name  of  the  creditor  if  known  to  the 
bankrupt,  unless  such  creditor  had  notice  or  actual  knowledge  of  the 
proceedings  in  bankruptcy;  or  (4)  were  created  by  his  fraud,  embezzle- 
ment, misappropriation,  or  defalcation  while  acting  as  an  oflScer  or  in 
any  fiduciary  capacity. 


868  LAW    OF    BANKRUPTCY.  Ch.  4 

lowance,  with  the  name  of  the  creditor  if  known  to  ike  bauk- 
rwpt,  unless  such  creditor  had  notice  or  actual  knowledge  of  tha 
proceedings  in  banki'uptcy ;  or 

(Jf.)  were  created  by  his  fraud,  embezzlement,  niisappropria- 
tion,  or  defalcation  while  acting  as  an  officer  or  in  any  fiduciary 
capacity. 


Chapter  IV. 
couets  and  peoceduke  theeein". 

§  1367.  Sec.  18.  Process,  Pleadings,  and  x\j).judica- 
TiONS. — ^a  Upon  the  filing  of  a  petition  for  involuntary  bank- 
ruptcy, service  thereof,  with  a  writ  of  subpoena,  shall  be  made 
upon  the  person  therein  named  as  defendant  in  the  same  man- 
ner that  service  of  such  process  is  now  had  upon  the  com- 
mencement of  a  suit  in  equity  in  the  courts  of  the  United 
States,  except  that  it  shall  be  returnable  within  fifteen  days, 
unless  the  judge  shall  for  cause  fix  a  longer  time;  but  in  case 
personal  service  can  not  be  made,  then  notice  shall  be  given  by 
publication  in  the  same  manner  and  for  the  same  time  as  pro- 
vided by  laiv  for  notice  by  publication  in  suits  to  enforce  a 
legal  or  equitable  lien  in  courts  of  the  United  States,  except 
that,  unless  the  judge  shall  otherwise  direct,  the  order  shall 
be  published  not  more  than  once  a  week  for  tivo  consecutive 
weeks,  and  the  return  day  shall  be  ten  days  after  the  last  publi- 
cation unless  the  judge  shall  for  cause  fix  a  longer  time. 

^b  The  bankrupt,  or  any  creditor,  may  appear  and  plead  to 
the  petition  within  five  days  after  the  return  day,  or  within 
such  further  time  as  the  court  may  allow. 

c  All  pleadings  setting  up  matters  of  fact  shall  be  verified 
nnder  oath. 

b  Prior  to  the  amendment,  this  subdivision  provided  as  follows: 
Upon  the  filing  of  a  petition  for  involuntary  bankruptcy,  service 
thereof,  with  a  writ  of  subpoena,  shall  be  made  upon  the  person  therein 
named  as  defendant  in  the  same  manner  that  service  of  such  process 
is  now  had  upon  the  commencement  of  a  suit  in  equity  in  the  courts 
of  the  United  States,  except  that  it  shall  be  returnable  within  fifteen 
days,  unless  the  judge  shall  for  cause  fix  a  longer  time;  but  in  case 
personal  service  can  not  be  made,  then  notice  shall  be  given  by  pub- 
lication in  the  same  manner  and  for  the  same  time  as  provided  by  law 
for  notice  by  publication  in  suits  in  equity  in  courts  of  the  United 
States. 

c  The  amendment  to  this  subdivision  consists  in  changing  the  time 
for  pleading  to  the  petition  from  ten  to  five  days. 


Ch.  4  NATIONAL    BANKRUPTCY    LAW    OF    1898.  869 

d  If  the  bankrupt,  or  any  of  liiis  creditors,  shall  apjDcar,  with- 
in the  time  limited,  and  controvert  the  facts  alleged  in  the  peti- 
tion, the  judge  shall  determine,  as  soon  as  may  be,  the  issues 
presented  by  the  pleadings,  without  the  intervention  of  a  jury, 
except  in  cases  where  a  jury  trial  is  given  by  this  Act,  and 
makes  the  adjudication  or  dismiss  the  petition. 

e  If  on  the  last  day  within  which  pleadings  may  be  filed 
none  are  filed  by  the  bankrupt  or  any  of  his  creditors,  the 
judge  shall  on  the  next  day,  if  present,  or  as  soon  thereafter 
as  practicable,  make  the  adjudication  or  dismiss  the  petition. 

f  If  the  judge  is  absent  from  the  district,  or  the  division  of 
the  district  in  which  the  petition  is  pending,  on  the  next  day 
after  the  last  day  on  which  pleadings  may  be  filed,  and  none 
have  been  filed  by  the  bankrupt  or  any  of  his  creditors,  the 
clerk  shall  forthwith  refer  the  case  to  the  referee. 

g  Upon  the  filing  of  a  voluntary  petition  the  judge  shall  hear 
the  petition  and  make  the  adjudication  or  dismiss  the  petition. 
If  the  judge  is  absent  from  the  district,  or  the  division  of  the 
district  in  which  the  petition  is  filed,  at  the  time  of  the  filing, 
the  clerk  shall  forthwith  refer  the  case  to  the  referee. 

§  1368.  Sec.  19.  Jury  Trials. — a  A  person  against  whom 
an  involuntary  petition  has  been  filed  shall  be  entitled  to  have 
a  trial  by  jury,  in  respect  to  the  question  of  his  insolvency, 
except  as  herein  otherwise  provided,  and  any  act  of  bankruptcy 
alleged  in  such  petition  to  have  been  committed,  upon  filing  a 
written  application  therefor  at  or  before  the  time  within  which 
an  answer  may  be  filed.  If  such  application  is  not  filed  within 
such  time,  a  trial  by  jury  shall  be  deemed  to  have  been  waived. 

b  If  a  jury  is  not  in  attendance  upon  the  court,  one  may  be 
specially  summoned  for  the  trial,  or  the  case  may  be  postponed, 
or,  if  the  case  is  pending  in  one  of  the  district  courts  within  the 
jurisdiction  of  a  circuit  court  of  the  United  States,  it  may  be 
certified  for  trial  to  the  circuit  court  sitting  at  the  same  place, 
or  by  consent  of  parties  when  sitting  at  any  other  place  in  the 
same  district,  if  such  circuit  court  has  or  is  to  have  a  jury  first 
in  attendance, 

c  The  right  to  submit  matters  in  controversy,  or  an  alleged 
offense  under  this  Act,  to  a  jury  shall  be  determined  and  en- 
joyed, except  as  provided  by  this  Act,  according  to  the  United 
States  laws  now  in  force  or  such  as  may  be  hereafter  enacted 
in  relation  to  trials  by  jury. 

§  1369.  Sec,  20.  Oaths,  Affirmations. — a  Oaths  re- 
quired by  this  Act,  except  upon  hearings  in  court,  may  be 
administered  by  (1)  referees;  (2)  officers  authorized  to  ad- 
minister oaths  in  proceedings  before  the  courts  of  the  ITnited 


870  LAW    OF    BANKRUPTCY.  Ch.  4 

States,  or  under  the  laws  of  the  State  where  the  same  are  to 
be  taken;  and  (3)  diplomatic  or  consular  officers  of  the  United 
States  in  any  foreign  country. 

b  Any  person  conscientiously  opposed  to  taking  an  oath  may, 
in!  lieu  thereof,  affirm.  Any  person  who  shall  affirm  falsely 
shall  be  punished  as  for  the  making  of  a  false  oath. 

§1370.  Sec.  21.  Evidence. — ''a  A  court  of  bankruptcy 
inuy,  upon  application  of  any  officer,  bankrupt,  or  creditor,  by 
order  require  any  designated  person,  including  the  bankrupt 
and  his  wife,  to  appear  in  court  or  before  a  referee  or  the  judge 
of  any  State  court,  to  be  examined  concerning  the  acts,  conduct, 
or  property  of  a  bankrupt  whose  estate  is  in  process  of  adm/in- 
istration  under  this  Act:  Provided,  That  the  wife  may  be 
exam.ined  07ily  touching  business  transacted  by  her  or  to  which 
she  is  a  party,  and  to  determine  the  fact  whether  she  has 
transacted  or  been  a  party  to  any  business  of  the  bankrupt. 

b  The  right  to  take  depositions  in  proceedings  under  this  Act 
shall  be  determined  and  enjoyed  according  to  the  United  States 
laws  now  in  force,  or  such  as  may  be  hereafter  enacted  relating 
to  the  taking  of  depositions,  except  as  herein  provided. 

c  ISTotice  of  the  taking  of  depositions  shall  be  filed  with  the 
referee  in  every  case.  When  depositions  are  to  be  taken  in 
opposition  to  the  allowance  of  a  claim  notice  shall  also  be 
served  upon  the  claimant,  and  when  in  opposition  to  a  dis- 
charge notice  shall  also  be  served  upon  the  bankrupt. 

d  Certified  copies  of  proceedings  before  a  referee,  or  of 
papers,  when  issued  by  the  clerk  or  referee,  shall  be  admitted 
as  evidence  with  like  force  and  effect  as  certified  copies  of  the 
records  of  district  courts  of  the  United  States  are  now  or  may 
hereafter  be  admitted  as  evidence. 

e  A  certified  copy  of  the  order  approving  the  bond  of  a  trustee 
shall  constitute  conclusive  evidence  of  the  vesting  in  him  of  the 
title  to  the  property  of  the  bankrupt,  and  if  recorded  shall  im- 
part the  same  notice  that  a  deed  from  the  bankrupt  to  the 
trustee  if  recorded  would  have  imparted  had  not  bankruptcy 
proceedings  intervened. 

f  A  certified  copy  of  an  order  confirming  or  setting  aside  a 

a  Prior  to  the  amendment  of  1903,  the  law  provided  as  follows: 
A  court  of  bankruptcy  may,  upon  application  of  any  officer,  bankrupt, 
or  creditor,  by  order  require  any  designated  person,  including  the 
bankrupt,  who  is  a  competent  witness  under  the  laws  of  the  State  in 
which  the  proceedings  are  pending,  to  appear  in  court  or  before  a  ref- 
eree or  the  judge  of  any  State  court,  to  be  examined  concerning  the 
acts,  conduct,  or  porperty  of  a  bankrupt  whose  estate  is  in  process  of 
administration  under  this  Act. 


Ch.  4  NATIONAL   BANKRUPTCY    LAW    OF    1898.  811 

composition,  or  granting  or  setting  aside  a  discharge,  not  re- 
voked, shall  be  evidence  of  the  jurisdiction  of  the  court,  the 
regularity  of  the  proceedings,  and  of  the  fact  that  the  order 
was  made. 

g  A  certified  copy  of  an  order  confirming  a  composition  shall 
constitute  evidence  of  the  revesting  of  the  title  of  his  property 
in  the  bankrupt,  and  if  recorded  shall  impart  the  same  notice 
that  a  deed  from  the  trustee  to  the  bankrupt  if  recorded  would 
impart. 

§  1371.  Sec.  22.  Refebence  of  Cases  aftee  Adjudica- 
tion.— a  After  a  person  has  been  adjudged  a  bankrupt  the 
judge  may  cause  the  trustee  to  proceed  with  the  administra- 
tion of  the  estate,  or  refer  it  (1)  generally  to  the  referee  or 
specially  with  only  limited  authority  to  act  in  the  premises  or 
to  consider  and  report  upon  specified  issues;  or  (2)  to  any 
referee  within  the  territorial  jurisdiction  of  the  court,  if  the 
convenience  of  parties  in  interest  will  be  served  thereby,  or  for 
cause,  or  if  the  bankimpt  does  not  do  business,  reside,  or  have 
his  domicile  in  the  district. 

b  The  judge  may,  at  any  time,  for  the  convenience  of  parties 
or  for  cause,  transfer  a  case  from  one  referee  to  another. 

§  1372.  Sec.  23.  Jurisdiction  of  United  States  and 
State  Courts. — a  The  United  States  circuit  courts  shall  have 
jurisdiction  of  all  controversies  at  law  and  in  equity,  as  dis- 
tinguished from  proceedings  in  bankruptcy,  between  trustees 
as  such  and  adverse  claimants  concerning  the  property  acquired 
or  claimed  by  the  trustees,  in  the  same  manner  and  to  the  same 
extent  only  as  though  bankruptcy  proceedings  had  not  been 
instituted  and  such  controversies  had  been  between  the  bank- 
rupts and  such  adverse  claimants. 

''b  Suits  by  the  trustee  shall  only  be  brought  or  prosecuted  in 
the  courts  where  the  bankrupt,  whose  estate  is  being  admin- 
istered by  such  trustee,  might  have  brought  or  prosecuted  them 
if  proceedings  in  bankruptcy  had  not  been  instituted,  unless 
by  consent  of  the  proposed  defendant,  except  suits  for  the  re- 
covery of  property  under  section  sixty,  subdivision  h,  and  sec- 
tion sixty-seven,  subdivision  e. 

c  The  United  States  circuit  courts  shall  have  concurrent 
jurisdiction  with  the  courts  of  bankruptcy,  within  their  re- 
spective territorial  limits,  of  the  ofi^enses  enumerated  in  this 
Act. 

^  1373,  Sec.  24.  Jurisdiction  of  Appellate  Courts. — 
a  The  Supreme  Court  of  the  United  States,  the  circuit  courts 

b  The  amendment  to  this  subdivision  consists  in  the  addition  of  all 
after  the  word  "defendant." 


872  LAW    OF    BANKRUPTCY.  ClI.  4 

of  appeals  of  tlie  United  States,  and  tlie  supreme  courts  of  the 
Territories,  in  vacation  in  clianibers  and  during  their  respective 
terms,  as  now  or  as  tiiej  may  he  hereafter  held,  are  hereby 
invested  with  appellate  jurisdiction  of  controversies  arising  in 
bankruptcy  proceedings  from  the  courts  of  bankruptcy  from 
which  they  have  appellate  jurisdiction  in  other  cases.  The 
Supreme  Court  of  the  United  States  shall  exercise  a  like  juris- 
diction from  courts  of  bankruptcy  not  within  any  organized 
circuit  of  the  United  States  and  fronj  the  supreme  court  of  the 
District  of  Columbia. 

b  The  several  circuit  courts  of  appeal  shall  have  jurisdiction 
in  equity,  either  interlocutory  or  final,  to  superintend  and 
revise  in  'matter  of  law  the  proceedings  of  the  several  inferior 
courts  of  bankruptcy  within  their  jurisdiction.  Such  power 
shall  be  exercised  on  due  notice  and  petition  by  any  party 
aggrieved. 

§  1374.  Sec.  25.  Appeals  and  Writs  of  Eeeor. — a  That 
appeals,  as  in  equity  cases-,  may  be  taken  in  bankruptcy  pro- 
ceedings from  the  courts  of  bankruptcy  to  the  circuit  court  of 
appeals  of  the  United  States,  and  to  the  supreme  court  of  the 
Territories,  in  the  following  cases,  to  wit, 

(1)  from  a  judgment  adjudging  or  refusing  to  adjudge  the 
defendant  a  bankrupt; 

(2)  from  a  judg-ment  granting  or  denying  a  discharge;  and 

(3)  from  a  judgment  allowing  or  rejecting  a  debt  or  claim  of 
five  hundred  dollars  or  over. 

Such  appeal  shall  be  taken  within  ten  days  after  the  judg- 
ment appealed  from  has  been  rendered,  and  may  be  heard  and 
determined  by  the  appellate  court  in  term  or  vacation,  as  the 
case  may  be; 

b  From  any  final  decision  of  a  court  of  appeals,  allowing  or 
rejecting  a  claim  under  this  Act,  an  appeal  may  be  had  under 
such  rules  and  w^ithin  such  time  as  may  be  prescribed  by  the 
Supreme  Court  of  the  United  States,  in  the  following  cases  and 
no  other : 

1.  Where  the  amount  in  controversy  exceeds  the  sum  of  two 
thousand  dollars,  and  the  question  involved  is  one  which  might 
have  been  taken  on  appeal  or  w^rit  of  error  from  the  highest 
court  of  a  State  to  the  Supreme  Court  of  the  United  States ;  or 

2.  Where  some  Justice  of  the  Supreme  Court  of  the  United 
States  shall  certify  that  in  his  opinion  the  determination  of  the 
question  or  questions  involved  in  the  allowance  or  rejection  of 
such  claim  is  essential  to  a  uniform  construction  of  this  Act 
throughout  the  United  States. 


Ch.  4  NATIONAL    BANKRUPTCY    LAW    OF    1898.  873 

c  Trustees  shall  not  be  required  to  give  bond  when  thej  take 
appeals  or  sue  out  writs  of  error. 

d  Controversies  maj  be  certified  to  the  Supreme  Court  of  the 
United  States  from  other  courts  of  the  United  States,  and  the 
former  court  may  exercise  jurisdiction  thereof  and  issue  writs 
of  certiorari  pursuant  to  the  provisions  of  the  United  States 
laws  now  in  force  or  such  as  may  be  hereafter  enacted. 

§  1375.  Sec.  26.  Arbitration  of  Controversies. — a  The 
trustee  may,  pursuant  to  the  direction  of  the  court,  submit  to 
arbitration  any  controversy  arising  in  the  settlement  of  the 
estate. 

b  Three  arbitrators  shall  be  chosen  by  mutual  consent,  or  one 
by  the  trustee,  one  by  the  other  party  to  the  controversy,  and 
the  third  by  the  two  so  chosen,  or  if  they  fail  to  agree  in  five 
days  after  their  appointment  the  court  shall  appoint  the  third 
arbitrator. 

c  The  written  finding  of  the  arbitrators,  or  a  majority  of 
them,  as  to  the  issues  presented,  may  be  filed  in  court  and  shall 
have  like  force  and  effect  as  the  verdict  of  a  jury. 

§  1376.  Sec.  27.  Compromises. — a  The  trustee  may,  with 
the  approval  of  the  court,  compromise  any  controversy  arising 
in  the  administration  of  the  estate  upon  such  terms  as  he  may 
deem  for  the  best  interests  of  the  estate. 

§  1377.  Sec.  28.  Designation  of  Newspapers. — a  Courts 
of  bankruptcy  shall  by  order  designate  a  newspaper  published 
within  their  respective  territorial  districts,  and  in  the  county 
in  which  the  bankrupt  resides  or  the  major  part  of  his  prop- 
erty is  situated,  in  which  notices  required  to  be  published  by 
this  Act  and  orders  which  the  court  may  direct  to  be  published 
shall  be  inserted.  Any  court  may  in  a  particular  case,  for  the 
convenience  of  parties  in  interest,  designate  some  additional 
newspaper  in  which  notices  and  orders  in  such  case  shall  be 
published. 

§  1378.  Sec.  29.  Offenses. — a  A  person  shall  be  pun- 
ished, by  imprisonment  for  a  period  not  to  exceed  five  years, 
upon  conviction  of  the  offense  of  having  knowingly  and  fraudu- 
lently appropriated  to  his  own  use,  embezzled,  spent,  or  unlaw- 
fully transferred  any  property  or  secreted  or  destroyed  any 
document  belonging  to  a  bankrupt  estate  which  came  into  his 
charge  as  trustee. 

b  A  person  shall  be  punished,  by  imprisonment  for  a  period 
not  to  exceed  two  years,  upon  conviction  of  the  offense  of  having 
knowingly  and  fraudulently 

(1)   concealed  while  a  bantruDt  or  after  his  discharge,  from 


874  LAW    OB"    BANKRUPTCY.  Ch.  4 

liis  trustee  any  of  tlie  property  belonging  to  his  estate  in  bank- 
ruptcy; or 

(2)  made  a  false  oath  or  account  in,  or  in  relation  to,  any 
proceeding  in  bankruptcy ; 

(3)  i)resented  under  oath  any  false  claim  for  proof  against 
the  estate  of  a  bankrupt,  or  used  any  such  claim  in  composition 
i)ersonally  or  by  agent,  proxy,  or  attorney,  or  as  agent,  proxy, 
or  attorney ;  or 

(4)  received  any  material  amount  of  property  from  a  bank- 
rupt after  the  filing  of  the  petition,  with  intent  to  defeat  this 
Act ;  or 

(5)  extorted  or  attempted  to  extort  any  money  or  property 
from  any  person  as  a  consideration  for  acting  or  forbearing  to 
act  in  bankruptcy  proceedings. 

c  A  person  shall  be  punished  by  fine,  not  to  exceed  five  hun- 
dred dollars,  and  forfeit  his  office,  and  the  same  shall  there- 
upon become  vacant,  upon  conviction  of  the  offense  of  having 
knowingly 

(1)  acted  as  a  referee  in,  a  case  in  which  he  is  directly  or 
indirectly  interested;  or 

(2)  purchased,  while  a  referee,  directly  or  indirectly,  any 
property  of  the  estate  in  bankruptcy  of  which  he  is  referee ;  or 

(3)  refused,  while  a  referee  or  trustee,  to  permit  a  reason- 
able opportunity  for  the  inspection  of  the  accounts  relating  to 
the  affairs  of,  and  the  papers  and  records  of,  estates  in  his 
charge  by  parties  in  interest  when  directed  by  the  court  so  to  do. 

d  A  person  shall  not  be  prosecuted  for  any  offense  arising 
under  this  Act  unless  the  indictment  is  found  or  the  informa- 
tion is  filed  in  court  within  one  year  after  the  commission  of 
the  offense. 

§  1379.  Sec.  30.  Rules,  Forms,  and  Orders. — a  All 
necessary  rules,  forms,  and  orders  as  to  procedure  and  for  car- 
rying this  Act  into  force  and  effect  shall  be  prescribed,  and 
may  be  amended  from  time  to  time,  by  the  Supreme  Court  of 
the  United  States. 

§  1380.  Sec.  31.  Computation  of  Time. — a  Whenever 
time  is  enumerated  by  days  in  this  Act,  or  in  any  proceeding 
in  bankruptcy,  the  number  of  days  shall  be  computed  by  ex- 
cluding the  first  and  including  the  last,  unless  the  last  fall  on  a 
Sunday  or  holiday,  in  which  event  the  day  last  included  shall 
he  the  next  day  thereafter  which  is  not  a  Sunday  or  a  legal 
holiday. 

§  1381.  Sec.  32.  Transfer  of  Cases. — a  In  the  event  pe- 
titions are  filed  against  the  same  person,  or  against  different 
members  of  a  partnership,   in   different  courts  of  bankruptcy 


Ch.  5  NATIONAL   BANKRUPTCY   LAW   OP    1898.  875 

each,  of  which:  has  jurisdiction,  the  cases  shall  be  transferred, 
bj  order  of  the  courts  relinquishing  jurisdiction,  to  and  be 
consolidated  bj  the  one  of  such  courts  which  can  proceed  witii 
the  same  for  the  greatest  convenience  of  parties  in  interest. 


Chaptee  Y. 
officees,  their  duties  and  compensation. 

§  1382.  Sec.  33.  Ceeation  of  Two  Offices. — a  The 
offices  of  referee  and  trustee  are  hereby  created. 

§  1383.  Sec.  34.  Appointment,  Removal,  and  Districts 
OF  Referees. — a  Courts  of  bankruptcy  shall,  within  the  terri- 
torial limits  of  which  they  respectively  have  jurisdiction,  (1) 
appoint  referees,  each  for  a  term  of  two  years,  and  may,  in 
their  discretion,  remove  them  because  their  services  are  not 
needed  or  for  other  cause;  and  (2)  designate,  and  from  time 
to  time  change,  the  limits  of  the  districts  of  referees,  so  that 
each  county,  where  the  services  of  a  referee  are  needed,  may 
constitute  at  least  one  district. 

§  1384.  Sec.  35.  Qualifications  of  Referees. — a  Indi- 
viduals shall  not  be  eligible  to  appointment  as  referees  unless 
they  are  respectively 

(1)  competent  to  perform  the  duties  of  that  office;  (2)  not 
holding  any  office  of  profit  or  emolument  under  the  laws  of  the 
United  States  or  of  any  State  other  than  commissioners  of 
deeds,  justices  of  the  peace,  masters  in  chancery,  or  notaries 
public ; 

(3)  not  related  by  consanguinity  or  affinity,  within  the  third 
degree  as  determined  by  the  common  law,  to  any  of  the  judges 
of  the  courts  of  bankruptcy  or  circuit  courts  of  the  United 
States,  or  of  the  justices  or  judges  of  the  appellate  courts  of 
the  districts  wherein  they  may  be  appointed ;  and 

(4)  residents  of,  or  have  their  offices  in,  the  territorial  dis- 
tricts for  which  they  are  to  be  appointed. 

§  1385.  Sec.  36.  Oaths  of  Office  of  Referees. — a  Ref- 
erees shall  take  the  same  oath  of  office  as  that  prescribed  for 
judges  of  United  States  courts. 

§  1386.  Sec.  37.  Number  of  Referees. — a  Such  number 
of  referees  shall  be  appointed  as  may  be  necessary  to  assist  in 
expeditiously  transacting  the  bankruptcy  business  pending  in 
the  various  courts  of  bankruptcy. 

§  1387.  Sec.  38.  Jurisdiction  of  Referees. — a  Referees 
respectively  are  hereby  invested,  subject  always  to  a  review  bv 


876  LAW    OF    BANKRUPTCY.  Ch.  o 

the  judge,  witliin  the  limits  of  their  distriets   as  established 
from  time  to  time,  with  jurisdiction  to 

(1)  consider  all  petitions  referred  to  them  by  the  clerks  and 
make  the  adjudications  or  dismiss  the  petitions ; 

(2)  exercise  the  powers  vested  in  courts  of  bankruptcy  for 
the  administering  of  oaths  to  and  the  examination  of  persons 
as  witnesses  and  for  requiring  the  production  of  documents 
in  proceedings  before  them,  except  the  power  of  commitment ; 

(3)  exercise  the  powers  of  the  judge  for  the  taking  possession 
and  releasing  of  the  property  of  the  bankrupt  in  the  event  of 
the  issuance  by  the  clerk  of  a  certificate  showing  the  absence 
of  a  judge  from  the  judicial  district,  or  the  division  of  the  dis- 
trict, or  his  sickness,  or  inability  to  act; 

(4)  perform  such  part  of  the  duties,  except  as  to  questions 
arising  out  of  the  applications  of  bankrupts  for  compositions 
or  discharges,  as  are  by  this  Act  conferred  on  courts  of  bank- 
ruptcy and  as  shall  be  prescribed  by  rules  or  orders  of  the 
courts  of  bankruptcy  of  their  respective  districts,  except  as 
herein  otherwise  provided ;  and 

(5)  upon  the  application  of  the  trustee  during  the  examina- 
tion of  the  bankrupts,  or  other  proceedings,  authorize  the  em- 
ployment of  stenographers  at  the  expense  of  the  estates  at  a 
compensation  not  to  exceed  ten  cents  per  folio  for  reporting  and 
transcribing  the  proceedings. 

§  1388.     Sec.  39.     Duties  of  Referees. — a  Referees  shall 

(1)  declare  dividends  and  prepare  and  deliver  to  trustees 
dividend  sheets  showing  the  dividends  declared  and  to  whom 
payable ; 

(2)  examine  all  schedules  of  property  and  lists  of  creditors 
filed  by  bankrupts  and  cause  such  as  are  incomplete  or  defective 
to  be  amended ; 

(3)  furnish  such  information  concerning  the  estates  in 
process  of  administration  before  them  as  may  be  requested  by 
the  parties  in  interest ; 

(4)  give  notices  to  creditors  as  herein  provided; 

(5)  make  up  records  embodying  the  evidence,  or  the  sub- 
stance thereof,  as  agreed  upon  by  the  parties  in  all  contested 
matters  arising  before  them,  whenever  requested  to  do  so  by 
either  of  the  parties  thereto,  together  with  their  findings  therein, 
and  transmit  them  to  the  judges; 

(6)  prepare  and  file  the  schedules  of  property  and  lists  of 
creditors  required  to  be  filed  by  the  bankrupts,  or  cause  the 
same  to  be  done,  when  the  bankrupts  fail,  refuse,  or  neglect  to 
do  so ; 

(7)  safely  keep,  perfect,   and  transmit    to    the    clerks    the 


Ch.  5  NATIONAL    BANKRUPTCY    LAW    OF    1898.  877 

records,  herein  required  to  be  kept  bj  them,  when  the  cases  are 
concluded ; 

(8)  transmit  to  the  clerks  such  papers  as  may  be  on  tile 
before  them  whenever  the  same  are  needed  in  any  proceedings 
in  courts,  and  in  like  manner  secure  the  return  of  such  paj^ers 
after  they  have  been  used,  or,  if  it  be  impracticable  to  transmit 
tlie  original  papers,  transmit  certified  copies  thereof  by  mail; 

(9)  upon  application  of  any  party  in  interest,  preserve  the 
evidence  taken  or  the  substance  thereof  as  agreed  upon  by  the 
parties  before  them  when  a  stenographer  is  not  in  attendance ; 
and 

(10)  whenever  their  respective  offices  are  in  the  same  cities 
or  towns  where  the  courts  of  bankruptcy  convene,  call  upon 
and  receive  from  the  clerks  all  papers  filed  in  courts  of  bank- 
ruptcy which  have  been  referred  to  them. 

b  Referees  shall  not  ( 1 )  act  in  cases  in  which  they  are  di- 
rectly or  indirectly  interested ;  ( 2 )  practice  as  attorneys  and 
counselors  at  law  in  any  bankruptcy  proceedings;  or  (3)  pur- 
chase, directly  or  indirectly,  any  property  of  an  estate  in  bank- 
ruptcy. 

§  1389.  Sec.  40.  Compexsation  of  Referees. — ^a  Ref- 
erees shall  receive  as  full  compensation  for  their  services,  pay- 
able after  they  are  i-endered,  a  fee  of  fifteen  dollars  deposited 
with  the  clerk  at  the  time  the  petition  is  filed  in  each  case,  except 
when  a  fee  is  not  required  from  a  voluntary  bankrupt,  and 
twenty-five  cents  for  every  proof  of  claim  fded  for  allowance, 
to  be  paid  from  the  estate,  if  any,  as  a  part  of  the  cost  of 
administration,  and  from  estates  which  have  been  admiyiistered 
before  them  one  per  centum  commissions  on  all  moneys  dis- 
bursed to  creditors  by  the  trustee,  or  one-half  of  one  per  centum 
on  the  amount  to  be  paid  to  creditors  upon  the  confirmation  of 
a  composition. 

h  Whenever  a  case  is  transferred  from  one  referee  to  another 
the  judge  shall  determine  the  proportion  in  which  the  fee  and 
commissions  therefor  shall  be  divided  between  the  referees. 

a  Prior  to  the  amendment  of  1903,  this  subdivision  provided  as  fol- 
lows: 

Referees  shall  receive  as  full  compensation  for  their  services,  payable 
after  they  are  rendered,  a  fee  of  ten  dollars  deposited  with  the  clerk 
at  the  time  the  petition  is  filed  in  each  case,  except  when  a  fee  is  not 
required  from  a  voluntary  bankrupt,  and  from  estates  which  have  been 
administered  before  them  one  per  centum  commissions  on  sums  to  be 
paid  as  dividends  and  commissions,  or  one-half  of  one  per  centum  on 
the  amount  to  be  paid  to  creditors  upon  the  confirmation  of  a  compo- 
sition. 


878  LAW    OF    BANKRUPTCY.  Ch.  5 

c  111  the  event  of  the  reference  of  a  case  being  revoked  before 
it  is  concluded,  and  when  the  case  is  specially  referred,  the 
judge  shall  determine  what  part  of  the  fee  and  commissions 
shall  be  paid  to  the  referee. 

§  1390.  Sp:c.  41.  Contempts  before  Referees. — a  A 
person  shall  not,  in  proceedings  before  a  referee,  (1)  disobey  or 
resist  any  lawful  order,  process,  or  writ;  (2)  misbehave  during 
a  hearing  or  so  near  the  place  thereof  as  to  obstruct  the  same ; 
(3)  neglect  to  produce,  after  having  been  ordered  to  do  so,  any 
pertinent  document;  or  (4)  refuse  to  appear  after  having  been 
subpoBuaed,  or,  upon  apj^earing,  refuse  to  take  the  oath  as  a 
witness,  or,  after  having  taken  the  oath,  refuse  to  be  examined 
according  to  law : 

Provided,  That  no  person  shall  be  required  to  attend  as  a 
witness  before  a  referee  at  a  place  outside  of  the  State  of  his 
residence,  and  more  than  one  hundred  miles  from  such  place  of 
residence,  and  only  in  case  his  lawful  mileage  and  fee  for  one 
day's  attendance  shall  be  first  paid  or  tendered  to  him. 

b  The  referee  shall  certify  the  facts  to  the  judge,  if  any 
person  shall  do  any  of  the  things  forbidden  in  this  section. 
The  judge  shall  thereupon,  in  a  summary  manner,  hear  the 
evidence  as  to  the  acts  complained  of,  and,  if  it  is  such  as  to 
warrant  him  in  so  doing,  punish  such  person  in  the  same  man- 
ner and  to  the  same  extent  as  for  a  contempt  committed  before 
the  court  of  bankruptcy,  or  commit  such  person  upon  the  same 
conditions  as  if  the  doing  of  the  forbidden  act  had  occurred 
with  reference  to  the  process  of,  or  in  the  presence  of,  the 
court. 

§  1391.  Sec.  42.  Records  of  Referees. — a  The  records 
of  all  proceedings  in  each  case  before  a  referee  shall  be  kept 
as  nearly  as  may  be  in  the  same  manner  as  records  are  now  kept 
in  equity  cases  in  circuit  courts  of  the  United  States. 

b  A  record  of  the  proceedings  in  each  case  shall  he  kept  in  a 
separate  book  or  books,  and  shall,  together  with  the  papers  on 
file,  constitute  the  records  of  the  case. 

c  The  book  or  books  containing  a  record  of  the  proceedings 
shall,  when  the  case  is  concluded  before  the  referee,  be  certified 
to  by  him,  and,  together  with  such  papers  as  are  on  file  before 
him,  be  transmitted  to  the  court  of  bankruptcy  and  shall  there 
remain  as  a  part  of  the  records  of  the  court. 

§  1392.  Sec.  43.  Referee's  Absence  or  Disability. — a 
Whenever  the  office  of  a  referee  is  vacant,  or  its  occupant  is 
absent  or  disqualified  to  act,  the  judge  may  act,  or  may  appoint 
another  referee,  or  another  referee  holding    an    appointment 


Ch.  0  NATIONAL    BANKRUPTCY    LAW    OF    1898.  879 

under  the  same  court  may,  by  order  of  the  judge,  temporarily 
till  the  vacancy. 

§  1393.  Sec.  44.  Appointment  of  Trustees. — a  The 
creditors  of  a  bankrupt  estate  shall,  at  their  tirst  meeting  after 
the  adjudication  or  after  a  vacancy  has  occurred  in  the  office  of 
trustee,  or  after  an  estate  has  been  reopened,  or  after  a  com- 
position has  been  set  aside  or  a  discharge  revoked,  or  if  there 
is  a  vacancy  in  the  office  of  trustee,  appoint  one  trustee  or  three 
trustees  of  such  estate.  If  the  creditors  do  not  appoint  a  trustee 
or  trustees  as  herein  provided,  the  court  shall  do  so. 

§  1394.  Sec.  45.  Qualifications  of  Trustees. — a  Trus- 
tees may  be  (1)  individuals  who  are  respectively  competent  to 
perform  the  duties  of  that  office,  and  reside  or  have  an  office 
in  the  judicial  district  within  which  they  are  appointed,  or  (2) 
corporations  authorized  by  their  charters  or  by  law  to  act  in 
such  capacity  and  having  an  office  in  the  judicial  district  with- 
in which  they  are  appointed. 

§  1395.  Sec.  46.  Death  or  Removal  of  Trustees. — a 
The  death  or  removal  of  a  trustee  shall  not  abate  any  suit  or  pro- 
ceeding which  he  is  prosecuting  or  defending  at  the  time  of 
his  death  or  removal,  but  the  same  may  be  proceeded  with  or 
defended  by  his  joint  trustee  or  successor  in  the  same  manner 
as  though  the  same  had  been  commenced  or  was  being  defended 
by  such  joint  trustee  alone  or  by  such  successor. 

§  1396.  Sec.  47.  Duties  of  Trustees. — a  Trustees  shall 
respectively 

(1)  account  for  and  pay  over  to  the  estates  under  their  con- 
trol all  interest  received  by  them  upon  property  of  such  estates ; 

(2)  collect  and  reduce  to  money  the  property  of  the  estates 
for  which  they  are  trustees,  under  the  direction  of  the  court, 
and  close  up  the  estate  as  expeditiously  as  is  compatible  with 
the  best  interests  of  the  parties  in  interest ; 

(3)  deposit  all  money  received  by  them  in  one  of  the  desig- 
nated depositories ; 

(4)  disburse  money  only  by  check  or  draft  on  the  deposi- 
tories in  which  it  has  been  deposited ; 

(5)  furnish  such  information  concerning  the  estates  of  which 
they  are  trustees  and  their  administration  as  may  be  requested 
by  parties  in  interest ; 

(6)  keep  regular  accounts  showing  all  amounts  received  and 
from  what  sources  and  all  amounts  expended  and  on  what 
accounts ; 

(7)  lay  before  the  final  meeting  cf  the  creditors  detailed 
statements  of  the  administration  of  the  estates ; 

(8)  make  final  reports  and  file  final  accounts  with  the  courts 


880  LAW    OF    BANKRUPTCY.  Ch.  5 

fifteen  days  before  the  days  fixed  for  the  iiual  meetings  of  the 
creditors ; 

(9)  pay  dividends  witliin  ten  days  after  they  are  declared 
by  the  referees; 

(10)  report  to  the  courts,  in  writing,  the  condition  of  the 
estates  and  the  amounts  of  money  on  hand,  and  such  other 
details  as  may  be  required  by  the  courts,  within  the  first  month 
after  their  appointment  and  every  two  months  thereafter,  unless 
otherwise  ordered  by  the  courts ;  and 

(11)  set  apart  the  bankrupt's  exemptions  and  report  the 
items  and  estimated  value  thereof  to  the  court  as  soon  as  prac- 
ticable after  their  appointment. 

b  Whenever  three  trustees  have  been  appointed  for  an  estate, 
the  concurrence  of  at  least  two  of  them  shall  be  necessary  to  the 
validity  of  their  every  act  concerning  the  administration  of  the 
estate. 

^c  The  trustee  shall,  within  thirty  days  after  the  adjudica- 
tion, file  a  certified  copy  of  the  decree  of  adjudication  in  the 
office  where  conveyances  of  real  estate  are  recorded  in  every 
county  where  the  bankrupt  owns  real  estate  not  exempt  from 
execution,  and  pay  the  fee  for  such  filing,  and  he  shall  receive 
a  compensation  of  fifty  cents  for  each  copy  so  filed,  which,  to- 
gether with  the  filing  fee,  shall  be  paid  out  of  the  estate  of  the 
bankrupt  as  a  part  of  the  cost  and  disbursements  of  the  pro- 
ceed ifigs. 

§  1397.  Sec.  48.  Compensation  of  Teustees. — ^a  Trus- 
tees shall  receive  for  their  services,  payable  after  they  are  ren- 
dered, a  fee  of  five  dollars  deposited  with  the  cleric  at  the  time 
the  petition  is  filed  in  each  case,  except  when,  a  fee  is  not  re- 
quired from  a  voluntary  bankrupt,  and  from  estates  v)hich  they 
have  administered  such  commissions  on  all  moneys  disbursed 
by  them  as  may  be  alloived  by  the  courts,  not  to  exceed  six  per 
centum  on  the  first  five  hundred  dollars  or  less,  four  per  centum 

a  Subdivision  "c"  does  not  appear  in  the  act  of  1898,  but  was  added 
by  the  amendatory  act  of  1903. 

b  The  amendment  to  this  subdivision  consists  in  the  substitution  by 
the  act  of  1903  of  the  matter  in  the  text  for  the  following: 

Trustees  shall  receive,  as  full  compensation  for  their  services,  pay- 
able after  they  are  rendered,  a  fee  of  five  dollars  deposited  with  the 
clerk  at  the  time  the  petition  is  filed  in  each  case,  except  when  a  fee 
is  not  required  from  a  voluntary  bankrupt,  and  from  estates  which 
they  have  administered,  such  commissions  on  sums  to  be  paid  as  divi- 
dends and  commissions  as  may  be  allowed  by  the  courts,  not  to  exceed 
three  per  centum  on  the  first  five  thousand  dollars  or  less,  two  per 
centum  on  the  second  five  thousand  dollars  or  part  thereof,  and  one  per 
centum  on  such  sums  in  excess  of  ten  thousand  dollars. 


Cm.  5  NATIONAL    BANKRUPTCY    LAW    OF    1898.  881 

on  moneys  in  excess  of  five  hundred  dollars  and  less  than  fifteen 
hundred  dollars,  two  per  centum  on  moneys  in  excess  of  fifteen 
hundred  dollars  and  less  than  ten  thousand  dollars,  and  one  per 
centum,  on  moneys  in  excess  of  ten  thousand  dollars.  And  in 
case  of  the  confirmation  of  a  composition  after  the  trustee  has 
qualified  the  court  may  allow  him,  as  compensation,  not  to 
exceed  one-half  of  one  per  centum  of  the  amount  to  he  paid  the 
creditors  on  such  composition. 

b  In  the  event  of  an  estate  being  administered  by  three  trus- 
tees instead  of  one  trustee  or  by  successive  trustees,  the  court 
shall  apportion  the  fees  and  commissions  between  them  accord- 
ing to  the  services  actually  rendered,  so  that  there  shall  not  bo 
paid  to  trustees  for  the  administering  of  any  estate  a  greater 
amount  than  one  trustee  would  be  entitled  to. 

c  The  court  may,  in  its  discretion,  withhold  all  compensation 
from  any  trustee  who  has  been  removed  for  cause. 

§  1398.  Sec.  49.  Accounts  and  Papers  of  Trustees. — 
a  The  accounts  and  papers  of  trustees  shall  be  open  to  the  in- 
spection of  officers  and  all  parties  in  interest, 

§  1399.  Sec.  50.  Bonds  of  Referees  and  Trustees. — 
a  Referees,  before  assuming  the  duties  of  their  offices,  and  with- 
in such  time  as  the  district  courts  of  the  United  States  having 
jurisdiction  shall  prescribe,  shall  respectively  qualify  by  enter- 
ing into  bond  to  the  United  States  in  such  sum  as  shall  be  fixed 
by  such  courts,  not  to  exceed  five  thousand  dollars,  with  such 
sureties  as  shall  be  approved  by  such  courts,  conditioned  for 
the  faithful  performance  of  their  official  duties. 

b  Trustees,  before  entering  upon  the  performance  of  their 
official  duties,  and  within  ten  days  after  their  appointment,  or 
within  such  further  time,  not  to  exceed  five  days,  as  the  court 
may  permit,  shall  respectively  qualify  by  entering  into  bond  to 
the  United  States,  with  such  sureties  as  shall  be  approved  by 
the  courts,  conditioned  for  the  faithful  performance  of  their 
official  duties. 

c  The  creditors  of  a  bankrupt  estate,  at  their  first  meeting 
after  the  adjudication,  or  after  a  vacancy  has  occurred  in  the 
office  of  trustee,  or  after  an  estate  has  Ijeen  reopened,  or  after  a 
composition  has  been  set  aside  or  a  discharge  revoked,  if  there 
is  a  vacancy  in  the  office  of  trustee,  shall  fix  the  amount  of  the 
bond  of  the  trustee ;  they  may  at  any  time  increase  the  amount 
of  the  bond.  If  the  creditors  do  not  fix  the  amount  of  the  bond 
of  the  trustee  as  herein  provided  the  court  shall  do  so. 

d  The  court  shall  require  evidence  as  to  the  actual  value  of 
the  property  of  sureties. 

e  There  shall  be  at  least  two  sureties  upon  each  bond. 

S6 


883  LAW    OF    BANKRUPTCY.  Ch.  5 

f  The  actual  value  of  the  property  of  the  sureties,  over  and 
above  their  liabilities  and  exemptions,  on  each  bond  shall  equal 
at  least  the  amount  of  such  bond. 

g  Corporations  organized  for  the  purpose  of  becoiiung  sure- 
ties upon  bonds,  or  authorized  by  law  to  do  so,  may  be  accepted 
as  sureties  upon  the  bonds  of  referees  and  trustees  whenever 
the  courts  are  satisfied  that  the  rights  of  all  parties  in  interest 
will  be  thereby  amply  protected. 

h  Bonds  of  referees,  trustees,  and  designated  depositories 
shall  be  filed  of  record  in  the  office  of  the  clerk  of  the  court 
and  may  be  sued  upon  in  the  name  of  the  United  States  for  the 
use  of  any  person  injured  by  a  breach  of  their  conditions. 

i  Trustees  shall  not  be  liable,  personally  or  on  their  bonds,  to 
the  United  States,  for  any  penalties  or  forfeitures  incurred  by 
the  bankrupts  under  this  Act,  of  whose  estates  they  are  respect- 
ively trustees. 

j  Joint  trustees  may  give  joint  or  several  Ijonds. 

k  If  any  referee  or  trustee  shall  fail  to  give  bond,  as  herein 
provided  and  within  the  time  limited,  he  shall  be  deemed  to 
have  declined  his  appointment,  and  such  failure  shall  create  a 
vacancy  in  his  office. 

1  Suits  upon  referees'  bonds  shall  not  be  brought  subsequent 
to  two  years  after  the  alleged  breach  of  the  bond. 

m  Suits  upon  trustees'  bonds  shall  not  be  brought  subsequent 
to  two  years  after  the  estate  has  been  closed. 

§  1400.  Sec.  51.  Duties  of  Clerks. — a  Clerks  shall  re- 
spectively 

(1)  account  for,  as  for  other  fees  received  by  them,  the 
clerk's  fee  paid  in  each  case  and  such  other  fees  as  may  be 
received  for  certified  copies  of  records  which  may  be  prepared 
for  persons  other  than  officers ; 

(2)  collect  the  fees  of  the  clerk,  referee,  and  trustee  in  each 
case  instituted  before  filing  the  petition,  except  the  petition  of 
a  proposed  voluntary  bankrupt  which  is  accompanied  by  an 
affidavit  stating  that  the  petitioner  is  without,  and  can  not 
obtain,  the  money  with  which  to  pay  such  fees ; 

(3)  deliver  to  the  referees  upon  application  all  papers  whicli 
may  be  referred  to  them,  or,  if  the  offices  of  such  referees  are 
not  in  the  same  cities  or  towns  as  the  offices  of  such  clerks,  trans- 
mit such  papers  by  mail,  and  in  like  manner  return  papers 
which  were  received  from  such  referees  after  they  have  been 
used ; 

(4)  and  wathin  ten  days  after  each  case  has  been  closed  pay 
to  the  referee,  if  the  case  was  referred,  the  fee  collected  for 


Ch.  6  NATIONAL    BANKRUPTCY    LAW    OF    1898.  883 

him,  and  to  the  trustee  the  fee  collected  for  him  at  the  time  of 
hling  the  petition, 

§  1401.  Sec.  52.  Compensation  of  Clerks  and  Mae- 
SHALS. — a  Clerks  shall  respectively  receive  as  full  compensation 
for  their  services  to  each  estate,  a  tiling  fee  of  ten  dollars,  except 
when  a  fee  is  not  required  from  a  voluntary  bankrupt. 

b  Marshals  shall  respectively  receive  from  the  estate  where 
an  adjudication  in  bankruptcy  is  made,  except  as  herein  other- 
wise provided,  for  the  performance  of  their  services  in  pro- 
ceedings in  bankruptcy,  the  same  fees,  and  account  for  them 
in  the  same  way,  as  they  are  entitled  to  receive  for  the  per- 
formance of  the  same  or  similar  services  in  other  cases  in 
accordance  with  laws  now  in  force,  or  such  as  may  be  hereafter 
enacted  fixing  the  compensation  of  marshals. 

§  1402.  Sec.  53.  Duties  of  Attorney-General. — a  The 
Attorney-General  shall  annually  lay  before  Congress  statistical 
tables  showing  for  the  whole  country,  and  by  States,  the  number 
of  cases  during  the  year  of  voluntary  and  involuntary  bank- 
ruptcy ;  the  amount  of  the  property  of  the  estates ;  the  divi- 
dends paid  and  the  expenses  of  administering  such  estates; 
and  such  other  like  information  as  he  may  deem  important. 

§  1403.  Sec.  54.  Statistics  of  Bankruptcy  Proceed- 
ings.— a  Officers  shall  furnish  in  writing  and  transmit  by  mail 
such  information  as  is  within  their  knowledge,  and  as  may  be 
shown  by  the  records  and  papers  in  their  possession,  to  the 
Attorney-General,  for  statistical  purposes,  within  ten  days  after 
being  requested  by  him  to  do  so. 


Chapteb  VI. 

creditors. 

§  1404.  Sec.  55.  Meetings  of  Creditors. — a  The  court 
shall  cause  the  first  meeting  of  the  creditors  of  a  bankrupt  to 
be  held,  not  less  than  ten  nor  more  than  thirty  days  after  the 
adjudication,  at  the  county  seat  of  the  county  in  which  the 
l)ankrupt  has  had  his  principal  place  of  business,  resided,  or 
had  his  domicile ;  or  if  that  place  would  be  manifestly  incon- 
venient as  a  place  of  meeting  for  the  parties  in  interest,  or  if 
the  bankrupt  is  one  who  does  not  do  business,  reside,  or  have 
his  domicile  within  the  ITnited  States,  the  court  shall  fix  a 
place  for  the  meeting  which  is  the  most  convenient  for  parties 
in  interest.     If  such  meeting  should  by  any  mischance  not  be 


884  LAW    OF    BANKRUPTCY.  Ch.  6 

held  within  such  time,  the  court  shall  tix  the  date,  as  soon  as 
may  be  thereafter,  when  it  shall  be  held. 

b  At  the  first  meeting  of  creditors  the  judge  or  referee  shall 
preside,  and,  before  proceeding  with  the  other  business,  may 
allow  or  disallow  the  claims  of  creditors  there  presented,  and 
may  publicly  examine  the  bankrupt  or  cause  him  to  Ix^  examined 
at  the  instance  of  any  creditor. 

c  The  creditors  shall  at  each  meeting  take  such  steps  as  may 
be  pertinent  and  necessary  for  the  promotion  of  the  best  inter- 
ests of  the  estate  and  the  enforcement  of  this  Act. 

d  A  meeting  of  creditors,  subsequent  to  the  first  one,  may  be 
held  at  any  time  and  place  when  all  of , the  creditors  who  have 
secured  the  allo'wance  of  their  claims  sign  a  written  consent  to 
hold  a  meeting  at  such  time  and  place. 

e  The  court  shall  call  a  meeting  of  creditors  whenever  one- 
fourth  or  more  in  number  of  those  who  have  proven  their  claims 
shall  file  a  written  request  to  that  effect;  if  such  request  is 
signed  by  a  majority  of  claims,  and  contains  a  request  for  such 
meeting  to  be  held  at  a  designated  place,  the  court  shall  call 
such  meeting  at  such  place  within  thirty  days  after  the  date  of 
the  filing  of  the  request. 

f  Whenever  the  affairs  of  the  estate  are  ready  to  be  closed  a 
final  meeting  of  creditors  shall  be  ordered. 

§  1405.  Sec.  56.  Voters  at  Meetings  of  Creditors. — 
a  Creditors  shall  pass  upon  matters  submitted  to  them  at  their 
meetings  by  a  majority  vote  in  number  and  amount  of  claims 
of  all  creditors  whose  claims  have  been  allowed  and  are  present, 
except  as  herein  otherwise  provided. 

b  Creditors  holding  claims  which  are  secured  or  have  priority 
shall  not,  in  respect  to  such  claims,  be  entitled  to  vote  at  cred- 
itors' meetings,  nor  shall  such  claims  be  counted  in  computing 
either  the  number  of  creditors  or  the  amount  of  their  claims, 
unless  the  amounts  of  such  claims  exceed  the  values  of  such 
securities  or  priorities,  and  then  only  for  such  excess. 

§  1406.  Sec.  57.  Proof  and  Allowance  of  Claims. — 
a  Proof  of  claims  shall  consist  of  a  statement  under  oath,  in 
writing,  signed  by  a  creditor  setting  forth  the  claim,  the  con- 
sideration therefor,  and  whether  any,  and,  if  so  what,  securities 
are  held  therefor,  and  whether  any,  and,  if  so  what,  payments 
have  been  made  thereon,  and  that  the  sum  claimed  is  justly 
owing  from  the  bankrupt  tO'  the  creditor. 

b  Whenever  a  claim  is  founded  upon  an  instrument  of  writ- 
ing, such  instrument,  unless  lost  or  destroyed,  shall  be  filed 
with  the  proof  of  claim.  If  such  instrument  i*^  lost  or  destroyed, 
a  statement  of  such  fact  and  of  the  circumstances  of  such  loss 


Ch.  6  NATIONAL   BANKRUPTCY    LAW   OF    1898.  885 

or  destruction  shall  be  filed  under  oath  with  the  claim.  After 
the  claim  is  allowed  or  disalloweil,  such  instrument  may  be 
withdrawn  by  permission  of  the  court,  upon  leaving  a  copy 
thereof  on  file  with  the  claim. 

c  Claims  after  being  proved  may,  for  the  purpose  of  allow- 
ance, be  filed  by  the  claimants  in  the  court  where  the  proceed- 
ings are  pending  or  before  the  referee  if  the  case  has  been 
referred. 

d  Claims  which  have  been  duly  proved  shall  be  allowed,  upon 
receipt  by  or  upon  presentation  to  the  court,  unless  objection  to 
their  allowance  shall  be  made  by  parties  in  interest,  or  their 
consideration  be  continued  for  cause  by  the  court  upon  its  own 
motion. 

e  Claims  of  secured  creditors  and  those  who  have  priority 
may  be  allowed  to  enable  such  creditors  to  participate  in  the 
proceedings  at  creditors'  meetings  held  prior  to  the  determina- 
tion of  the  value  of  their  securities  or  priorities,  but  shall  be 
allowed  for  such  sums  only  as  to  the  courts  seem  to  be  owing 
over  and  above  the  value  of  their  securities  or  priorities. 

f  Objections  to  claims  shall  be  heard  and  determined  as  sooji 
as  the  convenience  of  the  court  and  the  best  interests  of  the 
estates  and  the  claimants  will  permit. 

^g  The  claims  of  creditors  who  have  received  preferences, 
voidable  under  section  sixty,  subdivision  b,  or  to  whom  convey- 
ances, transfers,  assignments,  or  incumbrances,  void  or  voidable 
under  section  sixty-seven,  subdivision  e,  have  been  made  or 
given,  shall  not  be  allowed  unless  such  creditors  shall  surreiider 
such  preferences,  conveyances,  transfers,  assignments,  or  in- 
cumhiances. 

h  The  value  of  securities  held  by  secured  creditors  shall  be 
determined  by  converting  the  same  into  money  according  to  the 
terms  of  the  agreement  pursuant  to  which  such  securities  were 
delivered  to  such  creditors  or  by  such  creditors  and  the  trustee, 
by  agreement,  arbitration,  compromise,  or  litigation,  as  the 
court  may  direct,  and  the  amount  of  such  value  shall  be  cred- 
ited upon  such  claims,  and  a  dividend  shall  be  paid  only  on 
the  unpaid  balance. 

i  Whenever  a  creditor,  whose  claim  against  a  bankrupt  estate 
is  secured  by  the  individual  undertaking  of  any  person,  fails 
to  prove  such  claim,  such  person  may  do  so  in  the  creditor's 

a  Prior  to  the  amendment  of  1903,  this  subdivision  provided  as  fol- 
lows: 

"The  claims  of  creditors  who  have  received  preferences  shall  not  be 
allowed  unless  such  creditors  shall  surrender  their  preferences." 


886  LAW    OF    BANKRUPTCY.  Ch.  6 

name,  and  if  he  discharge  such  undertaking  in  whole  or  in  part 
Jio  shall  he  subrogated  to  that  extent  to  the  rights  of  the  creditor. 

j  J)('bts  owing  to  the  United  States,  a  State,  a  county,  a  dis- 
trict, or  a  municipality  as  a  penalty  or  forfeiture  shall  not  be 
allowed,  except  for  the  amount  of  the  pecuniary  loss  sustained 
by  the  act,  transaction,  or  proceeding  out  of  which  the  penalty 
or  forfeiture  arose,  with  reasonable  and  actual  costs  occasioned 
thereby  and  such  interest  as  may  have  accrued  thereon  accord- 
ing to  law. 

k  Claims  which  have  been  allowed  may  be  reconsidered  for 
cause  and  reallowed  or  rejected  in  whole  or  in  part,  according 
to  the  equities  of  the  case,  before  but  not  after  the  estate  has 
been  closed. 

1  Whenever  a  claim  shall  have  been  reconsidered  and  rejected, 
in  whole  or  in  part,  upon  which  a  dividend  has  been  paid,  the 
trustee  may  recover  from  the  creditor  the  amount  of  the  divi- 
dend received  upon  the  claim  if  rejected  in  whole,  or  the  pro- 
portional part  thereof  if  rejected  only  in  part. 

m  The  claim  of  any  estate  which  is  being  administered  in 
bankruptcy  against  any  like  estate  may  be  proved  by  the  trustee 
and  allowed  by  the  court  in  the  same  manner  and  upon  like 
terms  as  the  claims  of  other  creditors. 

n  Claims  shall  not  be  proved  against  a  bankrupt  estate  subse- 
quent to  one  year  after  the  adjudication ;  or  if  they  are  liqui- 
dated by  litigation  and  the  final  judgment  therein  is  rendered 
within  thirty  days  before  or  after  the  expiration  of  such  time, 
then  within  sixty  days  after  the  rendition  of  such  judgment: 
Provided,  That  the  right  of  infants  and  insane  persons  without 
guardians,  without  notice  of  the  proceedings,  may  continue  six 
months  longer. 

§  1407.  Sec.  58.  N^otices  to  Creditors. — a  Creditors 
shall  have  at  least  ten  days'  notice  by  mail,  to  their  respective 
addresses  as  they  appear  in  the  list  of  creditors  of  the  bankrupt, 
or  as  afterwards  filed  with  the  papers  in  the  case  by  the  cred- 
itors, unless  they  waive  notice  in  writing  of 

(1)  all  examinations  of  the  bankrupt; 

(2)  all  hearings  upon  applications  for  the  confirmation  of 
compositions  or  the  discharge  of  bankrupts; 

(3)  all  meetings  of  creditors  ; 

(4)  all  proposed  sales  of  property; 

(5)  the  declaration  and  time  of  payment  of  dividends; 

(6)  the  filing  of  the  final  accounts  of  the  trustee,  and  the 
time  when  and  the  place  where  they  will  be  examined  and 
passed  upon; 

(7)  the  proposed  compromise  of  any  controversy,  and 


C'H.  G  NATIONAL   BANKRUPTCY    LAW    OF    1898.  887 

(8)   the  proposed  dismissal  of  the  iJroceedings. 

b  I^otice  to  creditors  of  the  first  meeting  shall  be  published 
at  least  once  and  may  be  published  such  number  of  additional 
times  as  the  court  may  direct ;  the  last  publication  shall  be  at 
least  one  week  prior  to  the  date  fixed  for  the  meeting.  Other 
notices  may  be  published  as  the  court  shall  direct. 

c  All  notices  shall  be  given  by  the  referee,  unless  otherwise 
ordered  by  the  judge. 

§  1408.  Sec.  59.  Who  may  File  and  Dismiss  Petition. 
— a  Any  qualified  person  may  file  a  petition  to  be  adjudged  a 
voluntary  bankrupt. 

b  Three  or  more  creditors  who  have  provable  claims  against 
any  person  which  amount  in  the  aggregate,  in  excess  of  the 
value  of  securities  held  by  them,  if  any,  to  five  hundred  dollars 
or  over ;  or  if  all  of  the  creditors  of  such  person  are  less  than 
twelve  in  number,  then  one  of  such  creditors  whose  claim  equals 
such  amount  may  file  a  petition  to  have  him  adjudged  a  bank- 
rupt. 

c  Petitions  shall  be  filed  in  duplicate,  one  copy  for  the  clerk 
and  one  for  service  on  the  bankrupt. 

d  If  it  be  averred  in  the  petition  that  the  creditors  of  the 
bankrupt  are  less  than  twelve  in  number,  and  less  than  three 
creditors  have  joined  as  petitioners  therein,  and  the  answer 
avers  the  existence  of  a  larger  number  of  creditors,  there  shall 
be  filed  with  the  answers  a  list  under  oath  of  all  the  creditors, 
with  their  addresses,  and  thereupon  the  court  shall  bause  all 
such  creditors  to  be  notified  of  the  pendency  of  such  petition 
and  shall  delay  the  hearing  upon  such  petition  for  a  reasonable 
time,  to  the  end  that  parties  in  interest  shall  have  an  oppor- 
tunity to  be  heard ;  if  upon  such  hearing  it  shall  appear  that 
a  sufficient  number  have  joined  in  such  petition,  or  if  prior  to 
or  during  such  hearing  a  sufficient  number  shall  join  therein, 
the  case  may  be  proceeded  with,  but  otherwise  it  shall  be  dis- 
missed. 

e  In  computing  the  number  of  creditors  of  a  bankrupt  for 
the  purpose  of  determining  how  many  creditors  must  join  in 
the  petition,  such  creditors  as  were  employed  by  him  at  the 
time  of  the  filing  of  the  petition  or  are  related  to  him  by  con- 
sanguinity or  affinity  within  the  third  degree,  as  determined  by 
the  common  law,  and  have  not  joined  in  the  petition,  shall  not 
be  counted. 

f  Creditors  other  than  original  petitioners  may  at  any  time 
enter  their  appearance  and  join  in  the  petition,  or  file  an 
answer  and  be  heard  in  opposition  to  the  prayer  of  the  petition. 

g  A  voluntary  or  involuntary  petition  shall  not  be  dismissed 


888  LAW    OF    BANKRUPTCY.  Ch.  6 

by  the  petitioner  or  petitioners  or  for  want  of  prosecution  or  by 
consent  of  parties  until  after  notice  to  the  creditors. 

§  1409.  Sec.  60.  Pkefkrred  Creditors. — "a  A  person 
shall  be  deemed  to  have  given  a  preference  if,  being  insolvent, 
he  has,  within  four  months  before  the  filing  of  the  petition,  or 
after  the  filing  of  the  petition  and  before  the  adjudication,  pro- 
cured or  suffered  a  judgment  to  be  entered  against  himself  in 
favor  of  any  person,  or  made  a  transfer  of  any  of  liis  property, 
and  the  effect  of  the  enforcement  of  such  judgment  or  transfer 
ivill  be  to  enable  a^iy  one  of  his  creditors  to  obtain  a  greater 
percentage  of  his  debt  than  any  other  of  such  creditors  of  the 
same  class.  Where  the  preference  consists  in  a  transfer,  such 
period  of  four  months  shall  not  expire  until  four  months  after 
the  date  of  the  recording  or  registering  of  the  transfer,  if  by 
law  such  recording  or  registering  is  required. 

^b  If  a  bankrupt  shall  have  given  a  preference,  and  the  person 
receiving  it,  or  to  be  benefited  thereby,  or  his  agent  acting 
therein,  shall  have  had  reasonable  cause  to  believe  that  it  was 
intended  thereby  to  give  a  preference,  it  shall  be  voidable  by  the 
trustee,  and  he  may  recover  the  property  or  its  value  from  such 
person.  And,  for  the  purpose  of  such  recovery,  any  court  of 
bankruptcy,  as  hereinbefore  defined,  and  any  State  court  which 
would  have  had  jurisdiction  if  bankruptcy  had  not  intervened, 
shall  have  co7icurrent  jurisdiction. 

c  If  a  creditor  has  been  preferred,  and  afterwai-ds  in  good 
faith  gives  the  debtor  further  credit  without  security  of  any 
kind  for  property  which  becomes  a  part  of  the  debtor's  estates, 
the  amount  of  such  new  credit  remaining  unpaid  at  the  time  of 
the  adjudication  in  bankruptcy  may  be  set  off  against  the 
amount  which  would  otherwise  be  recoverable  from  him. 

d  If  a  debtor  shall,  directly  or  indirectly,  in  contemplation 

a  Prior  to  the  amendment  of  1903,  section  60a  and  b  provided  as  fol- 
lows: 

a  A  person  sihall  be  deemed  to  have  given  a  preference  if,  being  in- 
solvent, he  has  procured  or  suffered  a  judgment  to  be  entered  against 
himself  in  favor  of  any  person,  or  made  a  transfer  of  any  of  his 
property,  and  the  effect  of  the  enforcement  of  such  judgment  or  trans- 
fer will  be  to  enable  any  one  of  his  creditors  to  obtain  a  greater  per- 
centage of  his  debt  than  any  other  of  such  creditors  of  the  same  class. 

b  If  a  bankrupt  shall  have  given  a  preference  within  four  months, 
before  the  filing  of  a  petition,  or  after  the  filing  of  the  petition,  and 
before  the  adjudication,  and  the  person  receiving  it,  or  to  be  benefited 
thereby,  or  his  agent  acting  therein,  shall  have  had  reasonable  cause 
to  believe  that  it  was  intended  thereby  to  give  a  preference,  it  shall 
be  voidable  by  the  trustee,  and  he  may  recover  the  property  or  its 
value  from  such  person. 


Ch.  7  NATIONAL    BANKRUPTCY    LAW    OF    1898.  889 

(jf  the  filing  of  a  petition  by  or  against  him,  pay  money  or 
transfer  property  to  an  attorney  and  counselor  at  law,  solicitor 
in  equity,  or  proctor  in  admiralty  for  services  to  be  rendered, 
the  transaction  shall  be  re-examined  by  the  court  on  petition  of 
the  trustee  or  any  creditor  and  shall  only  be  held  valid  to  the 
extent  of  a  reasonable  amount  to  be  determined  by  the  court, 
and  the  excess  may  be  recovered  by  the  trustee  for  the  benefit 
of  the  estate. 


Chapter  VII. 

ESTATES. 

§  1410.  Sec.  61.  Depositories  foe  Money. — a  Courts  of 
bankruptcy  shall  designate,  by  order,  banking  institutions  as 
depositories  for  the  money  of  bankrupt  estates,  as  convenient 
as  may  be  to  the  residences  of  trustees,  and  shall  require  bonds 
to  the  United  States,  subject  to  their  approval,  to  be  given  by 
such  banking  institutions,  and  may  from  time  to  time  as  occa- 
sion may  require,  by  like  order  increase  the  number  of  deposi- 
tories or  the  amount  of  any  bond  or  change  such  depositories. 

§  1411.  Sec.  62.  Expenses  of  Administeeino  Estates. 
— a  The  actual  and  necessary  expenses  incurred  by  officers  in 
the  administration  of  estates  shall,  except  w^here  other  pro- 
visions are  made  for  their  payment,  be  reported  in  detail,  under 
oath,  and  examined  and  approved  or  disapproved  by  the  court. 
If  approved,  they  shall  be  paid  or  allowed  out  of  the  estates  in 
which  they  were  incurred. 

§  1412.  Sec.  63.  Debts  which  may  be  Peoved. — a  Debts 
of  the  bankrupt  may  be  proved  and  allowed  against  his  estate 
which  are 

(1)  a  fixed  liability,  as  evidencek:!  by  a  judgment  or  an  in- 
strument in  writing,  absolutely  owing  at  the  time  of  the  filing 
of  the  petition  against  him,  whether  then  payable  or  not,  with 
any  interest  thereon  which  would  have  been  recoverable  at  that 
date  or  with  a  rebate  of  interest  upon  such  as  were  not  then 
payable  and  did  not  bear  interest; 

(2)  due  as  costs  taxable  against  an  involuntary  bankrupt 
who  was  at  the  time  of  the  filing  of  the  petition  against  him 
plaintiff  in  a  cause  of  action  which  would  pass  to  the  trustee 
and  which  the  trustee  declines  to  prosecute  after  notice ; 

(3)  founded  upon  a  claim  for  taxable  costs  incurred  in  good 
faith  by  a  creditor  before  the  filing  of  the  petition  in  an  action 
to  recover  a  provable  debt; 


890  LAW    OF    BANKRUPTCY.  Ch.  7 

(4)  founded  upon  an  open  account,  or  upon  a  contract  ex- 
press or  inij)lied;    and 

(5)  founded  upon  provable  debts  reduced  to  judgments  after 
the  filing  of  the  petition  and  before  the  consideration  of  the 
bankrupt's  application  for  a  discharge,  less  costs  incurred  and 
interests  accrued  after  the  tiling  of  the  petition  and  up  to  the 
time  of  the  entry  of  such  judgments. 

b  Unliquidated  claims  against  the  bankrupt  may,  pursuant 
to  application  to  the  court,  be  liquidated  in  such  manner  as  it 
shall  direct,  and  may  thereafter  be  proved  and  allowed  against 
his  estate. 

§  1413.  Sec.  64,  Debts  which  have  Priority. — a  The 
court  shall  order  the  trustee  to  pay  all  taxes  legally  due  and 
owing  by  the  bankrupt  to  the  United  States,  State,  county, 
district,  or  municipality  in  advance  of  the  payment  of  divi- 
dends to  creditors,  and  upon  filing  the  receipts  of  the  proper 
public  officers  for  such  payment  he  shall  be  credited  with  tlie 
amount  thereof,  and  in  case  any  question  arises  as  to  the 
amount  or  legality  of  any  such  tax  the  same  shall  be  heard 
and  determined  by  the  court. 

b  The  debts  to  have  priority,  except  as  herein  provided,  and 
to  be  paid  in  full  out  of  bankrupt  estates,  and  the  order  of  pay- 
ment shall  be 

(1)  the  actual  and  necessary  cost  of  preserving  the  estate 
subsequent  to  filing  the  petition ; 

'^(2)  the  filing  fees  paid  hy  creditors  in  involuntary  cases, 
and,  where  property  of  the  bankrupt,  transferred  or  concealed 
by  him  either  before  or  after  the  filing  of  the  petition,  shall 
have  been  recovered  for  the  benefit  of  the  estate  of  the  bank- 
rupt by  the  efforts  and  at  the  expense  of  one  or  more  creditors, 
the  reasonable  expenses  of  such  recovery; 

(3)  the  cost  of  administration,  including  the  fees  and  mile- 
age payable  to  witnesses  as  now  or  hereafter  provided  by  the 
laws  of  the  United  States,  and  one  reasonable  attorney's  fee, 
for  the  professional  services  actually  rendered,  irrespective  of 
the  number  of  attorneys  employed,  to  the  petitioning  creditors 
in  involuntary  cases,  to  the  bankrupt  in  involuntary  cases  while 
performing  the  duties  herein  prescribed,  and  to  the  bankrupt  in 
voluntary  cases,  as  the  court  may  allow; 

(4)  wages  due  to  workmen,  clerks,  or  servants  which  have 
been  earned  within  three  months  before  the  date  of  the  com- 
mencement of  proceedings,  not  to  exceed  three  hundred  dollars 
to  each  claimant ;   and 

a  Prior  to  the  amendment  of  1903,  this  subdivision  merely  provided 
"(2)  the  filing  fees  paid  by  creditors  in  involuntary  cases." 


Ch.  7  NATIONAL    BANKRUPTCY    LAW    OF    1898.  891 

(5)  debts  owing  to  any  person  who  by  tlie  laws  of  the  States 
or  the  United  States  is  entitled  to  priority. 

c  In  the  event  of  the  confirmation  of  a  composition  being  set 
aside,  or  a  discharge  revoked,  the  property  acquired  by  the 
bankrupt  in  addition  to  his  estate  at  the  time  the  composition 
was  confirmed  or  the  adjudication  was  made  shall  be  applied 
to  the  payment  in  full  of  the  claims  of  creditors  for  property 
sold  to  him  on  credit,  in  good  faith,  while  such  composition 
or  discharge  was  in  force,  and  the  residue,  if  any,  shall  be 
applied  to  the  payment  of  the  debts  which  were  owing  at  the 
time  of  the  adjudication. 

§  1414.  Sec.  65.  Declakation  and  Payment  of  Divi- 
dends.— a  Dividends  of  an  equal  per  centum  shall  be  declared 
and  paid  on  all  allowed  claims,  except  such  as  have  priority  or 
are  secured. 

"&  The  first  dividend  shall  be  declared  within  thirty  days 
after  the  adjudication,  if  the  money  of  the  estate  in  excess  of 
the  amount  necessary  to  pay  the  debts  which  have  priority  and 
such  claims  as  have  not  been,  but  probably  will  be,  allowed 
equals  five  per  centum  or  more  of  such  allowed  claims.  Divi- 
dends subsequent  to  the  first  shall  be  declared  upon  like  terms 
as  the  first  and  as  often  as  the  amount  shall  equal  ten  per 
centum  or  more  and  upon  closing  the  estate.  Dividends  may 
be  declared  oftener  and  in  smaller  proportions  if  the  judge 
shall  so  order:  Provided,  That  the  first  dividend  shall  not  in- 
clude more  than  fifty  per  centum  of  the  money  of  the  estate  in 
excess  of  the  amount  necessary  to  pay  the  debts  which  have 
priority  and  such  claims  as  probably  ivill  be  allowed:  And  pro- 
vided further,  That  the  final  dividend  shall  not  be  declared 
within  three  months  after  the  first  dividend  shall  be  declared. 

c  The  rights  of  creditors  who  have  received  dividends,  or  in 
whose  favor  final  dividends  have  been  declared,  shall  not  be 
affected  by  the  proof  and  allowance  of  claims  subsequent  to 
the  date  of  such  payment  or  declarations  of  dividends ;   but  the 

a  Prior  to  the  amendment  of  this  subdivision  by  the  act  of  1903  it 
provided  as  follows: 

b  The  first  dividend  shall  be  declared  within  thirty  days  after  the 
adjudication,  if  the  money  of  the  estate  in  excess  of  the  amount  neces- 
sary to  pay  the  debts  which  have  priority  and  such  claims  as  have  not 
been,  but  probably  will  be,  allowed  equals  five  per  centum  or  more  of 
such  allowed  claims.  Dividends  subsequent  to  the  first  shall  be  de- 
clared upon  like  terms  as  the  first  and  as  often  as  the  amount  shall 
equal  ten  per  centum  or  more  and  upon  closing  the  estate.  Dividends 
may  be  declared  oftener  and  in  smaller  proportions  if  the  judge  shall 
so  order, 


892  LAW    OF    BANKRUPTCY.  Ch.  7 

creditors  proving  and  securing  the  allowance  of  such  claims 
shall  be  paid  dividends  equal  in  amount  to  those  already  re- 
ceived by  the  other  creditors  if  the  estate  equals  so  much  before 
such  other  creditors  are  paid  any  further  dividends. 

d  Whenever  a  person  shall  have  been  adjudged  a  bankrupt  by 
a  court  without  the  Unite'd  States  and  also  by  a  court  of  l)ank- 
ruptcy,  creditors  residing  within  the  United  States  shall  first 
be  paid  a  dividend  equal  to  that  received  in  the  court  without 
the  United  States  by  other  creditors  before  creditors  who  have 
received  a  dividend  in  such  courts  shall  be  paid  any  amounts. 

e  A  claimant  shall  not  be  entitled  to  collect  from  a  bankrupt 
estate  any  greater  amount  than  shall  accrue  pursuant  to  the 
provisions  of  this  Act. 

§  1415.  Sec.  QQ.  Unclaimed  Dividends. — a  Dividends 
which  remain  unclaimed  for  six  months  after  the  final  dividend 
has  been  declared  shall  be  paid  by  the  trustee  into  court. 

b  Dividends  remaining  unclaimed  for  one  year  shall,  under 
the  direction  of  the  court,  be  distributed  to  the  creditors  whose 
claims  have  been  allowed  but  not  paid  in  full,  and  after  sucli 
claims  have  been  paid  in  full  the  balance  shall  be  paid  to  the 
bankrupt :  Provided,  That  in  ease  unclaimed  dividends  belong 
to  minors  such  minors  may  have  one  year  after  arriving  at 
majority  to  claim  such  dividends. 

§  1416.  Sec.  67.  Liens. — a  Claims  which  for  want  of 
record  or  for  other  reasons  would  not  have  been  valid  liens  as 
against  the  claims  of  the  creditors  of  the  bankrupt  shall  not  bo 
liens  against  his  estate. 

b  Whenever  a  creditor  is  prevented  from  enforcing  his 
rights  as  against  a  lien  created,  or  attempted  to  be  created,  by 
his  debtor,  who  afterwards  becomes  a  bankrupt,  the  trustee  oi 
the  estate  of  such  bankrupt  shall  be  subrogated  to  and  may 
enforce  such  rights  of  such  creditor  for  the  benefit  of  the  estate. 

c  A  lien  created  by  or  obtained  in  or  pursuant  to  any  suit  or 
proceeding  at  law  or  in  equity,  including  an  attachment  upon 
mesne  process  or  a  judgment  by  confession,  which  was  begun 
against  a  person  within  four  months  before  the  filing  of  a 
petition  in  bankruptcy  by  or  against  such  person  shall  be  dis- 
solved by  the  adjudication  of  such  person  to  be  a  bankrupt  if 

(1)  it  appears  that  said  lien  was  obtained  and  permitted 
while  the  defendant  was  insolvent  and  that  its  existence  and 
enforcement  will  work  a  preference,  or 

(2)  the  party  or  parties  to  be  benefited  thereby  had  reason- 
able cause  to  believe  the  defendant  was  insolvent  and  in  con- 
templation of  bankruptcy,  or 


Ch.  7  NATIONAL   BANKRUPTCY    LAW    OF    1898.  893 

(o)  that  such  lien  was  sought  and  permitted  in  fraud  of  the 
provisions  of  this  Act; 

or  if  the  dissolution  of  such  lien  would  militate  against  the 
best  interests  of  the  estate  of  such  person  the  same  shall  not  be 
dissolved,  but  the  trustee  of  the  estate  of  such  person,  for  the 
benefit  of  the  estate,  shall  be  subrogated  to  the  rights  of  the 
holder  of  such  lien  and  empowered  to  perfect  and  enforce  the 
same  in  his  name  as  trustee  with  like  force  and  effect  as  such 
holder  might  have  done  had  not  bankruptcy  proceedings  inter- 
vened. 

d  Liens  given  or  accepted  in  good  faith  and  not  in  contempla- 
tion of  or  in  fraud  upon  this  Act,  and  for  a  present  considera- 
tion, which  have  been  recorded  according  to  law,  if  record 
thereof  was  necessary  in  order  to  impart  notice,  shall  not  be 
affected  by  this  Act. 

e  That  all  conveyances,  transfers,  assignments,  or  incum- 
brances of  his  property,  or  any  part  thereof,  made  or  given  by 
a  person  adjudged  a  bankrupt  under  the  provisions  of  this  Act 
subsequent  to  the  passage  of  this  Act  and  within  four  months 
prior  to  the  filing  of  the  petition,  with  the  intent  and  purpose 
on  his  part  to  hinder,  delay,  or  defraud  his  creditors,  or  any 
of  them,  shall  be  null  and  void  as  against  the  creditors  of  such 
debtor,  except  as  to  purchasers  in  good  faith  and  for  a  present 
fair  consideration;  and  all  property  of  the  debtor  conveyed, 
transferred,  assigned,  or  encumbered  as  aforesaid  shall,  if  he 
be  adjudged  a  bankrupt,  and  the  same  is  not  exempt  from 
execution  and  liability  for  debts  by  the  law  of  his  domicile, 
be  and  remain  a  part  of  the  assets  and  estate  of  the  bankrupt 
and  shall  pass  to  his  said  trustee,  whose  duty  it  shall  be  to 
recover  and  reclaim  the  same  by  legal  proceedings  or  otherwise 
for  the  benefit  of  the  creditors.  And  all  conveyances,  transfers, 
or  incumbrances  of  his  property  made  by  a  debtor  at  any  time 
Avithin  four  months  prior  to  the  filing  of  the  petition  againsr- 
him,  and  while  insolvent,  which  are  held  null  and  void  as 
against  the  creditors  of  such  debtor  by  the  laws  of  the  State. 
Territory,  or  District  in  which  such  property  is  situate,  shall 
be  deemed  null  and  void  under  this  Act  against  the  creditors 
of  such  debtor  if  he  be  adjudged  a  bankrupt,  and  such  property 
shall  pass  to  the  assignee  and  be  by  him  reclaimed  and  recov- 
ered for  the  benefit  of  the  creditors  of  the  bankrupt.     ^For  tJie 

a  Subdivision  67e  is  amended  by  the  act  of  1903,  by  the  insertion  at 
the  end  thereof  of  the  following:  "For  the  purpose  of  such  recovery 
any  court  of  banlcruptcy  as  hereinbefore  defined,  and  any  State  court 
which  would  have  had  jurisdiction  if  bankruptcy  had  not  intervened, 
shall  have  concurrent  jurisdiction." 


894  LAW    OF    BANKRUPTCY.  Ch.  7 

purpose  of  such  recovery  any  court  of  bankruptcy  as  herein- 
before defined,  and  any  titate  court  which  would  ha/ve  had  juris- 
diciion  if  bankruptcy  had  not  intervened,  shall  have  concurrent 
jurisdiction. 

f  That  all  levies,  judgments,  attachments,  or  other  liens,  ob- 
tained through  legal  proceedings  against  a  person  who  is  insol- 
vent, at  anj  time  within  four  months  prior  to  the  filing  of  a 
petition  in  bankruptcy  against  him,  shall  be  deemed  null  and 
void  in  case  he  is  adjudged  a  bankrupt,  and  the  property 
affected  by  the  levy,  judgment,  attachment,  or  other  lien  shall 
be  deemed  wholly  discharged  and  released  from  the  same,  and 
shall  pass  to  the  trustee  as  a  part  of  the  estate  of  the  bankrujit, 
unless  the  court  shall,  on  due  notice,  order  that  the  right  under 
such  levy,  judgment,  attachment,  or  other  lien  shall  be  pre- 
served for  the  benefit  of  the  estate ;  and  thereupon  the  same 
may  pass  to  and  shall  be  preserved  by  the  trustee  for  the  benefit 
of  the  estate  as  aforesaid.  And  the  court  may  order  such  con- 
veyance as  shall  be  necessary  to  carry  the  purposes  of  this  sec- 
tion into  effect :  Provided,  That  nothing  herein  contained  shall 
have  the  effect  to  destroy  or  impair  the  title  obtained  by  such 
levy,  judgment,  attachment,  or  other  lien,  of  a  bona  fide  pur- 
chaser for  value  who  shall  have  acquired  the  same  without 
notice  or  reasonable  cause  for  inquiry. 

§  1417.  Sec.  68.  Set-Offs  a:^d  Counterclaims. — a  In 
all  cases  of  mutual  debts  or  mutual  credits  between  the  estate 
of  a  bankrupt  and  a  creditor  the  account  shall  be  stated  and 
one  debt  shall  be  set  off  against  the  other,  and  the  balance  only 
shall  be  allowed  or  paid. 

b  A  set-off  or  counterclaim  shall  not  be  allowed  in  favor  of 
any  debtor  of  the  bankrupt  which  (1)  is  not  provable  against 
the  estate;  or  (2)  was  purchased  by  or  transferred  to  him 
after  the  filing  of  the  petition,  or  within  four  months  before 
such  filing,  with  a  view  to  such  use  and  with  knowledge  or 
notice  that  such  bankrupt  was  insolvent,  or  had  committed  an 
act  of  bankruptcy. 

§  1418.  Sec.  69.  Possession  of  Property. — a  A  judge 
may,  upon  satisfactory  proof,  by  affidavit,  that  a  bankrupt 
against  whom  an  involuntary  petition  has  been  filed  and  is 
pending  has  committed  an  act  of  bankruptcy,  or  has  neglected 
or  is  neglecting,  or  is  about  to  so  neglect  his  property  that  it 
has  thereby  deteriorated  or  is  thereby  deteriorating  or  is  about 
thereby  to  deteriorate  in  value,  issue  a  warrant  to  the  marshal 
to  seize  and  hold  it  subject  to  further  orders.  Before  such 
warrant  is  issued  the  petitioners  applying  therefor  shall  enter 
into  a  bond  in  such  an  amount  as  the  judge  shall  fix,  with  such 


Ch.  7  NATIONAL    BANKRUPTCY    LAW    OF    1898.  895 

sureties  as  he  shall  approve,  conditione'd  to  indemnify  such 
bankrupt  for  such  damages  as  he  shall  sustain  in  the  event  such 
seizure  shall  prove  to  have  been  wrongfully  obtained.  Such 
property  shall  be  released,  if  such  bankrupt  shall  give  bond  in  a 
sum  which  shall  be  fixed  by  the  judge,  with  such  sureties  as  he 
shall  approve,  conditioned  to  turn  over  such  property,  or  pay 
the  value  thereof  in  money  to  the  trustee,  in  the  event  he  is 
adjudged  a  bankrupt  pursuant  to  such  petition. 

§  1419.  Sec.  70.  Title  to  Pkopekty. — a  The  trustee  of 
the  estate  of  a  bankrupt,  upon  his  appointment  and  qualifica- 
tion, and  his  successor  or  successors,  if  he  shall  have  one  or 
more,  upon  his  or  their  appointment  and  qualification,  shall  in 
turn  be  vested  by  operation  of  law  with  the  title  of  the  bank- 
rupt, as  of  the  date  he  was  adjudged  a  bankrupt,  except  in 
so  far  as  it  is  to  property  which  is  exempt,  to  all 

(1)  documents  relating  to  his  property; 

(2)  interests  in  patents,  patent  rights,  cop^^rights,  and  trade- 
marks ; 

(.3)  powers  which  he  might  have  exercised  for  his  own  ben- 
efit, but  not  those  which  he  might  have  exercised  for  some  other 
person ; 

(4)  property  transferred  by  him  in  fraud  of  his  creditors; 

(5)  property  which  prior  to  the  filing  of  the  petition  he 
could  by  any  means  have  transferred  or  which  might  have  been 
levied  upon  and  sold  under  judicial  process  against  him : 

Provided,  That  when  any  bankrupt  shall  have  any  insurance 
policy  which  has  a  cash  surrender  value  payable  to  himself,  his 
estate,  or  personal  representatives,  he  may,  within  thirty  days 
after  the  cash  surrender  value  has  been  ascertained  and  stated 
to  the  trustee  by  the  company  issuing  the  same,  pay  or  secure 
to  the  trustee  the  sum  so  ascertained  and  stated,  and  continue 
to  hold,  own,  and  carry  such  policy  free  from  the  claims  of  the 
creditors  participating  in  the  distribution  of  his  estate  under 
the  bankruptcy  proceedings,  otherwise  the  policy  shall  pass  to 
the  trustee  as  assets ;  and 

(6)  rights  of  action  arising  upon  contracts  or  from  the  un- 
lawful taking  or  detention  of,  or  injury  to,  his  property. 

b  All  real  and  personal  property  belonging  to  bankrupt 
estates  shall  be  appraised  by  three  disinterested  appraisers ; 
they  shall  be  appointed  by,  and  report  to,  the  court.  Real  and 
personal  property  shall,  when  practicable,  be  sold  subject  to  the 
approval  of  the  court ;  it  shall  not  be  sold  otherwise  than  sub- 
ject to  the  approval  of  the  court  for  less  than  seventy-five  per 
centum  of  its  appraised  value. 


896  LAW    OF    BANKRUPTCY.  Ch.  7 

c  The  title  to  property  of  a  bankrupt  estate  which  has  been 
sold,  as  herein  provided,  shall  be  conveyed  to  the  purchaser  by 
the  trustee. 

d  Whenever  a  composition  shall  be  set  aside,  or  discharge 
revoked,  the  trustee  shall,  upon  his  appointment  and  qualifica- 
tion, be  vested  as  herein  provided  with  the  title  to  all  of  th(^ 
property  of  the  bankrupt  as  of  the  date  of  the  final  decree 
setting  aside  the  composition  or  revoking  the  discharge. 

'^e  The  trustee  may  avoid  any  transfer  by  the  bankrupt  of  his 
property  w^hich  any  creditor  of  such  bankrupt  might  hav»i 
avoided,  and  may  recover  the  property  so  transferred,  or  its 
value,  from  the  person  to  wdiom  it  was  transferred,  unless  he 
was  a  bona  fide  holder  for  value  prior  to  the  date  of  the  adjudi- 
cation. Such  property  may  be  recovered  or  its  value  collected 
from  whoever  may  have  received  it,  except  a  bona  fide  holder 
for  value.  For^  the  purpose  of  such  recovery  any  court  of  bank- 
ruptcy as  hereinbefore  defined,  and  any  State  court  which 
would  have  had  jurisdiction  if  bankruptcy  had  not  intervened, 
shall  have  concurrent  jurisdiction. 

f  Upon  the  confirmation  of  a  composition  offered  by  a  bank- 
rupt, the  title  to  his  property  shall  thereupon  revest  in  him. 

THE   TIME   WHEN   THIS  ACT  SHALL  GO  INTO  EFFECT. 

§  1420.  a  This  Act  shall  go  into  full  force  and  effect  upon 
its  passage :  Provided,  however.  That  no  petition  for  voluntary 
bankruptcy  shall  be  filed  within  one  month  of  the  passage  there- 
of, and  no  petition  for  involuntary  bankruptcy  shall  be  filed 
within  four  months  of  the  passage  thereof. 

b  Proceedings  commenced  under  State  insolvency  laws  before 
the  passage  of  this  Act  shall  not  be  affected  by  it. 

§  1421.  '^Sec.  71.  That  the  clerks  of  the  several  district 
courts  of  the  United  States  shall  prepare  and  keep  in  their 
respective  offices  complete  and  convenient  indexes  of  all  peti- 
tions and  discharges  in  bankruptcy  heretofore  or  hereafter  filed 
in  the  said  courts,  and  shall,  when  requested  so  to  do,  issue 
certificates  of  search  certifying  as  to  whether  or  not  any  such 
petitions  or  discharges  have  been  filed;  and  said  clerks  shall 
be  entitled  to  receive  for  such  certificates  the  same  fees  as  now 
allowed  by  law  for  certificates  as  to  judgments  in  said  courts: 

a  The  act  of  1903  amends  the  original  law  by  adding  at  the  end  of 
section  70e  the  following:  "For  the  purpose  of  such  recovery  any 
court  of  bankruptcy  as  hereinbefore  defined,  and  any  State  court  which 
would  have  had  jurisdiction  if  bankruptcy  had  not  intervened,  shall 
have  concurrent  jurisdiction." 


Ch.  7  NATIONAL   BANKRUPTCY    LAW    OF   1898.  897 

Provided,  That  said  hanhruptcy  indexes  and  dockets  shall  at 
all  times  he  open  to  inspection  and  examination  by  all  persons 
or  corporations  without  any  fee  or  charge  therefor. 

§  1422.  ^Sec.  72.  That  neither  the  referee  nor  the  trustee 
shall  in  any  form  or  guise  receive,  nor  shall  the  court  allow 
them,  any  other  or  further  compensation  for  their  services  than 
that  expressly  authorized  and  prescribed  in  this  Act. 

§  1423.  "Sec.  19.  That  the  provisions  of  this  amendatory 
Act  shall  not  apply  to  bankruptcy  cases  pending  when  this  Act 
takes  effect,  but  such  cases  shall  be  adjudicated  and  disposed 
of  conformably  to  the  provisions  of  the  said  Act  of  July  first, 
eighteen  hundred  and  ninety-eight. 

Original  Act  approved  July  1,  1898. 
Amendment  approved  February  5,  1903. 

a  Sections  71,  72  and  73  were  not  in  the  act  of  1898,  but  were  added 
by  the  amendatory  act  of  1903, 


TITLE  V. 

THE  NATIONAL   BANKRUPTCY   LAW  OF  1867  AND 
AMENDMENTS. 


An  ACT  to  establish  a  \miform  System  of  Bankruptcy  throughout  the 
United  States.' 

Be  it  enacted  hy  the  Senate  and  Rouse  of  Representatives 
of  the  United  States  of  AmeHca  in  Congress  assembled^  That 
the  several  District  Courts  of  the  United  States  be,  and  they 
hereby  are,  constituted  courts  of  bankruptcy,  and  they  shall 
have  original  jurisdiction  in  their  respective  districts  in  all 
matters  and  proceedings  in  bankruptcy,  and  they  are  hereby 
authorized  to  hear  and  adjudicate  upon  the  same  according 
to  the  provisions  of  this  act.  The  said  courts  shall  be  al- 
ways open  for  the  transaction  of  business  under  this  act,  and 
the  powers  and  jurisdiction  hereby  granted  and  conferred 
shall  be  exercised  as  well  in  vacation  as  in  term  time,  and  a 
judge  sitting  at  chambers  shall  have  the  same  powers  and 
jurisdiction,  including  the  power  of  keeping  order  and  of 
punishing  any  contempt  of  his  authority,  as  when  sitting  in 
court.  And  the  jurisdiction  hereby  conferred  shall  extend 
to  all  cases  and  controversies  arising  between  the  bankrupt 
and  any  creditor  or  creditors  who  shall  claim  any  debt  or 
demand  under  the  bankruptcy;  to  the  collection  of  all  the 
assets  of  the  bankrupt ;  to  the  ascertainment  and  liquidation 
of  the  liens  and  other  specific  claims  thereon ;  to  the  adjust- 
ment of  the  various  priorities  and  conflicting  interests  of  aU 

'This  act,  together  with  the  act  of    pealed  by  the  act  of  June  7,  1878, 
June  22, 1874,  and  all  acts  in  amend-    to  take  effect  September  1, 1878  (30 
ment  or  supplementary  thereto  or    St.  L.  99). 
in    explanation    thereof,^    were  r&- 

899 


900  LAW    OF    BANKRUPTCY. 

parties;  and  to  the  marshalling  and  disposition  of  the  differ- 
ent funds  and  assets,  so  as  to  secure  the  rights  of  all  parties 
and  due  distribution  of  the  assets  among  all  the  creditors; 
and  to  all  acts,  matters,  and  things  to  be  done  under  and  in 
virtue  of  the  bankruptcy,  until  the  final  distribution  and  set- 
tlement of  the  estate  of  the  bankrupt,  and  the  close  of  the 
proceedings  in  bankruptcy.  The  said  courts  shall  have  full 
authority  to  compel  obedience  to  all  orders  and  decrees  passed 
by  them  in  bankruptcy,  by  process  of  contempt  and  other 
remedial  process,  to  the  same  extent  that  the  circuit  courts 
now  have  in  any  suit  pending  therein  in  equity.  Said  courts 
may  sit,  for  the  transaction  of  business  in  bankruptcy,  at  any 
place  in  the  district,  of  which  place  and  the  time  of  holding 
court  they  shall  have  given  notice,  as  well  as  at  the  places 
designated  by  law  for  holding  such  courts.^ 

Sec.  2.  And  he  it  further  enacted^  That  the  several  circuit 
courts  of  the  United  States,  within  and  for  the  districts  where 
the  proceedings  in  bankruptcy  shall  be  pending,  shall  have 
a  general  superintendence  and  jurisdiction  of  all  cases  and 
questions  arising  under  this  act;  and,  except  when  special 
provision  is  otherwise  made,  may,  upon  bill,  petition,  or  other 
proper  process,  of  any  party  aggrieved,  hear  and  determine 
the  case  in  a  court  of  equity.  The  powers  and  jurisdiction 
hereby  granted  may  be  exercised  either  by  said  court  or  by 
any  justice  thereof  in  term  time  or  vacation.  Said  circuit 
courts  shall  also  have  concurrent  jurisdiction  with  the  dis- 
trict courts  of  the  ^  same  district  of  all  suits  at  law  or  in 
equity  which  may  or  shall  be  brought  by  the  assignee  in 
bankruptcy  against  any  person  claiming  an  adverse  inter- 

1  The  act  of  June  22, 1874  (18  St.  L.  debt  does  not  exceed  five  hundred 

178,  §  2),  amends  this  section  by  add-  dollars,  be  collected  in  the  courts  of 

ing  thereto  the  following  words:  the  State  where  &uch  bankrupt  re- 

"  Provided,  That  the  court  having  sides  having  jurisdiction  of  claims 

charge  of  the  estate  of  any  bank-  of  such  nature  and  amount." 

rupt  may  direct  that  any  of  the  2  Section  3  of  the  above  act  of  1874 

legal  assets  or  debts  of  the  bank-  inserts  the  word  "  any  "  in  lieu  of 

rupt,  as  contradistinguished  from  the  word  "same." 
equitable  demands,  shall,  when  such 


NATIONAL   BANKEUPTCY    LAW    OF  1867.  901 

est,^  or  by  such  person  against  such  assignee,  touching  any 
property  or  rights  of  property  of  said  bankrupt  transferable 
to  or  vested  in  such  assignee ;  but  no  suit  at  law  or  in  equity 
shall  in  any  case  be  maintainable  by  or  against  such  assignee, 
or  by  or  against  any  person  claiming  an  adverse  interest, 
touching  the  property  and  rights  of  property  aforesaid,  in  any 
court  whatsoever,  unless  the  same  shall  be  brought  within 
two  years  from  the  time  the  cause  of  action  accrued,  for  or 
against  such  assignee:  Provided,  That  nothing  herein  con- 
tained shall  revive  a  right  of  action  barred  at  the  time  such 
assignee  is  appointed. 

Of  the  Administration  of  the  Law  in  Courts  of  Bank- 
ruptcy. 

Seo.  3.  And  he  it  further  enacted,  That  it  shall  be  the  duty 
of  the  judges  of  the  district  courts  of  the  United  States,  within 
and  for  the  several  districts,  to  appoint  in  each  Congressional 
district  in  said  districts,  upon  the  nomination  and  recommen- 
dation of  the  Chief  Justice  of  the  Supreme  Court  of  the 
United  States,  one  or  more  registers  in  bankruptcy,  to  assist 
the  judge  of  the  district  court  in  the  performance  of  his 
duties  under  this  act.  No  person  shall  be  eligible  to  such 
appointment  unless  he  be  a  counsellor  of  said  court,  or  of 
some  one  of  the  courts  of  record  of  the  state  in  which  he  re- 
sides. Before  entering  upon  the  duties  of  his  office,  every 
person  so  appointed  a  register  in  bankruptcy  shall  give  a 
bond  to  the  United  States,  with  condition  that  he  will  faith- 
fully discharge  the  duties  of  his  office,  in  a  sum  not  less  than 
one  thousand  dollars,  to  be  fixed  by  said  court,  with  sureties 
satisfactory  to  said  court,  or  to  either  of  the  said  justices 
thereof;  and  he  shall,  in  open  court,  take  and  subscribe  the 
oath  prescribed  in  the  act  entitled  "  An  act  to  prescribe  an 
oath  of  office,  and  for  other  purposes,"  approved  July  second, 
eighteen  hundred  and  sixty-two,  and  also  that  he  will  not, 

1  Section  3  of  the  act  of  June  22,    words,  "  or  owing  any  debt  to  such 

1874  (18  St.  L.  178),  here  adds  the    bankrupt" 


903  LAW    OF    BANKRUPTCY. 

during  his  continuance  in  office,  be,  directly  or  indirectly, 
interested  in  or  benefited  by  the  fees  or  emoluments  arising 
from  any  suit  or  matter  pending  in  bankruptcy,  in  either  the 
district  or  circuit  court  in  his  district. 

Sec.  4.^  And  he  it  further  enacted,  That  every  register  in 
oankruptcy,  so  appointed  and  qualified,  shall  have  power,  and 
it  shall  be  his  duty,  to  make  adjudication  of  bankruptcy,  to 
receive  the  surrender  of  any  bankrupt,  to  administer  oaths 
in  all  proceedings  before  him,  to  hold  and  preside  at  meet- 
ings of  creditors,  to  take  proof  of  debts,  to  make  all  compu- 
tations of  dividends,  and  all  orders  of  distribution,  and  to 
furnish  the  assignee  with  a  certified  copy  of  such  orders,  and 
of  the  schedules  of  creditors  and  assets  filed  in  each  case,  to 
audit  and  pass  accounts  of  assignees,  to  grant  protection,  to 
pass  the  last  examination  of  any  baiLkrupt  in  cases  whenever 
the  assignee  or  a  creditor  do  not  oppose,  and  to  sit  in  cham- 
bers and  dispatch  there  such  part  of  the  administrative  busi- 
ness of  the  court  and  such  uncontested  matters  as  shall  be 
defined  in  general  rules  and  orders,  or  as  the  district  judge 
shall  in  any  particular  matter  direct ;  and  he  shall  also  make 
short  memoranda  of  his  proceedings  in  each  case  in  which 
he  shall  act,  in  a  docket  to  be  kept  by  him  for  that  purpose, 
and  he  shall  forthwith,  as  the  proceedings  are  taken,  forward 
to  the  clerk  of  the  district  court  a  certified  copy  of  said  mem- 
oranda, which  shall  be  entered  by  said  clerk  in  the  proper 
minute-book  to  be  kept  in  his  office,  and  any  register  of  the 
court  may  act  for  any  other  register  thereof :  Provided,  how- 
ever, That  nothing  in  this  section  contained  shall  empower 
a  register  to  commit  for  contempt,  or  to  hear  a  disputed  ad- 
judication, or  any  question  of  the  allowance  or  suspension  of 
an  order  of  discharge ;  but  in  all  matters  where  an  issue  of 
fact  or  of  law  is  raised  and  contested  by  any  party  to  the 
proceedings  before  him,  it  shall  be  his  duty  to  cause  the  ques- 
tion or  issue  to  be  stated  by  the  opposing  parties  in  writing, 

J  The  act  of  June  22,  1874  (18  St.    court  of  the  business  transacted  by 
L.  185,  §  19),  requires  the  register  to    him. 
make  a  report  to  the  clerk  of  the 


NATIONAL   BANKKUPTOY    LAW    OF  1867.  903 

and  he  shall  adjourn  the  same  into  court  for  decision  by  the 
judge.^  No  register  shall  be  of  counsel  or  attorney,  either  in 
or  out  of  court,  in  any  suit  or  matter  pending  in  bankruptcy 
in  either  the  circuit  or  district  court  of  his  district,  nor  in^an 
appeal  therefrom;  nor  shall  he  be  executor,  administrator, 
guardian,  commissioner,  appraiser,  divider,  or  assignee  of 
or  upon  any  estate  within  the  jurisdiction  of  either  of  said 
courts  of  bankruptcy,  nor  be  interested  in  the  fees  or  emolu- 
ments arising  from  either  of  said  trusts.  The  fees  of  said 
registers,  as  established  by  this  act,  and  by  the  general  rules 
and  orders  required  to  be  framed  under  it,  shall  be  paid  to 
them  by  the  parties  for  whom  the  services  may  be  rendered 
in  the  course  of  proceedings  authorized  by  this  act. 

Sec.  6.  And  he  it  further  enacted^  That  the  judge  of  the 
district  court  may  direct  a  register  to  attend  at  any  place 
within  the  district  for  the  purpose  of  hearing  such  voluntary 
applications  under  this  act  as  may  not  be  opposed,  of  attend- 
ing any  meeting  of  creditors,  or  receiving  any  proof  of  debts, 
and,  generally,  for  the  prosecution  of  any  bankruptcy  or 
other  proceedings  under  this  act;  and  the  travelling  and  in- 
cidental expenses  of  such  register,  and  of  any  clerk  or  other 
officer  attending  him,  incurred  in  so  acting,  shall  be  set[tled] 
by  said  court  in  accordance  with  the  rules  prescribed  under 
the  tenth  section  of  this  act,  and  paid  out  of  the  assets  of 
the  estate  in  respect  of  which  such  register  has  so  acted ;  or,  if 
there  be  no  such  assets,  or  if  the  assets  shall  be  insufficient, 

1  The  act  of  June  22,  1874  (18  St.  any  suit  or  matter  pending  in  bank- 

L.  184,  §  18),  makes  the  following  ruptcy  in  either  the  circuit  or  dis- 

amendment:    And  no   register  or  trict  court  of  his  district,  or  in  an 

clerk  of  court,  or  any  partner  or  appeal  therefrom.     Nor  shall  they, 

clerk  of  such  register  or  clerk  of  or   either   of  them,  be    executor, 

court,  or  any  person  having  any  administrator,   guardian,   commis- 

interest  with  either  in  any  fees  or  sioner,    appraiser,    divider,    or   as- 

emoluments  in  bankruptcy,  or  with  signee  of  or  upon  any  estate  within 

whom   such    register  or   clerk  of  the  jurisdiction  of  either  of  said 

court  sliall  have  any  interest  in  re-  courts  of  bankruptcy;  nor  be  inter- 

spect  to  any  matter  in  bankruptcy,  ested,  directly  or  indirectly,  in  the 

shall  be  of  counsel,  solicitor,  or  at-  fees  or  emoluments  arising  from 

tomey,  either  in  or  out  of  court,  in  either  of  said  tnista 


904  LAW    OF   BANKRUPTCY, 

then  such  expenses  shall  form  a  part  of  the  costs  in  the  case 
or  cases  in  which  the  register  shall  have  acted  in  such  jour- 
ney, to  be  apportioned  by  the  judge,  and  such  register,  so 
acting,  shall  have  and  exercise  all  powers,  except  the  power 
of  commitment,  vested  in  the  district  court  for  the  summon- 
ing and  examination  of  persons  or  witnesses,  and  for  requir- 
ing the  production  of  books,  papers  and  documents :  Provided, 
always,  That  all  depositions  of  persons  and  witnesses  taken 
before  said  register,  and  all  acts  done  by  him,  shall  be  re- 
duced to  writing,  and  be  signed  by  him,  and  shall  be  filed  in 
the  clerk's  office  as  part  of  the  proceedings.  Such  register 
shall  be  subject  to  removal  by  the  judge  of  the  district  court, 
and  all  vacancies  occurring  by  such  removal,  or  by  resig- 
nation, change  of  residence,  death  or  disability,  shall  be 
promptly  filled  by  other  fit  persons,  unless  said  court  shall 
deem  the  continuance  of  the  particular  office  unnecessary. 
Sec.  6.  And  he  it  further  enacted,  That  any  party  shall, 
during  the  proceedings  before  a  register,  be  at  liberty  to 
take  the  opinion  of  the  district  judge  upon  any  point  or 
matter  arising  in  the  course  of  such  proceedings,  or  upon  the 
result  of  such  proceedings,  which  shall  be  stated  by  the 
register  in  the  shape  of  a  short  certificate  to  the  judge,  who 
shall  sign  the  same  if  he  approve  thereof ;  and  such  certifi- 
cate, so  signed,  shall  be  binding  on  all  the  parties  to  the 
proceeding ;  but  every  such  certificate  may  be  discharged  or 
varied  by  the  judge  at  chambers  or  in  open  court.  In  any 
bankruptcy,  or  in  any  other  proceedings  within  the  jurisdic- 
tion of  the  court,  under  this  act,  the  parties  concerned,  or 
submitting  to  such  jurisdiction,  may  at  any  stage  of  the  pro- 
ceedings, by  consent,  state  any  question  or  questions  in  a 
special  case  for  the  opinion  of  the  court,  and  the  judgment 
of  the  court  shall  be  final  unless  it  be  agreed  and  stated  in 
such  special  case  that  either  party  may  appeal,  if,  in  such 
case,  an  appeal  is  allowed  by  this  act.  The  parties  may  also, 
if  they  think  fit,  agree,  that  upon  the  question  or  questions 
raised  by  such  special  case  being  finally  decided,  a  sum  of 
money,  fixed  by  the  parties,  or  to  be  ascertained  by  the 


NATIONAL   BANKRUPTCY    LAW    OF  1867.  905 

court,  or  in  such  mamier  as  the  court  may  direct,  or  any 
property,  or  the  amoumt  of  any  disputed  debt  or  claim,  shall 
be  paid,  delivered  or  transferred  by  one  of  such  parties  to 
the  other  of  them  either  with  or  without  costs. 

Seo.  7.  And  he  it  further  enacted^  That  parties  and  wit- 
nesses summoned  before  a  register  shall  be  bound  to  attend 
in  pursuance  of  such  summons  at  the  place  and  time  desig- 
nated therein,  and  shall  be  entitled  to  protection,  and  be 
liable  to  process  of  contempt  in  like  manner  as  parties  and 
witnesses  are  now  liable  thereto  in  case  of  default  in  attend- 
ance under  any  writ  of  subpoena,  and  all  persons  wilfully 
and  corruptly  swearing  or  affirming  falsely  before  a  register 
shall  be  liable  to  all  the  penalties,  punishments,  and  conse- 
quences of  perjury.  If  any  person  examined  before  a  register 
shall  refuse  or  decline  to  answer,  or  to  swear  to  or  sign 
his  examination  when  taken,  the  register  shall  refer  the 
matter  to  the  judge,  who  shall  have  power  to  order  the  per- 
son so  acting  to  pay  the  costs  thereby  occasioned,  if  such 
person  be  compellable  by  law  to  answer  such  question  or  to 
sign  such  examination,  and  such  person  shall  also  be  liable 
to  be  punished  for  contempt. 

Of  Appeals  and  Pkaotiob. 

Sec.  8.  And  he  it  further  enacted^  That  appeals  may  be 
taken  from  the  district  to  the  circuit  courts  in  all  cases  of 
equity,  and  writs  of  error  may  be  allowed  to  said  circuit 
courts  from  said  district  courts  in  cases  at  law  under  the 
jurisdiction  created  by  this  act,  when  the  debt  or  damages 
claimed  amount  to  more  than  five  hundred  dollars,  and  any 
gupposed  creditor,  whose  claim  is  wholly  or  in  part  rejected, 
or  an  assignee  who  is  dissatisfied  with  the  allowance  of  a 
claim  may  appeal  from  the  decision  of  the  district  court  to 
the  circuit  court  from  the  same  district ;  but  no  appeal  shall 
be  allowed  in  any  case  from  the  district  to  the  circuit  com't 
unless  it  is  claimed,  and  notice  given  thereof  to  the  clerk  of 
the  district  court,  to  be  entered  with  the  record  of  the  pro- 


90G  LAW    OF   BANKBUPTOT. 

ceedings,  and  also  to  the  assignee  or  creditor,  as  the  case 
may  be,  or  to  the  defeated  party  in  equity,  within  ten  days 
after  the  entry  of  the  decree  or  decision  appealed  from.  The 
appeal  shall  be  entered  at  the  terra  of  the  circuit  court  which 
shall  be  first  held  within  and  for  the  district  next  after  the 
expiration  of  ten  days  from  the  time  of  claiming  the  same. 
But  if  the  appellant  in  writing  waives  his  appeal  before  any 
decision  thereon,  proceedings  may  be  had  in  the  district 
court  as  if  no  appeal  had  been  taken ;  and  no  appeal  shall  be 
allowed  unless  the  appellant  at  the  time  of  claiming  the 
same  shall  give  bond  in  man[ner]  now  required  by  law  in 
cases  of  such  appeals.  No  writ  of  error  shall  be  allowed 
unless  the  party  claiming  it  shall  comply  with  the  statutes 
regulating  the  granting  of  such  writs. 

Sec.  9.  And  he  it  further  enacted,  That  in  cases  arising 
under  this  act  no  appeal  or  writ  of  error  shall  be  allowed  in 
any  case  from  the  circuit  courts  to  the  Supreme  Court  of  the 
United  States,  unless  the  matter  in  dispute  in  such  case  shall 
exceed  two  thousand  dollars. 

Sec  10.  And  he  it  furtlier  enacted,  That  the  Justices  of 
the  Supreme  Court  of  the  United  States,  subject  to  the  pro- 
visions of  this  act,  shall  frame  general  orders  for  the  follow- 
ing purposes : 

For  regulating  the  practice  and  procedure  of  the  district 
courts  in  bankruptcy,  and  the  several  forms  of  petitions, 
orders,  and  other  proceedings  to  be  used  in  said  courts  in  all 
matters  under  this  act; 

For  regulating  the  duties  of  the  various  officers  of  said 
courts ; 

For  regulating  the  fees^  payable  and  the  charges  and  costs 
to  be  allowed,  except  such  ^  as  are  established  by  this  act  or 
by  law,  with  respect  to  all  proceedings  in  bankruptcy  before 
said  courts,  not  exceeding  the  rate  of  fees  now  allowed  by 
law  for  similar  services  in  other  proceedings ; 

1  See  note  1  to  sec  47.  cept  such  as  are  established  by  this 

2  The  act  of  June  22,  1874  (18  St.    act  or  by  law." 
L.  184,  §  18),  repeals  the  words  "  ex- 


NATIONAL   BANKRUPTCY    LAW    OF  1867.  907 

For  regulating  the  practice  and  procedure  upon  appeals; 

For  regulating  the  filing,  custody,  and  inspection  of  rec- 
ords; 

And  generally  for  carrying  the  provisions  of  this  act  into 
effect. 

After  such  general  orders  shall  have  been  so  framed,  they 
or  any  of  them  may  be  rescinded  or  varied,  and  other  gen- 
eral orders  may  be  framed  in  manner  aforesaid ;  and  all  such 
general  orders  so  framed  shall  from  time  to  time  be  reported 
to  Congress,  with  such  suggestions  as  said  justices  may  think 
proper. 

YOLTINTARY   BANKRUPTCY COMMENCEMENT   OF   PROCEEDINGS. 

Sec  11.  And  he  it  further  enacted,  That  if  any  person  re- 
siding within  the  jurisdiction  of  the  United  States,  owing 
debts  provable  under  this  act  exceeding  the  amount  of  three 
hundred  dollars,  shall  apply  by  petition  addressed  to  the 
judge  of  the  judicial  district  in  which  such  debtor  has  re- 
sided or  carried  on  business  for  the  six  months  next  imme- 
diately preceding  the  time  of  filing  of  such  petition,  or  for 
the  longest  period  during  such  six  months,  setting  forth  his 
place  of  residence,  his  inability  to  pay  all  his  debts  in  full, 
his  willingness  to  surrender  all  his  estate  and  effects  for  the 
benefit  of  his  creditors  and  his  desire  to  obtain  the  benefit 
of  this  act,  and  shall  annex  to  his  petition  a  schedule,  veri- 
fied by  oath  before  the  court  or  before  a  register  in  bank- 
ruptcy, or  before  one  of  the  commissioners  of  the  circuit 
court  of  the  United  States,  containing  a  full  and  true  state- 
ment of  all  his  debts,  and,  as  far  as  possible,  to  whom  due, 
with  the  place  of  residence  of  each  creditor,  if  known  to  the 
debtor,  and  if  not  known  the  fact  to  be  so  stated,  and  the 
sum  due  to  each  creditor;  also,  the  nature  of  each  debt  or  de- 
mand, whether  founded  on  written  security,  obligation,  con- 
tract, or  otherwise,  and  also  the  true  cause  and  consideration 
of  such  indebtedness  in  each  case,  and  the  place  where  such 
indebtedness  accrued,  and  a  statement  of  any  existing  mort- 


908  LAW   OF   BANKKUPTOT. 

gage,  pledge,  lien,  judgment,  or  collateral  or  other  security 
given  for  the  payment  of  the  sam3;  and  shall  also  annex  to 
his  petition  an  accurate  inventory,*  verified  in  like  manner, 
of  all  his  estate,  both  real  and  personal,  assignable  under 
this  act,  describing  the  same  and  stating  where  it  is  situated, 
and  whether  there  are  any,  and  if  so,  what  encumbrances 
thereon,  the  filing  of  such  petition  shall  be  an  act  of  bank- 
ruptcy, and  such  petitioner  shall  be  adjudged  a  bankrupt : 
Provided^  That  all  citizens  of  the  United  States  petitioning 
to  be  declared  bankrupt  shall  on  filing  such  petition,  and  be- 
fore any  proceedings  thereon,  take  and  subscribe  an  oath  of 
allegiance  and  fidelity  to  the  United  States,  which  oath  shall 
be  filed  and  recorded  with  the  proceedings  in  bankruptcy. 
And  the  judge  of  the  district  court,  or,  if  there  be  no  oppos- 
ing party,  any  register  of  said  court,  to  be  designated  by  the 
judge,  shall  forthwith,  if  he  be  satisfied  that  the  debts  due 
from  the  petitioner  exceed  three  hundred  dollars,  issue  a 
warrant,  to  be  signed  by  such  judge  or  register,  directed  to 
the  ^  marshal  of  said  district,  authorizing  him  forthwith,  as 
messenger,  to  publish  notices  in  such  newspapers  as  the  war- 
rant specifies ; '  to  serve  written  or  printed  notice,  by  mail  or 
personally,  on  all  creditors  upon  the  schedule  filed  with  the 
debtor's  petition,  or  whose  names  may  be  given  to  him  in 
addition  by  the  debtor,  and  to  give  such  personal  or  other 

*  The  act  of  June  22, 1874  (18  Stat  two; "  and  inserting  after  the  word 

Lu  182,  §  15),  adds  the  words  "  and  "  specifies,"  where  it  last  occurs,  the 

valuation  "  after  the  word  "  inven-  words  "  but  whenever  the  creditors 

tory."  of  the  bankrupt  are  so  numerous  as 

2  The  act  of  1874,  above,  §  19,  pro-  to  make  any  notice  now  required 
vides  for  the  making  of  a  report  by  by  law  to  them,  by  mail  or  other- 
the  marshal  to  the  clerk.  wise,  a  great  and  disproportionate 

3  Section  5  of  the  act  of  1874,  expense  to  the  estate,  the  court 
above  referred  to,  makes  the  fol-  may,  in  lieu  thereof,  in  its  discre- 
lowing  amendment:  That  section  tion,  order  such  notice  to  be  given 
11  of  said  act  be  amended  by  strik-  by  publication  in  a  newspaper  or 
ing  out  the  words  "  as  the  warrant  newspapers,  to  all  such  creditors 
specifies,"  where  they  first  occur,  whose  claims,  as  reported,  do  not 
and  inserting  the  words  "  as  the  exceed  the  sums,  respectively,  of 
marshal  shall  select,  not  exceeding  fifty  dollars." 


NATIONAL   BANKRUPTCY    LAW    OF  1867.  909 

notice  to  any  persons  concerned  as  the  warrant  specifies, 
which  notice  shall  state: — 

First.  That  a  warrant  in  bankruptcy  has  been  issued 
against  the  estate  of  the  debtor. 

Second.  That  the  payment  of  any  debts  and  the  delivery 
of  any  property  belonging  to  such  debtor  to  him  or  for  his 
use,  and  the  transfer  of  any  property  by  him,  are  forbidden 
by  law. 

Third.  That  a  meeting  of  the  creditors  of  the  debtor,  giv- 
ing the  names,  residences,  and  amounts,  so  far  as  known,  to 
prove  their  debts  and  choose  one  or  more  assignees  of  his 
estate,  will  be  held  at  a  court  of  bankruptcy,  to  be  holden 
at  a  time  and  place  designated  in  the  warrant,  not  less  than 
ten  nor  more  than  ninety  days  after  the  issuing  of  the  same. 

Of  Assignments  and  Assignees. 

Seo.  12.  And  he  it  further  enacted^  That  at  the  meeting 
held  in  pursuance  of  the  notice,  one  of  the  registers  of  the 
court  shall  preside,  and  the  messenger  shall  make  return 
of  the  warrant  and  of  his  doings  thereon ;  and  if  it  appears  that 
the  notice  to  the  creditors  has  not  been  given  as  required  in 
the  warrant,  the  meeting  shall  forthwith  be  adjourned,  and 
a  new  notice  given  as  required.  If  the  debtor  dies  after  the 
issuing  of  the  warrant,  the  proceedings  may  be  continued 
and  concluded  in  like  manner  as  if  he  had  lived. 

Seo.  13.  Andle  it  further  enacted,  That  the  creditors  shall, 
at  the  first  meeting  held  after  due  notice  from  the  messen- 
ger, in  presence  of  a  register  designated  by  the  court,  choose 
one  or  more  assignees  of  the  estate  of  the  debtor;  the  choice 
to  be  made  by  the  greater  part  in  value  and  in  number  of 
the  creditors  who  have  proved  their  debts.  If  no  choice  is 
made  by  the  creditors  at  said  meeting,  the  judge,  or  if  there 
be  no  opposing  interest,  the  register,  shall  appoint  one  or 
more  assignees.  If  an  assignee,  so  chosen  or  appointed, 
fails  within  five  days  to  express  in  writing  his  acceptance  of 
the  trust,  the  judge  or  register  may  fill  the  vacancy.    All 


910  LAW    OF   BANKKUPTOT. 

elections  or  appointments  of  assignees  shall  be  subject  to  the 
approval  of  the  judge;  and  when  in  his  judgment  it  is  for 
any  cause  needful  or  expedient,  he  may  appoint  additional 
assignees,  or  order  a  new  election.  The  judge  at  any  time 
may,  and  upon  the  request  in  writing  of  any  creditor  who 
has  proved  his  claim  shall,  require  the  assignee  to  give  good 
and  sufficient  bond  to  the  United  States,  with  a  condition 
for  the  faithful  performance  and  discharge  of  his  duties; 
the  bond  shall  be  approved  by  the  judge  or  register  by 
his  indorsement  thereon,  shall  be  filed  with  the  record  of 
the  case,  and  inure  to  the  benefit  of  all  creditors  proving 
their  claims,  and  may  be  prosecuted  in  the  name  and  for 
the  benefit  of  any  injured  party.  If  the  assignee  fails  to 
give  the  bond  within  such  time  as  the  judge  orders,  not  ex- 
ceeding ten  days  after  notice  to  him  of  such  order,  the  judge 
shall  remove  him  and  appoint  another  in  his  place. 

Sec.  14.  And  he  it  further  enacted^  That  as  soon  as  said 
assignee  is  appointed  and  qualified,  the  judge,  or,  where 
there  is  no  opposing  interest,  the  register,  shall,  by  an  instru- 
ment under  his  hand,  assign  and  convey  to  the  assignee  all 
the  estate,  real  and  personal,  of  the  bankrupt,  with  all  his 
deeds,  books,  and  papers  relating  thereto,  and  such  assign- 
ment shall  relate  back  to  the  commencement  of  said  pro- 
ceedings in  bankruptcy,  and  thereupon,  by  operation  of  law, 
the  title  to  all  such  property  and  estate,  both  real  and  per- 
sonal, shall  vest  in  said  assignee,  although  the  same  is  then 
attached  on  mesne  process  as  the  property  of  the  debtor,  and 
shall  dissolve  any  such  attachment  made  within  four  months 
next  preceding  the  commencement  of  said  proceedings: 
Provided,  however,  That  there  shall  be  excepted  from  the 
operation  of  the  provisions  of  this  section  the  necessary  house- 
hold and  kitchen  furniture,  and  such  other  articles  and  nec- 
essaries of  such  bankrupt  as  the  said  assignee  shall  designate 
and  set  apart,  having  reference  in  the  amount  to  the  family, 
condition,  and  circumstances  of  the  bankrupt,  but  altogether 
not  to  exceed  in  value,  in  any  case,  the  sum  of  five  hundred 
dollars;  and  also  the  wearing  apparel  of  such  bankrupt, and 


NATIONAL   BANKKUPTCY    LAW    OF  1867.  911 

that  of  his  wife  and  children,  and  the  uniform,  arms  and 
equipments  of  any  person  who  is  or  has  been  a  soldier  in 
the  militia,  or  in  the  service  of  the  United  States ;  and  such 
other  property  as  now  is,  or  hereafter  shall  be,  exempted  from 
attachment,  or  seizure,  or  levy  on  execution  by  the  laws  of  the 
United  States,  and  such  other  property  not  included  in  the 
foregoing  exceptions  as  is  exempted  from  levy  and  sale  upon 
execution  or  other  process  or  order  of  any  court  by  the  laws  of 
the  State  in  which  the  bankrupt  has  his  domicile  at  the  time 
of  the  commencement  of  the  proceedings  in  bankruptcy,  to  an 
amount  not  exceeding  that  allowed  by  such  State  exemption 
laws  in  force  in  the  year  ^  eighteen  hundred  and  sixty-four : 
Provided,  That  the  foregoing  exception  shall  operate  as  a  lim- 
itation upon  the  conveyance  of  the  property  of  the  bankrupt 
to  his  assignees;  and  in  no  case  shall  the  property  hereby 
excepted  pass  to  the  assignees,  or  the  title  of  the  bankrupt 
thereto  be  impaired  or  affected  by  any  of  the  provisions  of 
this  act;  and  the  determination  of  the  assignee  in  the  mat- 
ter shall,  on  exception  taken,  be  subject  to  the  final  decision 
of  the  said  court:  And  provided  further,  That  no  mortgage 
of  any  vessel  or  of  any  other  goods  or  chattels,  made  as  se- 
curity for  any  debt  or  debts,  in  good  faith  and  for  present 
considerations  and  otherwise  valid,  and  duly  recorded,  pur- 
suant to  any  statute  of  the  United  States,  or  of  any  State, 
shall  be  invalidated  or  affected  hereby ;  and  all  the  prop- 
erty conveyed  by  the  bankrupt  in  fraud  of  his  creditors;  all 
rights  in  equity,  choses  in  action,  patents  and  patent  rights 
and  copyrights;  all  debts  due  him,  or  any  person  for  his 
use,  and  all  liens  and  securities  therefor ;  and  all  his  rights 
of  action  for  property  or  estate,  real  or  personal,  and  for  any 
cause  of  action  which  the  bankrupt  had  against  any  person 
arising  from  contract  or  from  the  unlawful  taking  or  deten- 
tion, or  of  injury  to  the  property  of  the  bankrupt,  and  all 
his  rights  of  redeeming  such  property  or  estate,  with  the 
like  right,  title,  power,  and  authority  to  sell,  manage,  dis- 

1  The  act  of  -^une  8, 1872  (17  St.  L.  334),  changes  this  year  from  "  1864" 
to  "1871." 


912  LAW    OF   BANKRUPTOT. 

pose  of,  sue  for  and  recover  or  defend  the  same  as  the  bank- 
rupt might  or  could  have  had  if  no  assignment  had  been 
made,  shall,  in  virtue  of  the  adjudication  of  bankruptcy  and 
the  appointment  of  his  assignee,  be  at  once  vested  in  such 
assignee ;  and  he  may  sue  for  and  recover  the  said  estate, 
debts  and  effects,  and  may  prosecute  and  defend  all  suits  at 
law  or  in  equity,  pending  at  the  time  of  the  adjudication  of 
bankruptcy,  in  which  such  bankrupt  is  a  party  in  his  own 
name,  in  the  same  manner  and  with  the  like  effect  as  they 
might  have  been '  presented  or  defended  by  such  bankrupt ; 
and  a  copy,  duly  certified  by  the  clerk  of  the  court,  under 
the  seal  thereof,  of  the  assignment  made  by  the  judge  or 
register,  as  the  case  may  be,  to  him  as  assignee,  shall  be  con- 
clusive evidence  of  his  title  as  such  assignee  to  take,  hold, 
sue  for,  and  recover  the  property  of  the  bankrupt,  as  herein- 
before mentioned;  but  no  property  held  by  the  bankrupt  in 
trust  shall  pass  by  such  assignment.  No  person  shall  be  en- 
titled to  maintain  an  actioii  against  an  assignee  in  bank- 
ruptcy for  anything  done  by  him  as  such  assignee,  without 
previously  giving  him  twenty  days'  notice  of  such  action, 
specifying  the  cause  thereof,  to  the  end  that  such  assignee 
may  have  an  opportunity  of  tendering  amend,  should  he  see 
fit  to  do  so.  No  person  shall  be  entitled,  as  against  the  as- 
signee, to  withhold  from  him  possession  of  any  books  of 
account  of  the  bankrupt,  or  claim  any  lien  thereon ;  and  no 
suit  in  which  the  assignee  is  a  party  shall  be  abated  by  his 
death  or  removal  from  office;  but  the  same  may  be  prose- 
cuted and  defended  by  his  successor,  or  by  the  surviving  or 
remaining  assignee,  as  the  case  may  be.  The  assignee  shall 
have  authority,  under  the  order  and  direction  of  the  court, 
to  redeem  or  discharge  any  mortgage  or  conditional  con- 
tract, or  pledge  or  deposit,  or  lien  upon  any  property,  real 
or  personal,  whenever  payable,  and  to  tender  due  perform- 
ance of  the  condition  thereof,  or  to  sell  the  same  subject  to 
such  mortgage,  lien  or  other  encumbrances.   The  debtor  shall 

iThe  act  of  July  27, 1868  (15  St  L.  228,  §  2),  changes  the  word  "pre- 
sented "  to  "  prosecuted." 


NATIONAL   BAJO[RTJPT0Y    LAW    OF  1867. 


913 


also,  at  the  request  of  the  assignee  and  at  the  expense  of  the 
estate,  make  and  execute  any  instruments,  deeds,  and  writings 
which  may  be  proper  to  enable  the  assignee  to  possess  him- 
self fully  of  all  the  assets  of  the  bankrupt.  The  assignee 
shall  immediately  give  notice  of  his  appointment,  by  publi- 
cation at  least  once  a  week  for  three  successive  weeks  in 
such  newspapers  as  shall  for  that  purpose  be  designated  by 
the  court,  due  regard  being  had  to  their  general  circulation  in 
the  district  or  in  that  portion  of  the  district  in  which  the  bank- 
rupt and  his  creditors  shall  reside,  and  shall,  within  six 
months,  cause  the  assignment  to  him  to  be  recorded  in  every 
registry  of  deeds  or  other  office  within  the  United  States 
where  a  conveyance  of  any  lands  owned  by  the  bankrupt 
ought  by  law  to  be  recorded ;  and  the  record  of  such  assign- 
ment, or  a  duly  certified  copy  thereof,  shall  be  evidence 
thereof  in  all  courts. 

Seo.  15.*  Arid  he  it  further  enacted.  That  the  assignee  shall 
demand  and  receive,  from  any  and  all  persons  holding  the 


1  The  act  of  June  23, 1874  (18  St 
L.  178,  §  1),  provides:  "That  the 
court  may,  in  its  discretion,  on 
sufficient  caiise  shown,  and  upon 
notice  and  hearing,  direct  the  re- 
ceiver or  assignee  to  take  posses- 
sion of  the  property,  and  carry  on 
the  business  of  the  debtor,  or  any 
part  thereof,  under  the  direction  of 
the  court,  when,  in  its  judgment, 
the  interest  of  the  estate  as  well  as 
of  the  creditors  will  be  promoted 
thereby,  but  not  for  a  period  ex- 
ceeding nine  months  from  the  time 
the  debtor  shall  have  been  de- 
clared a  bankrupt:  Provided,  that 
such  order  shall  not  be  made  until 
the  court  shall  be  satisfied  that  it 
is  approved  by  a  majority  in  value 
of  the  creditors." 

Section  4  provides:   That  unless 
otherwise  ordered  by  the  court,  the 
assignee  shall  sell  the  property  of 
48  ,« 


the  bankrupt,  whether  real  or  per- 
sonal, at  public  auction,  in  such 
parts  or  parcels  and  at  such  times 
and  places  as  shaU  be  best  calcu- 
lated to  produce  the  greatest 
amount  with  the  least  expense. 
All  notices  of  public  sales  under 
this  act  by  any  assignee  or  officer 
of  the  coiirt  shall  be  published  once 
a  week  for  three  consecutive  weeks 
in  the  newspaper  or  newspapers,  to 
be  designated  by  the  judge,  which, 
in  his  opinion,  shall  be  best  calcu- 
lated to  give  general  notice  of  the 
sale.  And  the  court,  on  the  appli- 
cation of  any  party  in  interest,  shall 
have  complete  supervisory  power 
over  such  sales,  including  the  power 
to  set  aside  the  same  and  to  order 
a  resale,  so  that  the  property  sold 
shall  realize  the  largest  sum.  And 
the  court  may,  in  its  discretion, 
order  any  real  estate  of  the  bank- 


914 


LAW    OF    BANKRUPTOT. 


same,  all  the  estate  assigned,  or  intended  to  be  assigned, 
under  the  provisions  of  this  act;  and  he  shall  sell  all  such 
unencumbered  estate,  real  and  personal,  which  comes  to  his 
hands,  on  such  terms  as  he  thinks  most  for  the  interest  of 
the  creditors;  but  upon  petition  of  any  person  interested, 
and  for  cause  shown,  the  court  may  make  such  order  con- 
cerning the  time,  place,  and  manner  of  sale  as  will,  in  its 
opinion,  prove  to  the  interest  of  the  creditors ;  and  the  as- 
signee shall  keep  a  regular  account '  of  all  money  received 
by  him  as  assignee,  to  which  every  creditor  shall,  at  reason- 
able times,  have  free  resort. 

Seo.  16.  And  he  it  further  enacted^  That  the  assignee  shall 
have  the  like  remedy  to  recover  all  said  estate,  debts  and 


nipt,  or  any  part  thereof,  to  be  sold 
for  one-fourth  cash  at  the  time  of 
sale,  and  the  residue  within  eight- 
een months  in  such  instalments  as 
the  court  may  direct,  bearing  in- 
terest at  the  rate  of  seven  per  cen- 
tum per  annum,  and  secured  by 
proper  mortgage  or  lien  upon  the 
property  so  sold.  And  it  shall  be 
the  duty  of  every  assignee  to  keep 
a  regular  account  of  all  moneys  re- 
ceived or  expended  by  him  as  such 
assignee,  to  which  account  every 
creditor  shall,  at  reasonable  times, 
have  free  access.  [Here  follows  the 
penalty  for  failure  to  properly  dis- 
charge his  duties,  etc.]  That  the 
assignee  shall  report,  under  oath, 
to  the  court,  at  least  as  often  as 
once  in  three  months,  the  condi- 
tion of  the  estate  in  his  charge,  and 
the  state  of  his  accoimts  in  detail, 
and  at  all  other  times  when  the 
court,  on  motion  or  otherwise,  shall 
so  order.  And  on  any  settlement 
of  the  accounts  of  any  assignee,  he 
shall  be  required  to  account  for  all 
interest,  benefit  or  advantage  re- 
ceived, or  in  any  manner  agreed  to 


be  received,  directly  or  indirectly, 
from  the  use,  disposal  or  proceeds 
of  the  bankrupt's  estate.  And  he 
shall  be  required,  upon  such  settle- 
ment, to  make  and  file  in  court  an 
affidavit  declaring,  according  to  the 
truth,  whether  he  has  or  ha-s  not, 
as  the  case  may  be,  received,  or  is 
or  is  not,  as  the  case  may  be,  to 
receive,  directly  or  indirectly,  any 
interest,  benefit  or  advantage  from 
the  use  or  deposit  of  such  fimds; 
and  such  assignee  may  be  exam- 
ined orally  upon  the  same  subject, 
an  d  if  he  shall  wilfully  swear  falsely, 
either  in  such  affidavit  or  examina- 
tion, or  to  his  report  provided  for 
in  this  section,  he  shall  be  deemed 
to  be  guilty  of  perjury,  and  on  con- 
viction thereof,  be  punished  by  im- 
prisonment in  the  penitentiary  not 
less  than  one  and  not  more  than 
five  years. 

1  The  act  of  June  22,  1874  (18  St. 
L.  185,  §  19),  requires  the  assignee 
to  make  a  report  of  the  business 
transacted  by  him,  and  of  the  fees 
received,  etc 


NATIONAL   BANKEUPTOY    LAW    OF  1867.  915 

effects  in  his  own  name,  as  the  creditor  might  have  had  if 
the  decree  in  bankruptcy  had  not  been  rendered  and  no  as- 
signment had  been  made.  If,  at  the  time  of  the  commence- 
ment of  proceedings  in  bankruptcy,  an  action  is  pending  in 
the  name  of  the  debtor  for  the  recovery  of  a  debt  or  other 
thing  which  might  or  ought  to  pass  to  the  assignee  by  the 
assignment,  the  assignee  shall,  if  he  requires  it,  be  admitted 
to  prosecute  the  action  in  his  own  name,  in  like  manner  and 
with  like  effect  as  if  it  had  been  originally  commenced  by 
him.  No  suit  pending  in  the  name  of  the  assignee  shall  be 
abated  by  his  death  or  removal;  but  upon  the  motion  of  the 
surviving  or  remaining  or  new  assignee,  as  the  case  may  be, 
he  shall  be  admitted  to  prosecute  the  suit  in  like  manner 
and  with  like  effect  as  if  it  had  been  originally  commenced 
by  him.  In  suits  prosecuted  by  the  assignee  a  certified  copy 
of  the  assignment  made  to  him  by  the  judge  or  register 
shall  be  conclusive  evidence  of  his  authority  to  sue. 

Sec.  17.  And  he  it  further  enacted^  That  the  assignee  shall, 
as  soon  as  may  be  after  receiving  any  money  belonging  to 
the  estate,  deposit  the  same  in  some  bank  in  his  name  as  as- 
signee, or  otherwise  keep  it  distinct  and  apart  from  all  other 
money  in  his  possession;  and  shall,  as  far  as  practicable, 
keep  all  goods  and  effects  belonging  to  the  estate  separate 
and  apart  from  all  other  goods  in  his  possession,  or  desig- 
nated by  appropriate  marks,  so  that  they  may  be  easily  and 
clearly  distinguished,  and  may  not  be  exposed  or  liable  to 
be  taken  as  his  property  or  for  the  payment  of  his  debts. 
When  it  appears  that  the  distribution  of  the  estate  may  be 
delayed  by  litigation  or  other  cause,  the  court  may  direct 
the  temporary  investment  of  the  money  belonging  to  such 
estate  in  securities  to  be  approved  by  the  judge  or  a  register 
of  said  court,  or  may  authorize  the  same  to  be  deposited  in 
any  convenient  bank  upon  such  interest,  not  exceeding  the 
legal  rate,  as  the  bank  may  contract  with  the  assignee  to 
pay  thereon.  He  shall  give  written  notice  to  all  known 
creditors,  by  mail  or  otherwise,  of  all  dividends,  and  such 
notice  of  meetings,  after  the  first,  as  may  be  ordered  by  the 


916  LAW    OF   BANKBUPTCY. 

court.  He  shall  be  allowed,  and  may  retain  out  of  the 
money  in  his  hands,  all  the  necessary  disbursements  made 
by  him  in  the  discharge  of  his  duty,  and  a  reasonable  com- 
pensation for  his  services,  in  the  discretion  of  the  court.  He 
may,  under  the  direction  of  the  court,  submit  any  contr^ 
versy  arising  in  the  settlement  of  demands  against  the  es- 
tate, or  of  debts  due  to  it,  to  the  determination  of  arbitrators, 
to  be  chosen  by  him,  and  the  other  party  to  the  controversy, 
and  may,  under  such  direction,  compound  and  settle  any 
such  controversy,  by  agreement  with  the  other  party,  as  he 
thinks  proper  and  most  for  the  interest  of  the  creditors. 

Sec.  18.  And  he  it  further  enacted^  That  the  court,  after 
due  notice  and  hearing,  may  remove  an  assignee  for  any 
cause  which,  in  the  judgment  of  the  court,  renders  such  re- 
moval necessary  or  expedient.  At  a  meeting  called  by  order 
of  the  court  in  its  discretion  for  the  purpose,  or  which  shall 
be  called  upon  the  application  of  a  majority  of  the  creditors 
in  number  and  value,  the  creditors  may,  with  consent  of 
[the]  court,  remove  any  assignee  by  such  a  vote  as  is  herein, 
before  provided  for  the  choice  of  assignee.  An  assignee 
may,  with  the  consent  of  the  judge,  resign  his  trust  and  be 
discharged  therefrom.  Vacancies  caused  by  death  or  other- 
wise in  the  office  of  assignee  may  be  filled  by  appointment 
of  the  court,  or  at  its  discretion  by  an  election  by  the  creditors- 
in  the  manner  hereinbefore  provided,  at  a  regular  meeting,  or 
at  a  meeting  called  for  the  purpose,  with  such  notice  thereof 
in  writing  to  all  known  creditors,  and  by  such  person,  as  the 
court  shall  direct.  The  resignation  or  removal  of  an  assignee 
shall  in  no  way  release  him  from  performing  all  things  req- 
uisite on  his  part  for  the  proper  closing  up  of  his  trust  and 
the  transmission  thereof  to  his  successors,  nor  shall  it  afifect 
the  liability  of  the  principal  or  surety  on  the  bond  given  by  the 
assignee.  When,  by  death  or  otherwise,  the  number  of  as- 
signees is  reduced,  the  estate  of  the  debtor  not  la^vfuUy  dis- 
posed of  shall  vest  in  the  remaining  assignee  or  assignees, 
and  the  persons  selected  to  fill  vacancies,  if  any,  with  the 
same  powers  and  duties  relative  thereto  as  if  they  were  orig- 


NATIONAL   BANKKUPTOY   LAW   OF  1867.  917 

inally  chosen.  Any  former  assignee,  his  executors  or  ad- 
ministrators, upon  request,  and  at  the  expense  of  the  estate, 
shall  make  and  execute  to  the  new  assignee  all  deeds,  con- 
veyances, and  assurances,  and  do  all  other  lawful  acts  requi- 
site to  enable  him  to  recover  and  receive  all  the  estate.  And 
the  court  may  make  all  orders  which  it  may  deem  expedient 
to  secure  the  proper  fulfillment  of  the  duties  of  any  former 
assignee,  and  the  rights  and  interests  of  all  persons  inter- 
ested in  the  estate.  No  person  who  has  received  any  pref- 
erence contrary  to  the  provisions  of  this  act  shall  vote  for 
or  be  eligible  as  assignee ;  but  no  title  to  property,  real  or 
personal,  sold,  transferred,  or  conveyed  by  an  assignee,  shall 
be  affected  or  impaired  by  reason  of  his  ineligibility.  An 
assignee  refusing  or  unreasonably  neglecting  to  execute  an 
instrument  when  lawfully  required  by  the  court,  or  disobey- 
ing a  lawful  order  or  decree  of  the  court  in  the  premises, 
may  be  punished  as  for  a  contempt  of  court. 

Of  Debts  and  Peoof  of  Claims. 

Seo.  19.  And  he  it  further  enacted^  That  all  debts  due  and 
payable  from  the  bankrupt  at  the  time  of  the  adjudication 
of  bankruptcy,  and  all  debts  then  existing  but  not  payable 
until  a  future  day,  a  rebate  of  interest  being  made  when  no 
interest  is  payable  by  the  terms  of  the  contract,  may  be 
proved  against  the  estate  of  the  bankrupt.  All  demands 
against  the  bankrupt  for  or  on  account  of  any  goods  or  chat- 
tels wrongfully  taken,  converted,  or  withheld  by  him  may  be 
proved  and  allowed  as  debts  to  the  amount  of  the  value  of 
the  property  so  taken  or  withheld,  with  interest.  If  the 
bankrupt  shall  be  bound  as  drawer,  indorser,  surety,  bail,  or 
guarantor  upon  any  bill,  bond,  note,  or  any  other  specialty  or 
contract,  or  for  any  debt  of  another  person,  and  his  liability 
shall  not  have  become  absolute  until  after  the  adjudication 
of  bankruptcy,  the  creditor  may  prove  the  same  after  such 
liability  shall  have  become  fixed,  and  before  the  final  divi- 
dend shaU  have  been  declared.     In  all  cases  of  contingent 


918  LAW    OF    BANKRUPTOT. 

debts  and  contingent  liabilities  contracted  by  the  bankrupt, 
and  not  herein  otherwise  provided  for,  the  creditor  may 
make  claim  therefor,  and  have  his  claim  allowed,  with  the 
right  to  share  in  the  dividends,  if  the  contingency  shall  hap- 
pen before  the  order  for  the  final  dividend ;  or  he  may  at 
any  time  apply  to  the  com-t  to  have  the  present  value  of  the 
debt  or  liability  ascertained  and  liquidated,  which  shall  then 
be  done  in  such  manner  as  the  court  shall  order,  and  he  shall 
be  allowed  to  prove  for  the  amount  so  ascertained.  Any 
person  liable  as  bail,  surety,  guarantor,  or  otherwise  for  the 
bankrupt,  who  shall  have  paid  the  debt,  or  any  part  thereof, 
in  discharge  of  the  whole,  shall  be  entitled  to  prove  such 
debt  or  to  stand  in  the  place  of  the  creditor  if  he  shall  have 
proved  the  same,  although  such  payment  shall  have  been 
made  after  the  proceedings  in  bankruptcy  were  commenced. 
And  any  person  so  liable  for  the  bankrupt,  and  who  has  not 
paid  the  whole  of  said  debt,  but  is  still  liable  for  the  same 
or  any  part  thereof,  may,  if  the  creditor  shall  fail  or  omit  to 
prove  such  debt,  prove  the  same  either  in  the  name  of  the 
creditor  or  otherwise,  as  may  be  provided  by  the  rules,  and 
subject  to  such  regulations  and  limitations  as  may  be  estab- 
lished by  such  rules.  Where  the  bankrupt  is  liable  to  pay 
rent  or  other  debt  falling  due  at  fixed  and  stated  periods, 
the  creditor  may  prove  for  a  proportionate  part  thereof  up 
to  the  time  of  the  bankruptcy,  as  if  the  same  grew  due  from 
day  to  day,  and  not  at  such  fixed  and  stated  periods.  If  any 
bankrupt  shall  be  liable  for  unliquidated  damages  arising 
out  of  any  contract  or  promise,  or  on  account  of  any  goods 
or  chattels  wrongfully  taken,  converted,  or  withheld,  the 
court  may  cause  such  damages  to  be  assessed  in  such  mode 
as  it  may  deem  best,  and  the  sum  so  assessed  may  be  proved 
against  the  estate.  No  debts  other  than  those  above  speci- 
fied shall  be  proved  or  allowed  against  the  estate. 

Sec.  20.  And  he  it  further  enacted^  That,  in  all  cases  of 
mutual  debts  or  mutual  credits  between  the  parties,  the  ac- 
count between  them  shall  be  stated,  and  one  debt  set  off 
against  the  other,  and  the  balance  only  shall  be  allowed  or 


NATIONAL   BANKKUPTCY    LAW    OF  1867.  919 

paid,  but  no  set-off  shall  be  allowed  of  a  claim  in  its  nature 
not  provable  against  the  estate :  ^  Provided^  That  no  set-off 
shall  be  allowed  in  favor  of  any  debtor  to  the  bankrupt  of 
a  claim  purchased  by  or  transferred  to  him  after  the  filing 
of  the  petition.  When  a  creditor  has  a  mortgage  or  pledge 
of  real  or  personal  property  of  the  bankrupt,  or  a  lien  thereon 
for  securing  the  payment  of  a  debt  owing  to  him  from  the 
bankrupt,  he  shall  be  admitted  as  a  creditor  only  for  the 
balance  of  the  debt  after  deducting  the  value  of  such  prop- 
erty, to  be  ascertained  by  agreement  between  him  and  the 
assignee,  or  by  a  sale  thereof,  to  be  made  in  such  manner 
as  the  court  shall  direct ;  or  the  creditor  may  release  or  con- 
vey his  claim  to  the  assignee  upon  such  property,  and  be 
admitted  to  prove  his  whole  debt,  K  the  value  of  the  prop- 
erty exceeds  the  sum  for  which  it  is  so  held  as  security,  the 
assignee  may  release  to  the  creditor  the  bankrupt's  right  of 
redemption  therein  on  receiving  such  excess ;  or  he  may  sell 
the  property,  subject  to  the  claim  of  the  creditor  thereon; 
and  in  either  case  the  assignee  and  creditor,  respectively,  shall 
execute  all  deeds  and  writings  necessary  or  proper  to  con- 
summate the  transaction.  If  the  property  is  not  so  sold  or 
released  and  delivered  up,  the  creditor  shall  not  be  allowed 
to  prove  any  part  of  his  debt. 

Sec.  21.  And  le  it  fartfuer  enacted^  That  no  creditor  prov- 
ing his  debt  or  claim  shall  be  allowed  to  maintain  any  suit 
at  law  or  in  equity  therefor  against  the  bankrupt,  but  shall 
be  deemed  to  have  waived  all  right  of  action  and  suit  against 
the  bankrupt,  and  all  proceedings  already  commenced  or  un- 
satisfied judgments  already  obtained  thereon,  shall  be  deemed 
to  be  discharged  and  surrendered  thereby;  '^  and  no  creditor 

1  The  act  of  June  22, 1874  (18  St.  L.,  L.  179,  §  7),  amends  this  section  by 
§  6),  amends  this  section  by  adding  inserting,  immediately  after  the 
after  the  word  "  estate  "  the  words  word  "  thereby,"  "  But  a  creditor 
"or  in  cases  of  compulsory  bank-  proving  his  debt  or  claim  shall  not 
ruptcy,  after  the  act  of  bankruptcy  be  held  to  have  waived  his  right  of 
upon  or  in  respect  of  which  the  ad-  action  or  suit  against  the  bankrupt 
judication  shall  be  made,  and  with  where  a  discharge  has  been  refused 
a  view  of  making  such  set-off."  or  the  proceedings  have  been  deter- 

2  The  act  of  June  22,  1874  (18  St.  mined  without  a  discharge." 


920  LAW   OF   BANILBUPTOT. 

whose  debt  is  provable  under  this  act  shall  be  allowed  to 
prosecute  to  final  judgment  any  suit  at  law  or  in  equity  there- 
for against  the  bankrupt,  until  the  question  of  the  debtor's 
discharge  shall  have  been  determined;  and  any  such  suit  or 
proceedings  shall,  upon  the  application  of  the  bankrupt,  be 
stayed  to  await  the  determination  of  the  court  in  bankruptcy 
on  the  question  of  the  discharge,  provided  there  be  no  unrea- 
sonable delay  on  the  part  of  the  bankrupt  in  endeavoring  to 
obtain  his  discharge,  and  provided,  also,  that  if  the  amount 
due  the  creditor  is  in  dispute,  the  suit,  by  leave  of  the  court 
in  bankruptcy,  may  proceed  to  judgment  for  the  purpose  of 
ascertaining  the  amount  due,  which  amount  may  be  proved 
in  bankruptcy,  but  execution  shall  be  stayed  as  aforesaid. 
If  any  bankrupt  shall,  at  the  time  of  adjudication,  be  liable 
upon  any  bill  of  exchange,  promissory  note,  or  other  obliga- 
tion in  respect  of  distinct  contracts  as  a  member  of  two  or 
more  firms  carrying  on  separate  and  distinct  trades,  and  hav- 
ing distinct  estates  to  be  wound  up  in  bankruptcy,  or  as  a 
sole  trader  and  also  [as]  a  member  of  a  firm,  the  circum- 
stance that  such  firms  are  in  whole  or  in  part  composed  of 
the  same  individuals,  or  that  the  sole  contractor  is  also  one 
of  the  joint  contractors,  shall  not  prevent  proof  and  receipt 
of  dividend  in  respect  of  such  distinct  contracts  against  the 
estates  respectively  liable  upon  such  contracts. 

Sec.  22.^  And  he  it  further  enacted^  That  all  proofs  of  debts 
against  the  estate  of  the  bankrupt,  by  or  in  behalf  of  credit- 
ors residing  within  the  judicial  district  where  the  proceed- 
ings in  bankruptcy  are  pending,  shall  be  made  before  one  of 
the  registers  of  the  court  in  said  district,  and  by  or  in  behalf 
of  non-resident  ^  debtors  before  any  register  in  bankruptcy 

1  Section  20  of  the  act  of  June  22,  tified  by  the  notary  and  attested  by 

1874  (18  St.  L.  186),  provides  "that  his  signature  and  official  seal"    By 

in  addition  to  the  officers  now  au-  the  act  of  July  27, 1868  (15  St.  L.  228, 

thorized    to   take   proof  of  debts  §  3),  this  right  to  take  proof  was 

against  the  estate  of  a  bankrupt,  extended  to  United  States  commis- 

notaries  public  are  hereby  author-  sioners. 

ized  to  take  such  proof  in  the  man-  2  The  act  of  July  27, 1868  (15  St.  L. 

ner  and  under  the  regulations  pro-  228,  §  2),  changes  this  word  "  debt- 

yided  by  law;  such  proof  to  be  cer-  ors  "  to  "  creditors." 


NATIONAL   BANKRUPTCY    LAW   OF  1867.  921 

in  the  judicial  district  where  such  creditors  or  either  of  them 
reside,  or  before  any  commissioner  of  the  circuit  court  author- 
ized to  administer  oaths  in  any  district.  To  entitle  a  claim- 
ant against  the  estate  of  a  bankrupt  to  have  his  demand 
allowed,  it  must  be  verified  by  a  deposition  in  writing  on 
oath  or  solemn  affirmation  before  the  proper  register  or 
commissioner  setting  forth  the  demand,  the  consideration 
thereof,  whether  any  and  what  securities  are  held  therefor, 
and  whether  any  and  what  payments  have  been  made 
thereon;  that  the  sum  claimed  is  justly  due  from  the  bank- 
rupt to  the  claimant ;  that  the  claimant  has  not,  nor  has  any 
other  person,  for  his  use,  received  any  security  or  satisfaction 
whatever  other  than  that  by  him  set  forth,  that  the  claim 
was  not  procured  for  the  purpose  of  influencing  the  proceed- 
ings under  this  act,  and  that  no  bargain  or  agreement,  ex- 
press or  implied,  has  been  made  or  entered  into,  by  or  on 
behalf  of  such  creditor,  to  sell,  transfer,  or  dispose  of  the  said 
claim  or  any  part  thereof,  against  such  bankrupt,  or  take  or 
receive,  directly  or  indirectly,  any  money,  property,  or  con- 
sideration whatever,  whereby  the  vote  of  such  creditor  for  as- 
signee, or  any  action  on  the  part  of  such  creditor,  or  any  other 
person  in  the  proceedings  under  this  act,  is  or  shall  be  in  any 
way  affected,  influenced,  or  controlled,  and  no  claim  shall  be 
allowed  unless  all  the  statements  set  forth  in  such  deposition 
shall  appear  to  be  true.  Such  oath  or  solemn  aflBrmation 
shall  be  made  by  the  claimant,  testifying  of  his  own  knowl- 
edge, unless  he  is  absent  from  the  United  States  or  prevented 
by  some  other  good  cause  from  testifying,  in  which  cases 
the  demand  may  be  verified  in  like  manner  by  the  attorney 
or  authorized  agent  of  the  claimant  testifying  to  the  best  of 
his  knowledge,  information,  and  belief,  and  setting  forth  his 
means  of  knowledge ;  or  if  in  a  foreign  country,  the  oath  of 
the  creditor  may  be  taken  before  any  minister,  consul,  or 
vice-consul  of  the  United  States ;  and  the  court  may,  if  it 
shall  see  fit,  require  or  receive  further  pertinent  evidence 
either  for  or  against  the  admission  of  the  claim.  Corpora- 
tions may  verify  their  claims  by  the  oath  or  solemn  affirma- 


922  LAW   OF   BANKEUPTOY. 

tion  of  their  president,  cashier,  or  treasurer.  If  the  proof 
is  satisfactory  to  the  register  or  commissioner,  it  shall  be 
signed  by  the  deponent,  and  delivered  or  sent  by  mail  to  the 
assignee,  who  shall  examine  the  same  and  compare  it  with 
the  books  and  accounts  of  the  bankrupt,  and  shall  register, 
in  a  book  to  be  kept  by  him  for  that  purpose,  the  names  of 
creditors  who  have  proved  their  claims,  in  the  order  in  which 
such  proof  is  received,  stating  the  time  of  receipt  of  such 
proof,  and  the  amount  and  nature  of  the  debts,  which  books 
shall  be  opened  to  the  inspection  of  all  the  creditors.  The 
court  may,  on  the  application  of  the  assignee,  or  of  any  cred- 
itor, or  of  the  bankrupt,  or  without  any  application,  examine 
upon  oath  the  bankrupt,  or  any  person  tendering  or  who  has 
made  proof  of  claims,  and  may  summon  any  person  capable 
of  giving  evidence  concerning  such  proof,  or  concerning  the 
debt  sought  to  be  proved,  and  shall  reject  all  claims  not  duly 
proved,  or  where  the  proof  shows  the  claim  to  be  founded 
in  fraud,  illegality,  or  mistake. 

Sec.  23.  And  he  it  further  enacted^  That  when  a  claim  is 
presented  for  proof  before  the  election  of  the  assignee,  and 
the  judge  entertains  doubts  of  its  validity  or  of  the  right  of 
the  creditor  to  prove  it,  and  is  of  opinion  that  such  validity 
or  right  ought  to  be  investigated  by  the  assignee,  he  may 
postpone  the  proof  of  the  claim  until  the  assignee  is  chosen. 
Any  person  who,  after  the  approval  of  this  act  shall  have 
accepted  any  preference,  having  reasonable  cause  to  believe 
that  the  same  was  made  or  given  by  the  debtor,  contrary  to 
any  provision  of  this  act,  shall  not  prove  the  debt  or  claim 
on  account  of  which  the  preference  was  made  or  given,  nor 
shall  he  receive  any  dividend  therefrom  until  he  shall  first 
have  surrendered  to  the  assignee  all  property,  money,  bene- 
fit, or  advantage  received  by  him  under  such  preference. 
The  court  shall  allow  all  debts  duly  proved,  and  shall  cause 
a  list  thereof  to  be  made  and  certified  by  one  of  the  regis- 
ters; and  any  creditor  may  act  at  all  meetings  by  his  duly 
constituted  attorney  the  same  as  though  personally  present. 

Seo.  24.  And  he  it  further  enacted,  That  a  supposed  cred- 


NATIONAL   BANBKUPTCY    LAW    OF  186''-  923 

itor  who  takes  an  appeal  to  the  circuit  court  from  the  decis- 
ion of  the  district  court,  rejecting  his  claim  in  whole  or  in 
part,  shall,  upon  entering  his  appeal  in  the  circuit  court,  file 
in  the  clerk's  ofiice  thereof  a  statement  in  writing  of  his 
claim,  setting  forth  the  same,  substantially,  as  in  a  declara- 
tion for  the  same  cause  of  action  at  law,  and  the  assignee 
shall  plead  or  answer  thereto  in  like  manner,  and  like  pro- 
ceedings shall  thereupon  be  had  in  the  pleadings,  trial,  and 
determination  of  the  cause,  as  in  action  at  law  commenced 
and  prosecuted,  in  the  usual  manner,  in  the  courts  of  the 
United  States,  except  that  no  execution  shall  be  awarded 
against  the  assignee  for  the  amount  of  a  debt  found  due  to 
the  creditor.  The  final  judgment  of  the  court  shall  be  con- 
clusive, and  the  list  of  debts  shall,  if  necessary,  be  altered 
to  conform  thereto.  The  party  prevailing  in  the  suit  shall 
be  entitled  to  costs  against  the  adverse  party,  to  be  taxed 
and  recovered  as  in  suits  at  law ;  if  recovered  against  the 
assignee,  they  shall  be  allowed  out  of  the  estate.  A  bill  of 
exchange,  promissory  note,  or  other  instrument,  used  in  evi- 
dence upon  the  proof  of  a  claim,  and  left  in  court  or  depos- 
ited in  the  clerk's  office,  may  be  delivered,  by  the  register 
or  clerk  having  the  custody  thereof,  to  the  person  who  used 
it,  upon  his  filing  a  copy  thereof,  attested  by  the  clerk  of 
the  court,  who  shall  indorse  upon  it  the  name  of  the  party 
against  whose  estate  it  has  been  proved,  and  the  date  and 
amount  of  any  dividend  declared  thereon. 

Of  Property  Perishable  and  in  Disputb. 

Sec.  25.  And  he  it  further  enacted^  That  when  it  appears 
to  the  satisfaction  of  the  court  that  the  estate  of  the  debtor, 
or  any  part  thereof,  is  of  a  perishable  nature,  or  liable  to  de- 
teriorate in  value,  the  court  may  order  the  same  to  be  sold, 
in  such  manner  as  may  be  deemed  most  expedient,  under 
the  direction  of  the  messenger  or  assignee,  as  the  case  may 
be,  who  shall  hold  the  funds  received  in  place  of  the  estate 
disposed  of;  and  whenever  it  appears  to  the  satisfaction  of 


924  LAW    OF    BANKJiUPTOY. 

the  court  that  the  title  of  any  portion  of  the  estate,  real  or 
personal,  which  has  come  into  possession  of  the  assignee,  or 
which  is  claimed  by  him,  is  in  dispute,  the  court  may,  upon 
the  petition  of  the  assignee,  and  after  such  notice  to  the 
claimant,  his  agent  or  attorney,  as  the  court  shall  deem  rea- 
sonable, order  it  to  be  sold,  under  the  direction  of  the  assignee, 
who  shall  hold  the  funds  received  in  place  of  the  estate  dis- 
posed of;  and  the  proceeds  of  the  sale  shall  be  consideretl 
the  measure  of  the  value  of  the  property  in  any  suit  or  con- 
troversy between  the  parties  in  any  courts.  But  this  pro- 
vision shall  not  prevent  the  recovery  of  the  property  from 
the  possession  of  the  assignee  by  any  proper  action  com- 
menced at  any  time  before  the  court  orders  the  sale. 

Examination  of  Bankrupts. 

Sec.  26.  And  he  it  further  enacted,  That  the  court  may, 
on  the  application  of  the  assignee  in  bankruptcy,  or  of  any 
creditor,  or  without  any  application,  at  all  times  require  the 
bankrupt,  upon  reasonable  notice,  to  attend  and  submit  to 
an  examination,  on  oath,  upon  all  matters  relating  to  the  dis- 
posal or  condition  of  his  property,  to  his  trade  and  dealings 
with  others,  and  his  accounts  concerning  the  same,  to  all 
debts  due  to  or  claimed  from  him,  and  to  all  other  matters 
concerning  his  property  and  estate  and  the  due  settlement 
thereof  according  to  law,  which  examination  shall  be  in 
writing,  and  shall  be  signed  by  the  bankrupt  and  filed  with 
the  other  proceedings;  and  the  court  may,  in  like  manner, 
require  the  attendance  of  any  other  person  as  a  witness, 
and  if  such  person  shall  fail  to  attend,  on  being  summoned 
thereto,  the  court  may  compel  his  attendance  by  warrant  di- 
rected to  the  marshal,  commanding  him  to  arrest  such  per- 
son and  bring  him  forthwith  before  the  court,  or  before  a 
register  in  bankruptcy,  for  examination  as  such  witness.  If 
the  bankrupt  is  imprisoned,  absent,  or  disabled  from  attend- 
ance, the  court  may  order  him  to  be  produced  by  the  jailer, 
or  any  ofBcer  in  whose  custody  he  may  be,  or  may  direct 


NATIONAL   BANKRUPTCY    LAW    OF  1867.  925 

the  examination  to  be  had,  taken,  and  certified  at  such  time 
and  place  and  in  such  manner  as  the  court  may  deem  proper, 
and  with  like  effect  as  if  such  examination  had  been  had  in 
court.  The  bankrupt  shall  at  all  times,  until  his  discharge, 
be  subject  to  the  order  of  the  court,  and  shall,  at  the  expense 
of  the  estate,  execute  all  proper  Avritings  and  instruments, 
and  do  and  perform  all  acts  required  by  the  court  touching 
the  assigned  property  or  estate,  and  to  enable  the  assignee 
to  demand,  recover,  and  receive  all  the  property  and  estate 
assigned,  wherever  situated ;  and  for  neglect  or  refusal  to 
obey  any  order  of  the  court,  such  bankrupt  may  be  com- 
mitted and  punished  as  for  a  contempt  of  court.  If  the 
bankrupt  is  without  the  district,  and  unable  to  return  and 
personally  attend  at  any  of  the  times  or  do  any  of  the  acts 
which  may  be  specified  or  required  pursuant  to  this  section, 
and  if  it  appears  that  such  absence  was  not  caused  by  wil- 
ful default,  and  if,  as  soon  as  may  be  after  the  removal  of 
such  impediment,  he  offers  to  attend  and  submit  to  the 
order  of  the  court  in  all  respects,  he  shall  be  permitted  so 
to  do,  with  like  effect  as  if  he  had  not  been  in  default.  He 
shall  also  be  at  liberty,  from  time  to  time,  upon  oath  to  at- 
tend and  correct  his  schedule  of  creditors  and  property,  so 
that  the  same  shall  conform  to  the  facts.  For  good  cause 
shown,  the  wife  of  any  bankrupt  may  be  required  to  attend 
before  the  court,  to  the  end  that  she  may  be  examined  as 
a  witness ;  and  if  such  wife  do  not  attend  at  the  time  and 
place  specified  in  the  order,  the  bankrupt  shall  not  be  en- 
titled to  a  discharge  unless  he  shall  prove  to  the  satisfaction 
of  the  court  that  he  was  unable  to  procure  the  attendance  of 
his  wife.  No  bankrupt  shall  be  liable  to  arrest  during  the 
pendency  of  the  proceedings  in  bankruptcy  in  any  civil  ac- 
tion, unless  the  same  is  founded  on  some  debt  or  claim  from 
which  his  discharge  in  bankruptcy  would  not  release  him.' 

1  This  section  is  amended  by  the  causes  and  trials  arising  or  ordered 

act  of  June  22,  1874,  §  8  (18  St.  L.  under  this  act,  the  alleged  bank- 

180),  by  adding  the  following  words  rupt,  and  any  party  thereto,  shall 

at  the  end  thereof:  "That  in  all  be  a  competent  witness." 


926  law  of  bankkuptoy. 

Of  the  Distkibution  of  the  Bankrupt's  Estate. 

Sec.  27.  And  he  it  further  enacted,  That  all  creditors  whose 
debts  are  duly  proved  and  allowed  shall  be  entitled  to  share 
in  the  bankrupt's  property  and  estate  pro  rata,  without  any 
priority  or  preference  whatever,  except  that  wages  due  from 
him  to  any  operative,  or  clerk,  or  house  servant,  to  an  amount 
not  exceeding  fifty  dollars,  for  labor  performed  within  six 
months  next  preceding  the  adjudication  of  bankruptcy,  shall 
be  entitled  to  priority,  and  shall  be  first  paid  in  full:  Pro- 
vided, That  any  debt  proved  by  any  person  liable,  as  bail, 
surety,  guarantor,  or  otherwise,  for  the  bankrupt,  shall  not 
be  paid  to  the  person  so  proving  the  same  until  satisfactory 
evidence  shall  be  produced  of  the  payment  of  such  debt  by 
such  person  so  liable,  and  the  share  to  which  such  debt  would 
be  entitled  may  be  paid  into  court,  or  otherwise  held  for  the 
benefit  of  the  party  entitled  thereto,  as  the  court  may  direct. 
At  the  expiration  of  three  months  from  the  date  of  the  ad- 
judication of  bankruptcy  in  any  case,  or  as  much  earlier  as 
the  court  may  direct,  the  court,  upon  request  of  the  assignee, 
shall  call  a  general  meeting  of  the  creditors,  of  which  due 
notice  shall  be  given,  and  the  assignee  shall  then  report,  and 
exhibit  to  the  court  and  to  the  creditors  just  and  true  ac- 
counts of  all  his  receipts  and  payments,  verified  by  his  oath, 
and  he  shall  also  produce  and  file  vouchers  for  all  payments 
for  which  vouchers  shall  be  required  by  any  rule  of  the 
court;  he  shall  also  submit  the  schedule  of  the  bankrupt's 
creditors  and  property  as  amended,  duly  verified  by  the 
bankrupt,  and  a  statement  of  the  whole  estate  of  the  bank- 
rupt as  then  ascertained,  of  the  property  recovered  and  of 
the  property  outstanding,  specifying  the  cause  of  its  being 
outstanding,  also  what  debts  or  claims  are  3''et  undetermined, 
and  stating  what  sum  remains  in  his  hands.     At  such  meet- 
ing the  majority  in  value  of  the  creditors  present  shall  de- 
termine whether  any  and  what  part  of  the  net  proceeds  of 
the  estate,  after  deducting  and  retaining  a  sum  suflicient  to 
provide  for  all  undetermined  claims  which,  by  reason  of  the 


NATIONAL    BANKRUPTCY    LAW    OF  1867.  927 

distant  residence  of  the  creditor,  or  for  other  suiRcient  reason, 
have  not  been  proved,  and  for  other  expenses  and  contin- 
gencies, shall  be  divided  among  the  creditors ;  but  unless  at 
least  one  half  in  value  of  the  creditors  shall  attend  such 
meeting,  either  in  person  or  by  attorney,  it  shall  be  the  duty 
of  the  assignee  so  to  determine.  In  case  a  dividend  is 
ordered,  the  register  shall,  within  ten  days  after  such  meet- 
ing, prepare  a  list  of  creditors  entitled  to  dividend,  and  shall 
calculate  and  set  opposite  to  the  name  of  each  creditor  who 
has  proved  his  claim  the  dividend  to  which  he  is  entitled  out 
of  the  net  proceeds  of  the  estate  set  apart  for  dividend,  and 
shall  forward  by  mail  to  every  creditor  a  statement  of  the 
dividend  to  which  he  is  entitled,  and  such  creditor  shall  be 
paid  by  the  assignee  in  such  manner  as  the  court  may  direct. 
Sec.  28.  And  he  it  further  enacted^  That  the  like  proceed- 
ings shall  be  had  at  the  expiration  of  the  next  three  months, 
or  earlier,  if  practicable,  and  a  third  meeting  of  the  credit- 
ors shall  then  be  called  by  the  court,  and  a  final  dividend 
then  declared,  unless  any  action  at  law  or  suit  in  equity  be 
pending,  or  unless  some  other  estate  or  effects  of  the  debtor 
afterwards  come  to  the  hands  of  the  assignee,  in  which  case 
the  assignee  shall,  as  soon  as  may  be,  convert  such  estate  or 
effects  into  money,  and  within  two  months  after  'the  same 
shall  be  so  converted,  the  same  shall  be  divided  in  man- 
ner aforesaid.  Further  dividends  shall  be  made  in  like  man- 
ner as  often  as  occasion  requires ;  and  after  the  third  meeting 
of  creditors  no  further  meeting  shall  be  called,  unless  or- 
dered by  the  court.  If  at  any  time  there  shall  be  in  the 
hands  of  the  assignee  any  outstanding  debts  or  other  prop- 
erty, due  or  belonging  to  the  estate,  which  cannot  be  col- 
lected and  received  by  the  assignee  without  unreasonable 
or  inconvenient  delay  or  expense,  the  assignee  may,  under 
direction  of  the  court,  sell  and  assign  such  debts  or  other 
property  in  such  manner  as  the  court  shall  order.  No  divi- 
dend already  declared  shall  be  disturbed  by  reason  of  debts 
being  subsequently  proved,  but  the  creditors  proving  such 


928  LAW    OF   BANKBUPTOT. 

debts  shall  be  entitled  to  a  dividend  equal  to  those  already 
received  by  the  other  creditors  before  any  further  payment 
is  made  to  the  latter.  Preparatory  to  the  final  dividend, 
the  assignee  shall  submit  his  account  to  the  court  and  file 
the  same,  and  give  notice  to  the  creditors  of  such  filing,  and 
shall  also  give  notice  that  he  will  apply  for  a  settlement  of 
his  account,  and  for  a  discharge  from  all  liability  as  assignee, 
at  a  time  to  be  specified  in  such  notice,  and  at  such  time  the 
court  shall  audit  and  pass  the  accounts  of  the  assignee,  and 
such  assignee  shall,  if  required  by  the  court,  be  examined 
as  to  the  truth  of  such  account,  and  if  found  correct  he  shall 
thereby  be  discharged  from  all  liability  as  assignee  to  any 
creditor  of  the  bankrupt.  The  court  shall  thereupon  order 
a  dividend  of  the  estate  and  effects,  or  of  such  part  thereof 
as  it  sees  fit,  among  such  of  the  creditors  as  have  proved 
their  claims,  in  proportion  to  the  respective  amount  of  their 
said  debts.  In  addition  to  all  expenses  necessarily  incurred 
by  him  in  the  execution  of  his  trust,  in  any  case,  the  assignee 
shall  be  entitled  to  an  allowance  for  his  services  in  such  case 
on  all  moneys  received  and  paid  out  by  him  therein,  for  any 
sum  not  exceeding  one  thousand  dollars,  five  per  centum 
thereof;  for  any  larger  sum,  not  exceeding  five  thousand 
dollars,  two  and  a  half  per  centum  on  the  excess  over  one 
thousand  dollars;  and  for  any  larger  sum,  one  per  centum 
on  the  excess  over  five  thousand  dollars,  and  if,  at  any  time, 
there  shall  not  be  in  his  hands  a  sufficient  amount  of  money 
to  defray  the  necessary  expenses  required  for  the  further 
execution  of  his  trust,  he  shall  not  be  obliged  to  proceed 
therein  until  the  necessary  funds  are  advanced  or  satisfac- 
torily secured  to  him.  If  by  accident,  mistake,  or  other 
cause,  without  fault  of  the  assignee,  either  or  both  of  the 
said  second  and  third  meetings  should  not  be  held  \vithin 
the  times  limited,  the  court  may,  upon  motion  of  an  inter- 
ested party,  order  such  meetings,  with  like  effect  as  to  the 
validity  of  the  proceedings  as  if  the  meeting  had  been  duly 
held.     In  the  order  for  a  dividend,  under  this  section,  the 


NATIONAL   BANKEUPTCY    LAW    OF  1867.  929 

following  claims  shall  be  entitled  to  priority  or  preference, 
and  to  be  first  paid  in  full  in  tlie  following  order:  — 

First.  The  fees,  costs  and  expenses  of  suits,  and  the  sev- 
eral proceedings  in  bankruptcy  under  this  act,  and  for  the 
custody  of  property,  as  herein  pro^aded. 

Second.  All  debts  due  to  the  United  States,  and  all  taxes 
and  assessments  under  the  laws  thereof. 

Third.  All  debts  due  to  the  state  in  which  the  proceedings 
in  bankruptcy  are  pending,  and  all  taxes  and  assessments 
made  under  the  laws  of  such  state. 

Fourth.  Wages  due  to  any  operative,  clerk,  or  house  serv- 
ant, to  an  amount  not  exceeding  fifty  dollars,  for  labor  per- 
formed within  six  months  next  preceding  the  first  publication 
of  the  notice  of  proceedings  in  bankruptcy. 

Fifth.  All  debts  due  to  any  persons  who,  by  the  laws  of 
the  United  States,  are  or  may  be  entitled  to  a  priority  or 
preference,  in  like  manner  as  if  this  act  had  not  been  passed: 
Always  provided,  That  nothing  contained  in  this  act  shall 
interfere  with  the  assessment  and  collection  of  taxes  by  the 
authority  of  the  United  States  or  any  State. 

Of  the  Bankrupt's  Dischakge  and  Its  Effect. 

Sec.  29.  And  he  it  further  enacted,  That  at  any  time  after 
the  expiration  of  six  months  from  the  adjudication  of  bank- 
ruptcy, or  if  no  debts  have  been  proved  against  the  bank- 
rupt, or  if  no  assets  have  come  to  the  hands  of  the  assignee, 
at  any  time  after  the  expiration  of  sixty  days,^  and  within 
one  year  from  the  adjudication  of  bankruptcy,  the  bankrupt 
may  apply  to  the  court  for  a  discharge  from  his  debts,  and 
the  court  shall  thereupon  order  notice  to  be  given  by  mail 
to  all  creditors  who  have  proved  their  debts,  and  by  publi- 
cation at  least  once  a  week  in  such  newspapers  as  the  court 

1  The  act  of  July  26,  1876  (19  St.    tion  of  bankruptcy  "  the  words  "  be- 
L.  103),  amends  this  section  by  sub-    fore  the  final  disposition    of  the 
atituting  in  lieu  of  the  words  "and     caiise." 
within  one  year  from  the  adjudica- 
49 


930'  LAW    OF    BANKRUPTCY. 

shall  designate,  due  regard  being  had  to  the  general  circula- 
tion of  the  same  in  the  district,  or  in  that  portion  of  the  dis- 
trict in  which  the  bankrupt  and  his  creditors  shall  reside,  to 
appear  on  a  day  appointed  for  that  purpose,  and  show  cause 
why  a  discharge  should  not  be  granted  to  the  bankrupt.    No 
discharge  shall  be  granted,  or,  if  granted,  be  valid,  if  the 
bankrupt  has  wilfully  sworn  falsely  in  his  affidavit  annexed 
to  his  petition,  schedule,  or  inventory,  or  upon  any  examina- 
tion in  the  course  of  the  proceedings  in  bankruptcy,  in  rela- 
tion to  any  material  fact  concerning  his  estate  or  his  tlebts, 
or  to  any  other  material  fact;  or  if  he  has  concealed  any 
part  of  his  estate  or  effects,  or  any  books  or  waitings  relating 
thereto,  or  if  he  has  been  guilty  of  any  fraud  or  negligence 
in  the  care,  custody,  or  delivery  to  the  assignee  of  the  prop- 
erty belonging  to  him  at  the  time  of  the  presentation  of  his 
petition  and  inventory,  excepting  such  property  as  he  is  per- 
mitted to  retain  under  the  provisions  of  this  act,  or  if  he  has 
caused,  permitted,  or  suffered  any  loss,  waste,  or  destruction 
thereof;  or  if,  within  four  months  before  the  commencement 
of  such  proceedings,  he  has  procured  his  lands,  goods,  money, 
or  chattels  to  be  attached,  sequestered,  or  seized  on  execu- 
tion ;  or  if,  since  the  passage  of  this  act,  he  has  destroyed, 
mutilated,  altered,  or  falsified  any  of  his  books,  documents, 
papers,  writings,  or  securities,  or  has  made  or  been  privy  to 
the  making  of  any  false  or  fraudulent  entry  in  any  book  of 
account  or  other  document,  ^vith  intent  to  defraud  his  cred- 
itors ;  or  has  removed  or  caused  to  be  removed  an}'^  part  of 
his  property  from  the  district,  with  intent  to  defraud  his 
creditors;  or  if  he  has  given  any  fraudulent  preference  con- 
trary to  the  provisions  of  this  act,  or  made  any  fraudulent 
payment,  gift,  transfer,  conveyance,  or  assignment  of  any 
part  of  his  property,  or  has  lost  any  part  thereof  in  gaming, 
or  has  admitted  a  false  or  fictitious  debt  against  his  estate ; 
or  if,  having  acknowledged  that  any  person  has  proved  such 
false  or  fictitious  debt,  he  has  not  disclosed  the  same  to 
his  assignee  within  one  month  after  such  knowledge;   or 
if,  being  a  merchant  or  tradesman,  he  has  not,  subsequently 


NATIONAL    BANKRUPTCY    LAW    OF  1867.  931 

to  the  passage  of  this  act,  kept  proper  books  of  account;  or 
if  he,  or  any  person  in  his  behalf,  has  procured  the  assent  of 
any  creditor  to  the  discharge,  or  influenced  the  action  of  any 
creditor  at  any  stage  of  the  proceedings,  by  any  pecuniary 
consideration  or  obligation ;  or  if  he  has,  in  contemplation 
of  becoming  bankrupt,  made  any  pledge,  payment,  transfer, 
assignment  or  conveyance  of  any  part  of  his  property,  di- 
rectly or  indirectly,  absolutely  or  conditionally,  for  the  pur- 
pose of  preferring  any  creditor  ^  or  person  having  a  claim 
against  hira,  or  who  is  or  may  be  under  liability  for  him,  or 
for  the  purpose  of  preventing  the  property  from  coming  into 
the  hands  of  the  assignee,  or  of  being  distributed  under  this 
act  in  satisfaction  of  his  debts ;  or  it  he  has  been  convicted 
of  any  misdemeanor  under  this  act,  or  has  been  guilty  of  any 
fraud  whatever  contrary  to  the  true  intent  of  this  act;  and 
before  any  discharge  is  granted,  the  bankrupt  shall  take  and 
subscribe  an  oath  to  the  effect  that  he  has  not  done,  suffered, 
or  been  priv}'^  to  any  act,  matter,  or  thing  specified  in  this 
act  as  a  ground  for  withholding  such  discharge,  or  as  invali- 
dating such  discharge  if  granted. 

Sec.  30.  And  he  it  further  enacted,  That  no  person  who 
shall  have  been  discharged  under  this  act,  and  shall  after- 
wards become  bankrupt,  on  his  own  application  shall  be 
again  entitled  to  a  discharge  whose  estate  is  insufficient  to 
pay  seventy  per  centum  of  the  debts  proved  against  it,  unless 
the  assent  in  writing  of  three  fourths  in  value  of  his  credit- 
ors who  have  proved  their  claims  is  filed  at  or  before  the 
time  of  application  for  discharge ;  but  a  bankrupt  who  shall 
prove  to  the  satisfaction  of  the  court  that  he  has  paid  all  the 
debts  owing  by  him  at  the  time  of  any  previous  bankruptcy, 
or  who  has  been  voluntarily  released  therefrom  by  his  cred- 
itors, shall  be  entitled  to  a  discharge  in  the  same  manner 
and  with  the  same  effect  as  if  he  had  not  previously  been 
bankrupt. 

Sec.  31.  And  he  it  further  enacted,  That  any  creditor  op 
posing  the  discharge  of  any  bankrupt  may  file  a  specification 
in  writing  of  the  grounds  of  his  opposition,  and  the  court 


932  LAW    OF    BANKUUl-rOY. 

may  in  its  discretion  order  any  question  of  fact  so  presented 
to  be  tried  at  a  stated  session  of  the  district  court. 

Sec.  32.  And  he  it  further  enacted,  That  if  it  shall  appear 
to  the  court  that  the  bankrupt  has  in  all  things  conformed 
to  his  duty  under  this  act,  and  that  he  is  entitled,  under  the 
provisions  thereof,  to  receive  a  discharge,  the  court  shall 
grant  him  a  discharge  from  all  his  debts  except  as  herein- 
after provided,  and  shall  give  him  a  certificate  thereof  under 
the  seal  of  the  court,  in  substance  as  follows : 

District  Court  of  the  United  States,  District  of . 

Whereas, has  been  duly  adjudged  a  bankrupt 

under  the  act  of  Congress  establishing  a  uniform  system  of 
bankruptcy  throughout  the  United  States,  and  appears  to 
have  conformed  to  all  the  requirements  of  law  in  that  be- 
half, it  is  therefore  ordered  by  the  court  that  said 

be  forever  discharged  from  all  debts  and  claims  which  by 
said  act  are  made  provable  against  his  estate,  and  which 

existed  on  the day  of ,  on  which  day  the  petition  for 

adjudication  was  filed  by  (or  against)  him;  excepting  such 
debts,  if  any,  as  are  by  said  act  excepted  from  the  operation 
of  a  discharge  in  bankruptcy.     Given  under  my  hand  and 

the  seal  of  the  court  at ,  in  the  said  district,  this  —  day  of 

,  A.  D. .  ,  Judge. 

{Seal.-] 

Sec.  33.  And  he  it  further  enacted,  That  no  debt  created 
by  the  fraud  or  embezzlement  of  the  bankrupt,  or  by  his  de- 
falcation as  a  public  officer,  or  while  acting  in  any  fiduciary 
character,  shall  be  discharged  under  this  act;  but  the  debt 
may  be  proved,  and  the  dividend  thereon  shall  be  a  payment 
on  account  of  said  debt;  and  no  discharge  granted  under 
this  act  shall  release,  discharge,  or  affect  any  person  liable 
for  the  same  debt  for  or  with  the  bankrupt,  either  as  part 
ner,  joint  contractor,  indorser,  surety,  or  otherwise.  And  in 
all  proceedings  in  bankruptcy  commenced  after  one  year 
from  the  time  this  act  shall  go  into  operation,  no  discharge 
shall  be  granted  to  a  debtor  whose  assets  do  not  pay  fifty ' 

1  The  act  of  June  22,  1874  (18  St.  (15  St.  L.  228,  §  1).  as  follows:  That 
L.  180,  §  9),  amends  this  section  as  in  cases  of  compulsory  or  involun- 
amended  by  the  act  of  July  27, 1808    tary  bankruptcy,  the  provisions  of 


NATIONAL    BANKEUPTCY    LAW    OF  1867.  933 

per  centum  of  the  claims  against  his  estate,  unless  the  assent 
in  writing  of  a  majority  in  number  and  value  of  his  credits 
ors  who  have  proved  their  claims  is  filed  in  the  case  at  or 
before  the  time  of  application  for  discharge. 

Sec.  34.  And  he  it  further  enacted,  That  a  discharge  duly 
granted  under  this  act  shall,  with  the  exceptions  aforesaid, 
release  the  bankrupt  from  all  debts,  claims,  liabilities,  and 
demands  which  were  or  might  have  been  proved  against  his 
estate  in  bankruptcy,  and  may  be  pleaded,  by  a  simple  aver- 
ment that  on  the  day  of  its  date  such  discharge  was  granted 
to  him,  setting  the  same  forth  in  haBC  verba,  as  a  full  and 
complete  bar  to  all  suits  brought  on  any  such  debts,  claims, 
liabilities,  or  demands,  and  the  certificate  shall  be  conclu- 
sive evidence  in  favor  of  such  bankrupt  of  the  fact  and  [the] 
regularity  of  such  discharge:  AIwoajs  provided,  That  any 
creditor  or  creditors  of  said  bankrupt,  whose  debt  was 
proved  or  provable  against  the  estate  in  bankruptcy,  who 
shall  see  fit  to  contest  the  validity  of  said  discharge  on  the 
ground  that  it  was  fraudulently  obtained,  may,  at  any  time 
within  two  years  after  the  date  thereof,  apply  to  the  court 
which  granted  it  to  set  aside  and  annul  the  same.  Said  ap- 
plication shall  be  in  writing,  shall  specify  which,  in  particu- 
lar, of  the  several  acts  mentioned  in  section  twenty-nine  it 
is  intended  to  give  evidence  of  against  the  bankrupt,  setting 

said  act,  and  any  amendment  voluntary  bankruptcy,  no  discharge 
thereof,  or  of  any  supplement  shall  be  granted  to  a  debtor  whose 
thereto,  requiring  the  payment  of  assets  shall  not  be  equal  to  thirty 
any  proportion  of  the  debts  of  the  per  centum  of  the  claims  proved 
bankrupt,  or  the  assent  of  any  por-  against  his  estate,  upon  which  lie 
tion  of  his  creditors,  as  a  condition  shall  be  liable  as  principal  debtor, 
of  his  discharge  from  his  debts,  without  the  assent  of  at  least  one- 
shall  not  apply;  but  he  may,  if  fourth  of  his  creditors  in  number, 
otherwise  entitled  thereto,  be  dis-  and  one-third  in  value;  and  the 
charged  by  the  court  in  the  same  provision  in  section  thirty-three  of 
manner  and  with  the  same  effect  said  act  of  March  second,  eighteen 
as  if  he  had  paid  sucli  per  centum  hundred  and  sixty-seven,  requiring 
of  his  debts,  or  as  if  the  required  fifty  per  centum  of  such  assets,  is 
proportion  of  his  creditors  liad  as-  hereby  repealed, 
sented  thereta    And  in  cases   of 


934  LAW    OF    BAJ^KRUPTCT. 

t'ortli  the  grounds  of  avoidance,  and  no  evidence  shall  be 
admitted  as  to  any  other  of  the  said  acts ;  but  said  applica- 
tion shall  be  subject  to  amendment  at  the  discretion  of  the 
court.  The  court  shall  cause  reasonable  notice  of  said  ap- 
plication to  be  given  to  said  bankrupt,  and  order  him  to  ap- 
pear and  answer  the  same,  Avithin  such  time  as  to  the  court 
shall  seem  fit  and  proper.  If,  upon  the  hearing  of  said  par- 
ties, the  court  shall  find  that  the  fraudulent  acts,  or  any  of 
them,  set  forth  as  aforesaid  by  said  creditor  or  creditors 
against  the  bankrupt,  are  proved,  and  that  said  creditor  or 
creditors  had  no  knowledge  of  the  same  until  after  the 
granting  of  said  discharge,  judgment  shall  be  given  in  favor 
of  said  creditor  or  creditors,  and  the  discharge  of  said  bank- 
rupt shall  be  set  aside  and  annulled.  But  if  said  court  shall 
find  that  said  fraudulent  acts  and  all  of  them,  set  forth  as 
aforesaid,  are  not  proved,  or  that  they  were  known  to  said 
creditor  or  creditors  before  the  granting  of  said  discharge, 
then  judgment  shall  be  rendered  in  favor  of  the  bankrupt, 
and  the  validity  of  his  discharge  shall  not  be  affected  by 
said  proceedings. 

Preferences  and  Fraudulent  Conveyances  Declared 

Void. 

Sec.  35.*  And  he  it  further  enacted^  That  if  any  person, 
being  insolvent,  or  in  contemplation  of  insolvency,  within 
four  months   before  the  filing  of  the  petition  by  or  against 

1  The  act  of  June  23,  1874  (18  St.  tioned  in  said  section  thirty-five  is 
L.  180,  §§  10,  11),  makes  the  follow-  hereby  changed  to  three  months; 
ing  change  with  reference  to  this  but  this  provision  shall  not  take  ef- 
section:  "  That  in  cases  of  involun-  feet  until  three  months  after  the 
tary  or  compulsory  bankruptcy,  the  passage  of  this  act." 
period  of  four  months  mentioned  It  is  further  amended  as  follows: 
in  section  thirty-five  of  the  act  to  "  First.  After  the  word  '  and,'  in 
which  this  is  an  amendment,  is  line  eleven,  insert  the  word  '  know- 
hereby  changed  to  two  months ;  but  ing. ' 

this  provision  shall  not  take  effect  "  Secondly.     After  the  word  '  at- 

until  two  months  after  the  passage  tachment,'  in  the  same  line,  insert 

of  this  act.     And  in  the  cases  afore-  the  words  '  sequestration,  seizure. ' 

said,  the  period  of  six  months  men-  "  Thirdly.     After  the  word  '  and," 


NATIONAL    BANKKLl'TCY    LAW    OF   1867.  935 

him,  with  a  view  to  give  a  preference  to  any  creditor  or  per- 
son having  a  claim  against  him,  or  who  is  under  any  liabil- 
ity for  him,  procures  any  part  of  his  property  to  be  attached, 
sequestered,  or  seized  on  execution,  or  makes  any  payment, 
pledge,  assignment,  transfer,  or  conveyance  of  any  part  of 
his  property,  either  directly  or  indirectly,  absolutely  or  con- 
ditionally, the  person  receiving  such  payment,  pledge,  as- 
signment, transfer,  or  conveyance,  or  to  be  benefited  thereby, 
or  by  such  attachment,  having  reasonable  cause  to  believe 
such  person  is  insolvent,  and  that  such  attachment,  payment, 
pledge,  assignment,  or  conveyance  is  made  in  fraud  of  the 
provisions  of  this  act,  the  same  shall  be  void,  and  the  as- 
signee may  recover  the  property,  or  the  value  of  it,  from  the 
person  so  receiving  it,  or  so  to  be  benefited ;  and  if  any  per- 
son being  insolvent,  or  in  contemplation  of  insolvency  or 
bankruptcy,  within  six  months  before  the  filing  of  the  peti- 
tion by  or  against  him,  makes  any  payment,  sale,  assignment, 
transfer,  conveyance,  or  other  disposition  of  any  part  of  his 
property  to  any  person  who  then  has  reasonable  cause  to 
believe  him  to  be  insolvent,  or  to  be  acting  in  contemplation 
of  insolvency,  and  that  such  payment,  sale,  assignment, 
transfer,  or  other  conveyance  is  made  with  a  view  to  pre- 
vent his  property  from  coming  to  his  assignee  in  bankruptcy, 
or  to  prevent  the  same  from  being  distributed  under  this 
act,  or  to  defeat  the  object  of,  or  in  any  way  impair,  hinder, 
impede,  or  delay  the  operation  and  effect  of,  or  to  evade  any 
of  the  provisions  of  this  act,  the  sale,  assignment,  transfer, 
or  conveyance  shall  be  void,  and  the  assignee  may  recover 
the  property,  or  the  value  thereof,  as  assets  of  the  bankrupt. 
And  if  such  sale,  assignment,  transfer,  or  conveyance  is  not 
made  in  the  usual  and  ordinary  course  of  business  of  the 
debtor,  the  fact  shall  be  prima  facie  evidence  of  fraud.  Any 
contract,  covenant,  or  security  made  or  given  by  a  bankrupt 

in    line   twenty,   insert  the   word  ual  value,  or  the  security  therefor, 

'knowing.'     And  nothing  in  said  made  in  good  faith,  upon  a  security 

section    thirty-five    shall    be    con-  taken  in  good  faith  on  the  occasion 

strued  to  invalidate  any  loan  of  act-  of  the  making  of  such  loan," 


030)  l-AW   of   BANKRUPTCY. 

or  other  person  with,  or  in  trust  for,  any  creditor,  for  secur- 
ing the  payment  of  any  money  as  a  consideration  for  or 
with  intent  to  induce  the  creditor  to  forbear  opposing  the 
application  for  discharge  of  the  bankrupt,  shall  be  void ;  and 
if  any  creditor  shall  obtain  any  sum  of  money  or  other 
goods,  chattels,  or  security  from  any  person  as  an  induce- 
ment for  forbearing  to  oppose,  or  consenting  to  such  appli- 
cation for  discharge,  every  creditor  so  offending  shall  forfeit 
all  right  to  any  share  or  dividend  in  the  estate  of  the  bank- 
rupt, and  shall  also  forfeit  double  the  value  or  amount  of  such 
money,  goods,  chattels,  or  security  so  obtained  to  be  recov- 
ered by  the  assignee  for  the  benefit  of  the  estate, 

Baitkkuptcy  of  Partnerships  and  of  Corporations. 

Sec.  36.  And  he  it  further  enacted^  That  where  two  or 
more  persons  who  are  partners  in  trade  shall  be  adjudged 
bankrupt,  either  on  the  petition  of  such  partners,  or  any  one 
of  them,  or  on  the  petition  of  any  creditor  of  the  partners, 
a  warrant  shall  issue  in  the  manner  provided  by  this  act, 
upon  which  all  the  joint  stock  and  property  of  the  copart- 
nership, and  also  all  the  separate  estate  of  each  of  the  part- 
ners, shall  be  taken,  excepting  such  parts  thereof  as  are 
hereinbefore  excepted ;  and  all  the  creditors  of  the  company, 
and  the  separate  creditors  of  each  partner,  shall  be  allowed 
to  prove  their  respective  debts;  and  the  assignee  shall  be 
chosen  by  the  creditors  of  the  company,  and  shall  also  keep 
separate  accounts  of  the  joint  stock  or  property  of  the  co- 
partnership and  of  the  separate  estate  of  each  member 
thereof;  and  after  deducting  out  of  the  whole  amount  re- 
ceived by  such  assignee  the  whole  of  the  expenses  and  dis- 
bursements, the  net  proceeds  of  the  joint  stock  shall  be 
appropriated  to  pay  the  creditors  of  the  copartnership,  and 
the  net  proceeds  of  the  separate  estate  of  each  partner  shall 
be  appropriated  to  pay  his  separate  creditors;  and  if  there 
shall  be  any  balance  of  the  separate  estate  of  any  partner, 
after  the  payment  of  his  separate  debts,  such  balance  shall 


NATIONAL   BANKRUPTCY    LAW    OF  1867.  937 

be  added  to  the  joint  stock  for  the  payment  of  the  joint 
creditors;  and  if  there  shall  be  any  balance  of  the  joint 
stock  after  payment  of  the  joint  debts,  such  balance  shall  be 
divided  and  appropriated  to  and  among  the  separate  estates 
of  the  several  partners  according  to  their  respective  right 
and  interest  therein,  and  as  it  would  have  been  if  the  part- 
nership had  been  dissolved  without  any  bankruptcy;  and 
the  sum  so  appropriated  to  the  separate  estate  of  each  part- 
ner shall  be  applied  to  the  payment  of  his  separate  debts; 
and  the  certificate  of  discharge  shall  be  granted  or  refused 
to  each  partner  as  the  same  would  or  ought  to  be  if  the  pro- 
ceedings had  been  against  him  alone  under  this  act;  and  in 
all  other  respects  the  proceedings  against  partners  shall  be 
conducted  in  the  like  manner  as  if  they  had  been  commenced 
and  prosecuted  against  one  person  alone.  If  such  copart- 
ners reside  in  different  districts,  that  court  in  which  the  pe- 
tition is  first  filed  shall  retain  exclusive  jurisdiction  over  the 
case. 

Sec.  37.  And  he  it  further  enacted^  That  the  provisions  of 
this  act  shall  apply  to  all  moneyed  business  or  commercial 
corporations  and  joint  stock  companies,  and  that  upon  the 
petition  of  any  officer  of  any  such  corporation  or  company, 
duly  authorized  by  a  vote  of  a  majority  of  the  corporators 
at  any  legal  meeting  called  for  the  purpose,  or  upon  the  pe- 
tition of  any  creditor  or  creditors  of  such  corporation  or 
company,  made  and  presented  in  the  manner  hereinafter 
provided  in  respect  to  debtors,  the  like  proceedings  shall  be 
had  and  taken  as  are  hereinafter  provided  in  the  case  of 
debtors ;  and  all  the  provisions  of  this  act  which  apply  to  the 
debtor,  or  set  forth  his  duties  in  regard  to  furnishing  sched- 
ules and  inventories,  executing  papers,  submitting  to  exami- 
nations, disclosing,  making  over,  secreting,  concealing,  con- 
veying, assigning,  or  paying  away  his  money  or  property, 
shall  in  like  manner,  and  with  like  force,  effect,  and  penal- 
ties, apply  to  each  and  every  officer  of  such  corporation  or 
company  in  relation  to  the  same  matters  concerning  the  cor- 
poration or  company,  and  the  money  and  property  thereof. 


938  LAW    OF    BANKRUPTCY. 

All  [)ayraents,  conveyances,  and  assignments  declared  fraud- 
ulent and  void  by  this  act  when  made  by  a  debtor,  shall  in 
like  manner,  and  to  the  like  extent,  and  with  like  remedies, 
be  fraudulent  and  void  when  made  by  a  corporation  or  com- 
pany. No  allowance  or  discharge  shall  be  granted  to  any 
corporation  or  joint  stock  company,  or  to  any  person  or  offi- 
cer or  member  thereof:  Provided^  That  whenever  any  cor- 
poration by  proceedings  under  this  act  shall  be  declared 
bankrupt,  all  its  property  and  assets  shall  be  distributed 
to  the  creditors  of  such  corporations  in  the  manner  pro- 
vided in  this  act  in  respect  to  natural  persons. 

Of  Dates  and  Deposffions. 

Sec.  38.  And  he  it  further  enacted^  That  the  filing  of  a  pe- 
tition for  adjudication  in  bankruptcy,  either  by  a  debtor  in 
his  own  behalf,  or  by  any  creditor  against  a  debtor;  upon 
which  an  order  may  be  issued  by  the  court,  or  by  a  register 
in  the  manner  provided  in  section  four,  shall  be  deemed  and 
taken  to  be  the  commencement  of  proceedings  in  bank- 
ruptcy under  this  act;  the  proceedings  in  all  cases  of  bank- 
ruptcy shall  be  deemed  matters  of  record,  but  the  same  shall 
not  be  required  to  be  recorded  at  large,  but  shall  be  care- 
fully filed,  kept,  and  numbered  in  the  office  of  the  clerk  of  the 
court,  and  a  docket  only,  or  short  memorandum  thereof,  kept 
in  books  to  be  provided  for  that  purpose,  which  shall  be  open 
to  public  inspection.  Copies  of  such  records,  duly  certified 
under  the  seal  of  the  court,  shall  in  all  cases  be  prima  facie 
evidence  of  the  facts  therein  stated.  Evidence  or  examina- 
tion in  any  of  the  proceedings  under  this  act  may  be  taken 
before  the  court,  or  a  register  in  Dankruptcy,  viva  voce  or  in 
writing,  before  a  commissioner  of  the  circuit  court,  or  by 
affidavit,  or  on  commission,  and  the  court  may  direct  a  refer- 
ence to  a  register  in  bankruptcy,  or  other  suitable  person,  to 
take  and  certify  such  examination,  and  may  compel  the  at- 
tendance of  witnesses,  the  production  of  books  and  papers, 
and  the  giving  of  testimony  in  the  same  manner  as  in  suits 
in  equity  in  the  circuit  court. 


national  banked ptcy  law  of  1867.  939 

Involuntary  Bankruptcy. 

Sec.  39.  And  he  it  further  enacted,  That  any  person  resid- 
ing and  owing  debts  as  aforesaid,  who,  after  the  passage  of 
this  act,  shall  depart  from  the  State,  district,  or  Territory  of 
which  he  is  an  inhabitant,  with  intent  to  defraud  his  credit- 
ors, or,  being  absent,  shall,  with  such  intent,  remain  absent; 
or  shall  conceal  himself  to  avoid  the  service  of  legal  process 
in  any  action  for  the  recovery  of  a  debt  or  demand  provable 
under  this  act;  or  shall  conceal  or  remove  any  of  his  prop- 
erty to  avoid  its  being  attached,  taken,  or  sequestered  on  legal 
process;  or  shall  make  any  assignment,  gift,  sale,  convey- 
ance, or  transfer  of  his  estate,  property,  rights,  or  credits, 
either  within  the  United  States  or  elsewhere,  with  intent  to 
delay,  defraud,  or  hinder  his  creditors ;  or  who  has  been  ar- 
rested and  held  in  custody  under  or  by  virtue  of  mesne  pro- 
cess or  execution,  issued  out  of  any  court '  of  any  State,  dis- 
trict, or  Territory,  within  which  such  debtor  resides  or  has 
property  founded  upon  a  demand  in  its  nature  provable 
against  a  bankrupt's  estate  under  this  act,  and  for  a  sum 
.exceeding  one  hundred  dollars,  and  such  process  is  remain- 
ing in  force  and  not  discharged  by  payment,  or  in  any  other 
manner  provided  by  the  law '  of  such  State,  district,  or  Ter- 
ritory applicable  thereto,  for  a  period  of  ^  seven  days;  or  has 
been  actually  imprisoned  for  more  than  -  seven  days  in  a 
civil  action,  founded  on  contract,  for  the  sum  of  one  hundred 
dollars  or  upwards;  or  who,  being  bankrupt  or  insolvent, 
or  in  contemplation  of  bankruptcy  or  insolvency,  shall  make 
any  payment,  gift,  grant,  sale,  conveyance,  or  transfer  of 
money  or  other  property,  estate,  rights,  or  credits,^  or  give 
any  warrant  to  confess  judgment;  or  procure  or  suffer  his 
property  to  be  taken  on  legal  process,  with  intent  to  give  a 
preference  to  one  or  more  of  his  creditors,  or  to  any  person 

iThe  act  of  Juna  23,  1874  (18  St.  1874,  above,   changes   "seven"  to 

L.  180,  §  12),  amends  this  section  by  "twenty." 

here  inserting  the  vrords  "of  the  'Section   12  of  the  act  of  1874 

United  States  or."  here  adds  the  words  "  or  confess 

2  Section      12     of     the     act     of  judgment." 


940 


LAW    OF    BANKRUPTCY. 


or  persons  who  are  or  may  be  liable  for  him  as  indorsers, 
bail,  sureties,  or  otherwise,  or  with  the  intent,  by  such  dis- 
position of  his  property,  to  defeat  or  delay  the  operation  of 
this  act;  ^  or  who,  being  a  banker,^  merchant,  or  trader,  has 


1  The  act  of  June  23,  1874  (18  St 
L,  180,  §  12),  amends  this  section  by 
inserting  the  following  in  lieu  of 
the  balance  of  this  paragraph :  "  Or 
who  being  a  bank,  banker,  broker, 
merchant,  trader,  manufacturer,  or 
miner,  has  fraudulently  stopped 
payment,  or  who,  being  a  bank, 
banker,  broker,  merchant,  trader, 
manufacturer,  or  miner,  has 
stopped  or  suspended  and  not  re- 
sumed payment,  within  a  period  of 
forty  days,  of  his  commercial  paper 
(made  or  passed  in  the  course  of  his 
business  as  such),  or  who,  being  a 
bank  or  banker,  shall  fail  for  forty 
days  to  pay  any  depositor  upon  de- 
mand of  payment  lawfully  made, 
shall  be  deemed  to  have  committed 
an  act  of  bankruptcy,  and,  subject 
to  the  conditions  hereinafter  pre- 
scribed, shall  be  adjudged  a  bank- 
rupt on  the  petition  of  one  or  more 
of  his  creditors,  who  shall  consti- 
tute one-fourth  thereof,  at  least, 
in  number,  and  the  aggregate  of 
whose  debts  provable  under  this  act 
amounts  to  at  least  one-third  of  the 
debts  so  provable:  Provided,  That 
such  petition  is  brought  within 
six  montlis  after  such  act  of  bank- 
ruptcy shall  have  been  committed." 
[The  act  of  July  26,  1876  (19  St.  L. 
102),  here  inserts  a  provision  to  the 
effect  that  an  assignment  made  by 
a  debtor  of  all  his  property,  in  good 
faith,  for  the  benefit  of  his  credit- 
ors, without  creating  a  preference 


and  valid  under  the  state  laws, 
shall  not  be  a  bar  to  the  discharge 
of  such  debtor.]  "  And  the  provis- 
ions of  this  section  shall  apply  to 
all  cases  of  compulsory  or  involun- 
tary bankruptcy  commenced  since 
the  first  day  of  December,  eighteen 
hundred  and  seventy-three,  as  well 
as  to  those  commenced  hereafter. 
And  in  all  cases  commenced  since 
the  first  day  of  December,  eighteen 
hundred  and  seventy-three,  and 
prior  to  the  passage  of  this  act,  as 
well  as  those  commenced  hereafter, 
the  court  shall,  if  such  allegation 
as  to  the  number  or  amount  of  pe- 
titioning creditors  be  denied  by  the 
debtor,  by  a  statement  in  writing 
to  that  effect,  require  him  to  file  ip 
court  forthwith  a  fiill  list  of  hi^ 
creditors,  with  their  places  of  resi- 
dence and  the  sums  due  them 
respectively,  and  shall  ascertain, 
upon  reasonable  notice  to  the  cred- 
itors, whether  one-fourth  in  num- 
ber and  one-third  in  amount 
thereof,  as  aforesaid,  have  peti- 
tioned that  the  debtor  be  adjudged 
a  bankrupt.  But  if  such  debtor 
shall,  on  the  filing  of  the  petition, 
admit  in  writing  that  the  requisite 
number  and  amount  of  creditors 
have  petitioned,  the  court  (if  satis- 
fied that  the  admission  was  made 
in  good  faith)  shall  so  adjudge, 
which  judgment  shall  be  final,  and 
the  matter  proceed  without  fur- 
ther steps  on  that  subject.    And  if 


2 The  act  of  July  14,  1870  (16  St.    adding  the  words  "broker,  manu- 
L.  276,  §  2),  amends  this  clause  by    facturer  or  miner." 


NATIONAL   liANKKUPTCY    LAW    OF  laCT. 


941 


fraudulently  stopped  or  suspended  and  not  resumed  payment 
of  his  commercial  paper,  within  a  period  of  fourteen  days, 
shall  be  deemed  to  have  committed  an  act  of  bankrui)tcy, 
and,  subject  to  the  conditions  hereinafter  prescribed,  shall 
be  adjudged  a  bankrupt,  on  the  petition  of  one  or  more  of 
his  creditors,  the  aggregate  of  whose  debts  provable  under 
this  act  amount  to  at  least  two  hundred  and  fifty  dollars, 
provided  such  petition  is  brought  within  six  months  after 
the  act  of  bankruptcy  shall  have  been  committed.  And  if 
such  person  shall  be  adjudged  a  bankrupt,  the  assignee  may 


it  shall  appear  that  such  number 
and  amount  have  not  so  petitioned, 
the  court  shall  grant  reasonable 
time,  not  exceeding,  in  cases  here- 
tofore commenced,  twenty  days, 
and,  in  cases  hereafter  commenced, 
ten  days,  within  which  other  cred- 
itors may  join  in  such  petition. 
And  if,  at  the  expiration  of  such 
time  so  limited,  the  number  and 
amount  shall  comply  with  the  re- 
quirements of  this  section,  the 
matter  of  bankruptcy  may  pro- 
ceed; but  if,  at  the  expiration  of 
such  limited  time,  such  number 
and  amount  shall  not  answer  the 
requirements  of  this  section,  the 
proceedings  shall  be  dismissed,  and, 
in  cases  hereiifter  commenced,  with 
costs.  And  if  such  person  shall  be 
adjudged  a  bankrupt,  the  assignee 
may  recover  back  the  m^ney  or 
property  so  paid,  conveyed,  sold, 
assigned,  or  transferred  contrary 
to  this  act:  Provided,  That  the  per- 
son receiving  such  payment  or  con- 
veyance had  reasonable  cause  to 
believe  that  the  debtor  was  insolv- 
ent, and  knew  that  a  fraud  on  this 
act  was  intended;  and  such  per- 
son, if  a  creditor,  shall  not,  in  cases 
of  actual  fraud  ou  his  part,  be  al> 


lowed  to  prove  for  more  than  a 
moiety  of  his  debt;  and  this  limit- 
ation on  the  proof  of  debts  shall 
apply  to  cases  of  voluntary  as  well 
as  involuntary  bankruptcy.  And 
the  petition  of  creditors  under  this 
section  may  be  sufficiently  verified 
by  the  oaths  of  the  first  five  signers 
thereof,  if  so  many  there  be.  And 
if  any  of  said  first  five  signers  shall 
not  reside  in  the  district  in  which 
such  petition  is  to  be  filed,  the 
same  may  be  signed  and  verified 
by  the  oath  or  oaths  of  the  attor- 
ney or  attorneys,  agent  or  agents, 
of  such  signers.  And  in  comput- 
ing the  number  of  creditors,  as 
aforesaid,  who  shall  join  in  such 
petition,  creditors  whose  respective 
debts  do  not  exceed  two  hundred 
and  fifty  dollars  shall  not  be  reck- 
oned. But  if  there  be  no  creditors 
whose  debts  exceed  said  siun  of 
two  hundred  and  fifty  dollars,  or  if 
the  requisite  number  of  creditors 
holding  debts  exceeding  two  hun- 
dred and  fifty  dollars  fail  to  sign 
the  petition,  the  creditors  having 
debts  of  a  less  amount  shall  be 
reckoned  for  the  purposes  afore- 
said." 


942  LAW    OF    BANKKUPTCY. 

recover  back  the  money  or  other  property  so  paid,  conveyed, 
sold,  assigned,  or  transferred  contrary  to  this  act,  provided 
the  person  receiving  such  payment  or  conveyance  had  reason- 
able cause  to  believe  that  a  fraud  on  this  act  was  intended, 
or*  that  the  debtor  was  insolvent,  and  such  creditor  shall  not 
be  allowed  to  prove  his  debt  in  bankruptcy. 

Sec.  40.  And  he  it  further  enacted^  That  upon  the  filing  of 
the  petition  authorized  by  tlie  next  preceding  section,  if  it 
shall  appear  that  sufficient  grounds  exist  therefor,  the  court 
shall  direct  the  entry  of  an  order  requiring  the  debtor  to 
appear  and  show  cause,  at  a  court  of  bankruptcy  to  be  holden 
at  a  time  to  be  specified  in  the  order,  not  less  than  five  days 
from  the  service  thereof,  why  the  prayer  of  the  petition 
should  not  be  granted ;  and  may  also,  by  its  injunctions,  re- 
strain the  debtor,  and  any  other  person,  in  the  meantime, 
from  making  any  transfer  or  disposition  of  any  part  of  the 
debtor's  property  not  excepted  by  this  act  from  the  opera- 
tion thereof  and  from  any  interference  therewith ;  and  if  it 
shall  appear  that  there  is  probable  cause  for  believing  that 
the  debtor  is  about  to  leave  the  district,  or  to  remove  or 
conceal  his  goods  and  chattels  or  his  evidence  of  property, 
or  make  any  fraudulent  conveyance  or  disposition  thereof, 
the  court  may  issue  a  warrant  to  the  marshal  of  the  district, 
commanding  him  to  arrest  the  alleged  [bankrupt]  and  him 
safely  keep,  unless  he  shall  give  bail  to  the  satisfaction  of 
the  court  for  his  appearance  from  time  to  time,  as  required 
by  the  court,  until  the  decision  of  the  court  upon  the  peti- 
tion or  the  further  order  of  the  court,  and  forthwith  to  take 
possession  provisionally  of  all  the  property  and  effects  of  the 
debtor,  and  safely  keep  the  same  until  the  fm'ther  order  of 
the  court.  A  copy  of  the  petition  and  of  such  order  to  show 
cause  shall  be  served  on  such  debtor  by  delivering  the  same 
to  him  personally,  or  leaving  the  same  at  his  last  or  usual 
place  of  abode ;  or,  if  such  debtor  cannot  be  found,  or  his  place 
of  residence  ascertained,  service  shall  be  made  by  publication 

iBy  the  act  of  JiUy  27,  1868  (15  St  L.  228,  §  2),  this  word  "or"  is 
changed  to  "and." 


NATIONAL   BANKRUPTCY    LAW    OF  1867. 


943 


in  such  manner  as  the  judge  may  direct.  No  farther  pro- 
ceedings, unless  the  debtor  appear  and  consent  thereto,  shall 
be  had  until  proof  shall  have  been  given,  to  the  satisfaction 
of  the  court,  of  such  service  or  publication;  and  if  such 
proof  be  not  given  on  the  return  day  of  such  order,  the  pro- 
ceedings shall  be  adjourned  and  an  order  made  that  the  no- 
tice be  forthwith  so  served  or  published.' 

Sec.  41.  And  he  it  further  enacted,  That  on  such  return  day 
or  adjourned  day,  if  the  notice  has  been  fully  served  or  pub- 
lished, or  shall  be  waived  by  the  appearance  and  consent  of 
the  debtor,  the  court  shall  proceed  summarily  to  hear  the 
allegations  of  the  petitioner  and  debtor,  and  may  adjourn 
the  proceedings  from  time  to  time,  on  good  cause  shown, 
iind  shall,  if  the  debtor  on  the  same  day  so  demand  in  writ- 
ing, order  a  trial  by  jury  at  the  first  term  of  the  court  at 
which  a  jury  shall  be  in  attendance,  to  ascertain  the  fact  of 
such  alleged  bankruptcy ;  ^  and  if  upon  such  hearing  or  trial, 


I  The  act  of  June  22,  1874  (18  St 
L.  182,  §  13),  amends  this  section 
by  adding  at  the  end  thereof  the 
following  words:  "And  if,  on  the 
return-day  of  the  order  to  show 
cause  as  aforesaid,  the  court  shall 
be  satisfied  that  the  requirement  of 
section  thirty-nine  of  said  act  as  to 
the  number  and  amount  of  petition- 
ing creditors  has  been  complied 
with,  or  if,  within  the  time  pro- 
vided for  in  section  thirty-nine  of 
this  act,  creditors  sufficient  in  num- 
ber and  amount  shall  sign  such  peti- 
tion so  as  to  make  a  total  of  one- 
fourth  in  number  of  the  creditors 
and  one-third  in  the  amount  of  the 
provable  debts  against  the  bank- 
rupt, as  provided  in  said  section, 
the  court  shall  so  adjudge,  which 
judgment  shall  be  final ;  otherwise 
it  shall  dismiss  the  proceedings,  and, 
in  cases  hereafter  commenced,  with 
costs." 


2  The  act  of  June  22,  1874  (18  St. 
L.  182,  §  14),  amends  this  section  by 
striking  out  all  of  said  section  after 
the  word  "  bankruptcy  "  and  insert- 
ing the  words,  "  Or,  at  the  election 
of  the  debtor,  the  court  may,  in  its 
discretion,  award  a  venire  facias  to 
the  marshal  of  the  district,  return- 
able within  ten  days  before  him  for 
the  trial  of  the  facts  set  forth  in 
his  petition,  at  which  time  the  trial 
shall  be  had,  unless  adjourned  for 
cause.  And  unless,  upon  such  hear- 
ing or  trial,  it  shall  appear  to  the 
satisfaction  of  said  court,  or  of  the 
jury,  as  the  case  may  be,  that  the 
facts  set  forth  in  said  petition  are 
true,  or  if  it  shall  appear  that  the 
debtor  has  paid  and  satisfied  all 
liens  upon  his  property,  in  case  the 
existence  of  such  liens  was  the  sole 
ground  of  the  proceeding,  the  pro- 
ceeding shall  be  dismissed,  and  the 
res[K)ndeiu  shall  recover  costs;  and 


944  LAW    OF   BANKRUPTOy 

the  debtor  proves  to  the  satisfaction  of  the  court  or  of  the 
jury,  as  the  case  may  be,  that  the  facts  set  forth  in  the  peti- 
tion are  not  true,  or  that  the  debtor  has  paid  and  satisfied 
all  liens  upon  his  property,  in  case  the  existence  of  such  liens 
were  the  sole  ground  of  the  proceeding,  the  proceedings  shall 
be  dismissed  and  the  respondent  shall  recover  costs. 

Sec.  42.  And  he  it  further  enacted^  That  if  the  facts  set 
forth  in  the  petition  are  found  to  be  true,  or  if  default  be 
made  by  the  debtor  to  appear  pursuant  to  the  order,  upon 
due  proof  of  service  thereof  being  made,  the  court  shall  ad- 
judge the  debtor  to  be  a  bankrupt,  and,  as  such,  subject  to 
the  provisions  of  this  act,  and  shall  forthwith  issue  a  war- 
rant to  take  possession  of  the  estate  of  the  debtor.  The  war- 
rant shall  be  directed,  and  the  property  of  the  debtor  shall 
be  taken  thereon,  and  shall  be  assigned  and  distributed  in 
the  same  manner  and  with  similar  proceedings  to  those 
hereinbefore  provided  for  the  taking  possession,  assignment, 
and  distribution  of  the  property  of  the  debtor  upon  his  own 
petition.  The  order  of  adjudication  of  bankruptcy  shall  re- 
quire the  bankrupt  forthwith,  or  within  such  number  of 
days,  not  exceeding  five  after  the  date  of  the  order  or  notice 
thereof,  as  shall  by  the  order  be  prescribed,  to  make  and  de- 
liver, or  transmit  by  mail,  post-paid,  to  the  messenger,  a 
schedule  of  the  creditors  and  an  inventory  ^  of  his  estate  in 
the  form  and  verified  in  the  manner  required  of  a  petition- 
ing debtor  by  section^  thirteen.     If  the  debtor  has  failed  to 

all  proceedings  in  bankruptcy  may  ruptcy,  except  so  far  as  such  estate 

be  discontinued  on  reasonable  no-  shall  have  been  already  adminis- 

tice  and  hearing,  with  the  approval  tered  and   disposed   of.     And   the 

of  the  court,  and  upon  the  assent,  court  shall  have  power  to  make  all 

in  writing,  of  such  debtor,  and  not  needful  orders  and  decrees  to  carry 

less  than  one-half  of  his  creditors  in  the  foregoing  provision  into  effect." 
number  and  amount;  or,  in  case  all        '  The  act  of  June  22,  1874  (18  St. 

the  creditors  and  such  debtor  as-  L.  182,  §  15),  adds  the  words  "and 

sent  thereto,  such  discontinuance  valuation,"   after    the    word   "in- 

shall  be  ordered  and  entered;  and  ventory." 

all   parties   shall    be    remitted,  in        2  The  act  of  July  27,  1868  (15  St 

either  case,  to  the  same  rights  and  L.  238,  §  2),  changes  the  word  "  thir- 

duties  existing  at  the  date  of  the  teen  "  to  "eleven." 
filing    of  the    petition    for    bank- 


NATIOJ^AL    BANKRUPTCY    LAW    OF   1867.  945 

appear  in  person,  or  by  attorney,  a  certified  copy  of  the  ad- 
judication shall  be  forthwith  served  on  him  by  delivery  or 
publication  in  the  manner  hereinbefore  provided  for  the 
service  of  the  order  to  show  cause;  and  if  the  bankrupt  is 
absent  or  cannot  be  found,  such  schedule  and  inventory  shall 
be  prepared  by  the  messenger  and  the  assignee  from  the 
best  information  they  can  obtain.  If  the  petitioning  cred- 
itor shall  not  appear  and  proceed  on  the  return  day,  or  ad- 
journed day,  the  court  may,  upon  the  petition  of  any  other 
creditor,  to  the  required  amount,  proceed  to  adjudicate  on 
such  petition,  without  requiring  a  new  service  or  publication 
of  notice  to  the  debtor. 

Of  Superseding  the  Bankrupt  Proceedings  by  Arrange- 
ment, 

Sec.  43.  And  he  it  further  enacted^  That  if  at  the  first  meet- 
ing of  creditors,  or  at  any  meeting  of  creditors  to  be  specially 
called  for  that  purpose,  and  of  which  previous  notice  shall 
have  been  given  for  such  length  of  time  and  in  such  manner 
as  the  court  may  direct,  three  fourths  in  value  of  the  credit- 
ors whose  claims  have  been  proved  shall  determine  and  re- 
solve that  it  is  for  the  interest  of  the  general  body  of  the 
creditors  that  the  estate  of  the  bankrupt  should  be  wound 
up  and  settled,  and  distribution  made  among  the  creditors 
by  trustees,  under  the  inspection  and  direction  of  a  commit- 
tee of  the  creditors,  it  shall  be  lawful  for  the  creditors  to 
certify  and  report  such  resolution  to  the  court,  and  to  nomi- 
nate one  or  more  trustees  to  take  and  hold  and  distribute  the 
estate,  under  the  direction  of  such  committee.  If  it  shall 
appear  to  the  court,  after  hearing  the  bankrupt  and  such 
creditors  as  may  desire  to  be  heard,  that  the  resolution  was 
duly  passed,  and  that  the  interests  of  the  creditors  will  be 
promoted  thereby,  it  shall  confirm  the  same;  and  upon  the 
execution  and  filing,  by  or  on  behalf  of  three  fourths  in  value 
of  all  the  creditors  whose  claims  have  been  proved,  of  a  con- 
sent that  the  estate  of  the  bankrupt  be  wound  up  and  settled 

50 


946  ^^^^    O^    BANKRUPTCY. 

by  said  trustees  according  to  tlie  terms  of  such  resolution, 
the  bankrupt,  or  his  assignee  in  bankruptcy,  if  appointed,  as 
the  case  may  be,  shall,  under  the  direction  of  the  court,  and 
under  oath,  convey,  transfer,  and  deliver  all  the  property  and 
estate  of  the  bankrupt  to  the  said  trustee  or  trustees,  who 
shall,  upon  such  conveyance  and  transfer,  have  and  hold  the 
same  in  the  same  manner,  and  with  the  same  powers  and 
rights,  in  all  respects,  as  the  bankrupt  would  have  had  or 
held  the  same  if  no  proceedings  in  bankruptcy  had  been 
taken,  or  as  the  assignee  in  bankruptcy  would  have  done  had 
such  resolution  not  been  passed ;  and  such  consent  and  the 
proceedings  thereunder  shall  be  as  binding  in  all  respects  on 
any  creditor  whose  debt  is  provable,  who  has  not  signed  the 
same,  as  if  he  had  signed  it,  and  on  any  creditor  whose  debt, 
if  provable,  is  not  proved,  as  if  he  had  proved  it;  and  the 
court,  by  order,  shall  direct  all  acts  and  things  needful  to 
be  done  to  carry  into  effect  such  resolution  of  the  creditors, 
and  the  said  trustees  shall  proceed  to  wind  up  and  settle  the 
estate  under  the  direction  and  inspection  of  such  committee 
of  the  creditors,  for  the  equal  benefit  of  all  such  creditors, 
and  the  winding  up  and  settlement  of  any  estate  under  the 
provisions  of  this  section  shall  be  deemed  to  be  proceedings 
in  bankruptcy  under  this  act;  and  the  said  trustees  shall 
have  all  the  rights  and  powers  of  assignees  in  bankruptcy. 
The  court,  on  the  application  of  such  trustees,  shall  have 
power  to  summon  and  examine,  or  [on]  oath  or  otherwise, 
the  bankrupt  and  any  creditor,  and  any  person  indebted  to 
the  estate,  or  known  or  suspected  of  having  any  of  the  estate 
in  his  possession,  or  any  other  person  whose  examination  may 
be  material  or  necessary  to  aid  the  trustees  in  the  execu- 
tion of  their  trust,  and  to  compel  the  attendance  of  such 
persons  and  the  production  of  books  and  papers  in  the  same 
manner  as  in  other  proceedings  in  bankruptcy  under  this 
act;  and  the  bankrupt  shall  have  the  like  right  to  apply  for 
and  obtain  a  discharge  after  the  passage  of  such  resolution 
and  the  appointment  of  such  trustees  as  if  such  resolution 
had  not  been  passed,  and  as  if  all  the  procecdiugs  had  con 


NATIONAL   BANKRUPTCY    LAW    OF  1867. 


947 


tinued  in  the  maimer  provided  in  the  preceding  sections  of 
this  act.  If  the  resolution  shall  not  be  duly  reported,  or  the 
consent  of  the  creditors  shall  not  be  duly  filed,  or  if,  upon 
its  filing,  the  court  shall  not  think  fit  to  approve  thereof,  the 
bankruptcy  shall  proceed  as  though  no  resolution  had  been 
passed,  and  the  court  may  make  all  necessary  orders  for  re- 
suming the  proceedings.  And  the  period  of  time  which  shall 
have  elapsed  between  the  date  of  the  resolution  and  the  date 
of  the  order  for  assuming  proceedings  shall  not  be  reckoned 
in  calculating  periods  of  time  prescribed  by  this  act.' 


1  The  act  of  June  22,  1874  (18  St. 
L.  182,  §  17),  here  adds  the  follow- 
ing provisions:  That  in  all  cases  of 
bankruptcy  now  pending,  or  to  be 
hereafter  pending,  by  or  against 
any  person,  whether  an  adjudica- 
tion in  bankruptcy  shall  have  been 
had  or  not,  the  creditors  of  such 
alleged  bankrupt  may,  at  a  meet- 
ing called  under  the  direction  of 
the  court,  and  upon  not  less  than 
ten  days'  notice  to  each  known 
creditor  of  the  time,  place  and  pur- 
pose of  such  meeting,  such  notice 
to  be  personal  or  otherwise,  as  the 
court  may  direct,  resolve  that  a 
composition  proposed  by  the  debtor 
shall  be  accepted  in  satisfaction  of 
the  debts  due  to  them  from  the 
debtor.  And  such  resolution  shall, 
to  be  operative,  have  been  passed 
by  a  majority  in  number  and  three- 
fourths  in  value  of  tlie  creditors  of 
the  debtor  assembled  at  such  meet- 
ing either  in  person  or  by  proxy, 
and  shall  be  confirmed  by  the  sig- 
natures thereto  of  the  debtor  and 
two-thirds  in  number  and  one-half 
in  value  of  all  the  creditors  of  the 
debtor.  And  in  calculating  a  ma- 
jority for  the  purposes  of  a  com- 
position under  this  section,  credit- 


ors whose  debts  amount  to  sums 
not  exceeding  $50  shall  be  reckoned 
in  the  majority  in  value,  but  not 
in  the  majority  in  number;  and 
the  value  of  the  debts  of  secured 
creditors  above  the  amount  of  such 
security,  to  be  determined  by  the 
court,  sliall,  as  nearly  as  circum- 
stances admit,  be  estimated  in  the 
same  way.  And  creditors  whose 
debts  are  fiilly  secured  shall  not  be 
entitled  to  vote  upon  or  sign  such 
resolution  without  first  relinquish- 
ing such  security  for  the  benefit  of 
the  estate. 

The  debtor,  unless  prevented  by 
sickness  or  other  cause  satisfactory 
to  such  meeting,  shall  be  present  at 
the  same,  and  shall  answer  any  in- 
quiries made  of  him ;  and  he,  or,  if 
he  is  so  prevented  from  being  at 
such  meeting,  some  one  in  his  be- 
half, shall  produce  to  the  meeting 
a  statement  showing  the  whole  of 
his  assets  and  debts,  and  the  names 
and  addresses  of  the  creditors  to 
whom  such  debts  respectively  are 
due. 

Such  resolution,  together  with 
the  statement  of  the  debtor  as  to 
his  assets  and  debts,  shall  be  pre- 
sented to  the  court:  and  the  coiu-t 


948 


LAW    OF   BAKKEUPTOY. 


Penalties  Against  Bankrupts. 

Sec.  44.  And  he  it  further  enacted,  That  from  and  after  the 
passage  of  this  act  if  any  debtor  or  bankrupt  shall,  after  the 
commencement  of  proceedings  in  bankruptcy,  secrete  or  con- 
ceal any  property  belonging  to  his  estate,  or  part  with,  con- 
ceal, or  destroy,  alter,  mutilate,  or  falsify,  or  cause  to  be 


shall,  upon  notice  to  all  the  credit- 
ors of  the  debtor  of  not  less  than 
five  days,  and  upon  hearing,  inquire 
whether  such  resolution  has  been 
passed  in  the  manner  directed  by 
this  section;  and  if  satisfied  that  it 
has  been  so  passed,  it  shall,  subject 
to  the  provisions  hereinafter  con- 
tained, and  upon  being  satisfied 
that  the  same  is  for  the  best  inter- 
est of  all  concerned,  cavise  such 
resolution  to  be  recorded  and  state- 
ment of  assets  and  debts  to  be  filed ; 
and  until  such  record  and  filing 
shall  have  taken  place,  such  reso- 
lution shall  be  of  no  validity.  And 
any  creditor  of  the  debtor  niay  in- 
spect such  record  and  statement  at 
all  reasonable  times. 

The  creditors  may,  by  resolution 
passed  in  the  manner  and  under  the 
circumstances  aforesaid,  add  to,  or 
vary  the  provisions  of,  any  compo- 
sition previously  accepted  by  them, 
without  prejudice  to  any  persons 
taking  interests  under  such  provis- 
ions who  do  not  assent  to  such  ad- 
dition or  variation.  And  any  such 
additional  resolution  shall  be  pre- 
sented to  the  court  in  the  same 
manner,  and  proceeded  with  in  the 
same  way,  and  with  the  same  con- 
sequences, as  the  resolution  by 
which  the  composition  was  ac- 
cepted in  the  first  instance.  The 
provisions  of  a  composition  ac- 
cepted by  such  resolution  in  pursu- 


ance of  this  section  shall  be  binding 
on  all  the  creditors  whose  names 
and  addresses  and  the  amoimts  of 
the  debts  due  to  whom  are  shown 
in  the  statement  of  the  debtor  pro- 
duced at  the  meeting  at  which  the 
resolution  shall  have  been  passed, 
but  shall  not  affect  or  prejudice  the 
rights  of  any  other  creditors. 

Where  a  debt  arises  on  a  bill  of 
exchange  or  promissory  note,  if  the 
debtor  shall  be  ignorant  of  the 
holder  of  any  such  bill  of  exchange 
or  promissory  note,  he  shall  be  re- 
quired to  state  the  amount  of  such 
bill  or  note,  the  date  on  which  it 
falls  due,  the  names  of  the  acceptor 
and  of  the  person  to  whom  it  is 
payable,  and  any  other  particulars 
within  his  knowledge  respecting 
the  same;  and  the  insertion  of  such 
particulars  shall  be  deemed  a  suffi- 
cient description  by  the  debtor  in 
respect  to  such  debt. 

Any  mistake  made  inadvertently 
by  a  debtor  in  the  statement  of  his 
debts  may  be  corrected  upon  rea- 
sonable notice,  and  with  the  con- 
sent of  a  general  meeting  of  his 
creditors. 

Every  such  composition  shall, 
subject  to  priorities  declared  in 
said  act,  provide  for  a  pro  rata  pay- 
ment or  satisfaction,  in  money,  to 
the  creditors  of  such  debtor  in  pro- 
portion to  the  amount  of  their  un 
secured  debts,  or  their  debts  in  re- 


NATIONAL    r.ANKRUPTCY    LAW    OF   1867.  949 

concealed,  destroyed,  altered,  mutilated,  or  falsified,  any 
book,  deed,  document,  or  writing  relating  thereto,  or  remove, 
or  cause  to  be  removed,  the  same  or  any  part  thereof  out  of 
the  district,  or  otherwise  dispose  of  any  part  thereof,  with 
intent  to  prevent  it  from  coming  into  the  possession  of  the 
assignee  in  bankruptcy,  or  to  hinder,  impede,  or  delay  either 
of  them  in  recovering  or  receiving  the  same,  or  make  any 
payment,  gift,  sale,  assignment,  transfer,  or  conveyance  of 
any  property  belonging  to  his  estate  with  the  like  intent,  or 
spends  any  part  thereof  in  gaming ;  or  shall,  with  intent  to 
defraud,  wilfully  and  fraudulently  conceal  from  his  assignee 
or  omit  from  his  schedule  any  property  or  effects  whatso- 
ever; or  if,  in  case  of  any  person  having,  to  his  knowledge 
or  belief,  proved  a  false  or  fictitious  debt  against  his  estate, 
he  shall  fail  to  disclose  the  same  to  his  assignee  within  one 
month  after  coming  to  the  knowledge  or  belief  thereof;  or 
shall  attempt  to  account  for  any  of  his  property  by  fictitious 
losses  or  expenses ;  or  shall,  within  three  months  before  the 
commencement  of  proceedings  in  bankruptcy,  under  the  false 
color  and  pretense  of  carrying  on  business  and  dealing  in 

spect  to  which  any  such  security  the  court,  on  notice,  satisfactory 
shall  have  been  duly  surrendered  evidence  and  hearing,  that  a  com- 
and  given  up.  position  under  this  section  cannot, 
The  provisions  of  any  composi-  in  consequence  of  legal  diificulties, 
tion  made  in  pursuance  of  this  sec-  or  for  any  sufficient  cause,  proceed 
tion  may  be  enforced  by  the  court,  without  injustice  or  undue  delay 
on  motion  made  in  a  summary  man-  to  the  creditors  or  to  the  debtor, 
ner  by  any  person  interested,  and  the  court  may  refuse  to  accept  and 
on  reasonable  notice;  and  any  dis-  confirm  such  composition,  or  may 
obedience  of  the  order  of  the  court  set  the  same  aside;  and,  in  either 
made   on    such    motion    shall   be  case,  the  debtor  shall  be  proceeded 
deemed  to  be  a  contempt  of  court,  with  as  a  bankrupt  in  conformity 
Rules  and  regtdations  of  court  may  with  the  provisions  of  law,  and  pro- 
be made  in  relation  to  proceedings  ceedings  may  be  had  accordingly; 
of  composition  herein  provided  for  and  the  time  during  which  such 
in  the  same  manner  and  to  the  composition    shall   have    been    in 
same  extent  as  now  provided  by  force  shall   not,  in  such  case,  be 
law  in  relation  to  proceedings  in  computed  in  calculating  periods  of 
bankruptcy.  time  prescribed  by  said  act 
If  it  shall  at  any  time  appear  to 


950  LAW    OF    BANKKUPTCY. 

the  ordinary  course  of  trade,  obtain  on  credit  from  any  per- 
son any  goods  or  chattels  with  intent  to  defraud ;  or  shall, 
with  intent  to  defraud  his  creditors,  within  three  months 
next  before  the  commencement  of  proceedings  in  bankruptcy, 
pawn,  pledge,  or  dispose  of,  otherwise  than  by  bona  fide  trans- 
actions in  the  ordinary  way  of  his  trade,  any  of  his  goods 
or  chattels  which  have  been  obtained  on  credit  and  remain 
unpaid  for,  he  shall  be  deemed  guilty  of  a  misdemeanor,  and, 
upon  conviction  thereof  in  any  court  of  the  United  States, 
shall  be  punished  by  imprisonment,  with  or  without  hard 
labor,  for  a  term  not  exceeding  three  years. 

Penalties  Against  Officers. 

Seo.  45.  And  he  it  further  enacted^  That  if  any  judge,  reg- 
ister, clerk,  marshal,  messenger,  assignee,  or  any  other  ofiQ- 
cer  of  the  several  courts  of  bankruptcy  shall,  for  anything 
done  or  pretended  to  be  done  under  this  act,  or  under  color 
of  doing  anything  thereunder,  wilfully  demand  or  take,  or 
appoint  or  allow  any  person  whatever  to  take  for  him  or  on 
his  account,  or  for  or  on  account  of  any  other  person,  or  in 
trust  for  him  or  for  any  other  person,  any  fee,  emolument, 
gratuity,  sum  of  money,  or  anything  of  value  whatever, 
other  than  is  allowed  by  this  act,  or  which  shall  be  allowed 
under  the  authority  thereof,  such  person,  when  convicted 
thereof,  shall  forfeit  and  pay  the  sum  of  not  less  than  three 
hundred  dollars  and  not  exceeding  five  hundred  dollars,  and 
be  imprisoned  not  exceeding  three  years. 

iSec.  46.  And  he  it  further  enacted,  That  if  any  person  shall 
forge  the  signature  of  a  judge,  register,  or  other  officer  of  the 
court,  or  shall  forge  or  counterfeit  the  seal  of  the  courts,  or 
knowingly  concur  in  using  any  such  forged  or  counterfeit 
signature  or  seal  for  the  purpose  of  authenticating  any  pro- 
ceeding or  document,  or  shall  tender  in  evidence  any  such 
proceeding  or  document  with  a  false  or  counterfeit  signature 
of  any  such  judge,  register,  or  other  officer,  or  a  false  or  coun- 
terfeit seal  of  the  court,  subscribed  or  attached  thereto,  know 


NATIONAL    BANKKUPTCY    LAW    OF  1867.  951 

ing  such  signature  or  seal  to  be  false  or  counterfeit,  any  such 
person  shall  be  guilty  of  felony,  and  upon  conviction  thereof 
shall  be  liable  to  a  fine  of  not  less  than  five  hundred  dollars, 
and  not  more  than  five  thousand  dollars,  and  to  be  impris- 
oned not  exceeding  five  years,  at  the  discretion  of  the  court. 

Fees  and  Costs. 

Sec.  47.^  And  he  it  further  enacted,  That  in  each  case  there 
shall  be  allowed  and  paid,  in  addition  to  the  fees  of  the  clerk 
of  the  court  as  now  established  by  law,  or  as  may  be  estab- 
lished by  general  order,  under  the  provisions  of  this  act,  for 
fees  in  bankruptcy,  the  following  fees,  which  shall  be  ap- 
plied to  the  payment  for  the  services  of  the  registers:  — 

For  issuing  every  warrant,  two  dollars. 

For  each  day  in  which  a  meeting  is  held,  three  dollars. 

For  each  order  for  a  dividend,  three  dollars. 

For  every  order  substituting  an  arrangement  by  trust 
deed  for  bankruptcy,  two  dollars. 

For  every  bond  with  sureties,  two  dollars. 

For  every  application  for  any  meeting  in  any  matter  under 
this  act,  one  dollar. 

1  The  act  of  June  22,  1874  (18  St.  make  and  promulgate  new  rules 
L.  184,  g  18),  makes  the  following  and  regulations  in  respect  to  the 
amendment  of  this  section:  "That  matters  aforesaid,  under  the  pow- 
from  and  after  the  passage  of  this  ers  conferred  upon  them  by  sec- 
act  the  fees,  commissions,  charges,  tions  ten  and  forty-seven  of  said 
and  allowances,  excepting  actual  act,  and  no  longer,  which  duties 
and  necessary  disbursements,  of,  they  shall  perform,  as  soon  as  may 
and  to  be  made  by  the  officers,  be.  And  said  justices  shall  have 
agents,  marshals,  messengers,  as-  power  under  said  sections,  by  gen- 
signees,  and  registers  in  cases  of  eral  regulations,  to  simplify  and,  so 
bankruptcy,  shall  be  reduced  to  far  as  in  their  judgment  will  con- 
one-half  of  the  fees,  commissions,  dace  to  tlie  benefit  of  creditors,  to 
charges,  and  allowances  heretofore  consolidate  the  duties  of  the  regis- 
provided  for  or  made  in  like  cases:  ter,  assignee,  marshal,  and  clerk, 
Provided,  That  the  preceding  pro-  and  to  reduce  fees,  costs,  and 
vision  shall  be  and  remain  in  force  charges,  to  the  end  that  prolixity, 
until  the  justices  of  the  Supreme  del<ay,  and  uimecessary  expense 
Court  of  the  United  States  shall  may  be  avoided." 


953  LAW    OF   BANKRUPTOr. 

For  every  day's  service  while  actually  employed  under  a 
special  order  of  the  court,  a  sum  not  exceeding  five  dollars, 
to  be  allowed  by  the  court. 

For  taking  depositions  the  fees  now  allowed  by  law. 

For  every  discharge  when  there  is  no  opposition,  two 
dollars. 

Such  fees  shall  have  priority  of  payment  over  all  other 
claims  out  of  the  estate,  and,  before  a  warrant  issues,  the  pe- 
titioner shall  deposit '  with  the  senior  register  of  the  court, 
or  with  the  clerk,  to  be  delivered  to  the  register,  fifty  dollars 
as  security  for  the  payment  thereof;  and  if  there  are  not 
sufficient  assets  for  the  payment  of  the  fees,  the  person  upon 
whose  petition  the  warrant  is  issued,  shall  pay  the  same,  and 
the  court  may  issue  an  execution  against  him  to  compel  pay- 
ment to  the  register. 

Before  any  dividend  is  ordered,  the  assignee  shall  pay 
out  of  the  estate  to  the  messenger  the  following  fees,  and 
no  more :  — 

First.  For  service  of  warrant,  two  dollars. 

Second.  For  all  necessary  travel,  at  the  rate  of  five  cents 
a  mile  each  way. 

Third.  For  each  written  note  to  creditor  named  in  the 
schedule,  ten  cents. 

Fourth.  For  custody  of  property,  publication  of  notices, 
and  other  services,  his  actual  and  necessary  expenses  upon 
returning  the  same  in  specific  items,  and  making  oath  that 
they  have  been  actually  incurred  and  paid  by  him,  and  are 
just  and  reasonable,  the  same  to  bf  taxed  or  adjusted  by  the 
court,  and  the  oath  of  the  messenger  shall  not  be  conclusive 
as  to  the  necessity  of  said  expenses. 

For  cause  shown,  and  upon  hearing  thereon,  such  further 
allowance  may  be  made  as  the  court,  in  its  discretion,  may 
determine. 

The  enumeration  of  the  foregoing  fees  shall  not  prevent 

iThe  act  of  July  27,  1868,  (15  St    ior  register  or"  and  "to  be  deliv- 
L.  228,  §  2),  amends  this  section  by    ered  to  the  register." 
omitting  the  words  "  with  the  sen* 


NATIONAL    BANKRUPTCY    LAW    OF  1867.  953 

ihe  judges,  who  shall  frame  general  rules  and  orders  in  ac- 
cordance with  the  provisions  of  section  ten,  from  prescribing 
a  tariff  of  fees  for  all  other  services  of  the  officers  of  courts 
of  bankruptcy,  or  from  reducing  the  fees  prescribed  in  this 
section  in  classes  of  cases  to  be  named  in  their  rules  and 
orders. 

Of  Meaning  of  Terms  and  Computation  of  Time. 

Sec.  48.  And  he  it  fwrther  enacted^  That  the  word  "  as- 
signee "  and  the  word  "  creditor "  shall  include  the  plural 
also;  and  the  word  "messenger"  shall  include  his  assistant 
or  assistants,  except  in  the  provision  for  the  fees  of  that  offi- 
cer. The  word  "  marshal "  shall  include  the  marshal's  depu- 
ties; the  word  "person"  shall  also  include  "corporation;" 
and  the  word  "  oath  "  shall  include  "  affirmation."  And  in 
all  cases  in  which  any  particular  number  of  days  is  pre- 
scribed by  this  act,  or  shall  be  mentioned  in  any  rule  or 
order  of  court  or  general  order  which  shall  at  any  time  be 
made  under  this  act,  for  the  doing  of  any  act,  or  for  any 
other  purpose,  the  same  shall  be  reckoned,  in  the  absence  of 
any  expression  to  the  contrary,  exclusive  of  the  first,  and 
inclusive  of  the  last  day,  unless  the  last  day  shall  fall  on  a 
Sunday,  Christmas  day,  or  on  any  day  appointed  by  the 
President  of  the  United  States  as  a  day  of  public  fast  or 
thanksgiving,  or  on  the  fourth  of  July,  in  which  case  the 
time  shall  be  reckoned  exclusive  of  that  day  also. 

Sec.  49.  And  he  it  further  enacted,  That  all  the  jurisdic- 
tion, power,  and  authority  conferred  upon  and  vested  in  the 
District  Court  of  the  United  States  by  this  act  in  cases  in 
bankruptcy  are  hereby  conferred  upon  and  vested  in  the  Su- 
preme Court  of  the  District  of  Columbia,  and  in  and  upon 
the  ^  supreme  courts  of  the  several  Territories  of  the  United 
States,'^  when  the  bankrupt  resides  in  the  said  District  of 

iThe  act  of  June  22,  1874  (18  St.  1874  inserts  here  the  words  "sub- 

L.  182),  §  16,  amends  this  section  by  ject  to  the  general  superintendence 

substituting   the  words  "  District  and  jurisdiction    conferred    upon 

Court"  in  lieu  of  "Supreme  C!ourts."  circuit  courts  by  section  two  of 

2  Section  16  of  the  above  act  of  said  act." 


954  i-AW    OF    BANKRUPTOT. 

Columbia  or  in  either  of  the  said  Territories.  And  in  those 
judicial  districts  which  are  not  within  any  organized  circuit 
of  the  United  States,  the  power  and  jurisdiction  of  a  circuit 
court  in  bankruptcy  may  be  exercised  by  the  district  judge. 

Seo.  50.  And  he  it  further  enacted,  That  this  act  shall 
commence  and  take  effect  as  to  the  appointment  of  the  offi- 
cers created  hereby,  and  the  promulgation  of  rules  and  gen- 
eral orders,  from  and  after  the  date  of  its  approval :  Provided, 
That  no  petition  or  other  proceeding  under  this  act  shall  be 
filed,  received,  or  commenced  before  the  first  day  of  June, 
Anno  Domini,  eighteen  hundred  and  sixty-seven. 

Approved,  March  2,  1867. 


INDEX. 


[REFERENCES    ARE    TO    SECTIONS] 

A 

ABANDONMENT, 

by  trustee,  of  bankrupt's  property,  1209. 

of  homestead  exemptions  by  bankrupt,  191. 
ABBREVIATIONS, 

petitions,  etc.,  not  to  contain,  1240. 
ABSENCE, 

of  referee,  who  to  act,  665. 

filling  vacancy  in  case  of,  728.  1392. 
ACCOUNTS  (see  Books  of  Account), 

debt  founded  on  open,  provable,  977,  997. 

false,  making  of  by  bankrupt,  636. 

final,  to  be  approved  by  court,  26,  1351. 

form  of  trustees,  1335. 
of  oath  to  final.  1336. 
of  order  discharging  trustee,  1337. 

manner  of  keeping  in  case  of  partnership,  154. 

marshal's,  etc..  rendition  of,  etc.,  976,  1254. 

notice  to  be  given  of  filing  final,  etc.,  896,  904,  1407. 

open  to  inspection.  777,  1398. 

referee  to  keep,  1261. 

refusal  of  trustee  and  referee  to  permit  inspection  an  offense,  641. 

trustee  to  keep,  file,  etc.,  752,  755,  1396. 

ACKNOWLEDGMENTS   (see  Oaths). 
ACT, 

bankruptcy,  of  1867,  p.  898. 

bankruptcy,  of  1898,  took  effect  when,  1223,  1420. 
amendments  of  1903,  took  effect  when,  1233,  1423. 
ACTS  OF  BANKRUPTCY, 

admitting  in  writing  inability  to  pay  debts,  etc.,  85. 
classes  of,  64,  1352. 
conveyances  and  transfers,  69,  70. 
of  partnership  property,  72. 
to  relatives,  73. 

mortgages,  pledges,  sales,  etc.,  74,  77. 
creditors  participating  in  cannot  take  advantage  of,  66,  923. 
defense  of  solvency,  when  made,  etc.,  86,  89. 
determination  of  insolvency,  67,  68. 

955 


95(5  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

ACTS  OF  BANKRUPTCY— Continued, 
four  months'  period,  counting  of,  85. 
general  assignment  for  benefit  of  creditors,  82. 
intent,  allegation  and  proof,  81. 
jury  trial  on.  allowed,  500,  1368. 
legal  proceedings  resulting  in,  78. 

inability  to  defeat,  79. 

receivership,  etc.,  80. 
partnership,  in  case  of,  145. 
persons  conniving  or  participating  in,  66. 
testimony  on  denying  insolvency,  90,  91. 
time  for  filing  petition  after  commission  of,  84, 

ADJOURNMENTS. 

of  creditors'  meetings,  when  allowed,  etc.,  814. 
of  hearing  on  application  for  discharge,  345. 

ADJUDICATIONS, 

appeal  from  order  granting  or  refusing,  498,  603,  1374. 

conclusive,  when,  924. 

consent  of  bankrupt,  effect,  925. 

of  corporation  to,  121. 
copy  of  decree  to  be  recorded  where  property  located,  769. 
cost  in  contested,  1269. 
defined,  25,  1350. 
effect  of,  250,  494,  495. 
form  of,  1297. 

that  debtor  is  not  bankrupt,   1296. 
jurisdiction  of  court  over,  26,  1351. 
making  on  failure  to  plead,  488,  489. 
operates  in  rem,  250. 
partnership  as  bankrupt,  when,  130. 
referee  may  make,  674,  676,  1387. 
set  aside  when,  497. 

voluntary  petition  to  be  made  by  judge,  etc.,  491,  493. 
when  not  set  aside,  496. 

ADMINISTRATION. 

cost  of,  entitled  to  priority  of  payment,  1016,  1022,  1024. 

ADMINISTRATOR, 

cannot  be  adjudicated  bankrupt,  122. 

ADMISSION, 

by  corporation,  83. 

inability  to  pay  debts,  act  of  bankruptcy,  64,  83,  1352. 
of  bankrupt,  that  requisite  quorum  has  filed  petition,  insufficient, 
etc.,  925. 

ADVERSE  CLAIMANT  (see  also  Courts  of  Bankruptcy), 
determination  of  existence  of,  585. 
suit  to  recover  jurisdiction  by  trustee  against,  571,  572. 


INDEX.  957 

[REFERENCES    ARE    TO    SECTIONS] 

AFFIDAVIT, 

form  of,  in  case  of  lost  bill,  etc.,  1323. 

in  support  of  petition  for  seizure  of  bankrupt's  property,  1143. 

pauper  or  inability,  payment  of  fees  in  case  of,  795,  798. 

to  proof  of  claim,  by  whom  made,  1256. 
AFFIRMATIONS, 

may  be  taken  in  lieu  of  oath,  517,  1369. 
AGENT, 

creditor  may  appear  and  act  by,  470. 

form  of  proof  of  debt  by,  1321. 
of  secured  debt,  1322. 
by  agent,  1322. 

knowledge  of,  in  case  of  preference,  964. 

may  have  pleadings  verified  by,  479. 

proof  of  claim  may  be  made  by,  848,  1256. 
ALASKA, 

U.  S.  courts  of,  made  courts  of  bankruptcy,  26,  1351. 
ALIEN, 

may  be  adjudged  bankrupt,  26,  111,  1351. 

when  court  has  jurisdiction  over,  35. 
ALIMONY, 

when  not  affected  by  discharge,  422. 

when  provable,  979. 

when  proceedings  to  enforce  judgments  under,  will  not  be  stayed, 
264. 
ALLOTMENTS, 

Indian,  exempt,  204. 
ALLOWANCE. 

of  claims,  861. 

to  wife  and   children   in  case   of  death  or   insanity  of  bankrupt, 
226,  230. 
AMENDMENTS, 

Act  of  1903,  takes  effect  when,  1233,  1423. 

may  be  authorized   by  referee,  690. 

of  schedules,  when  allowed,  218. 

petition  for,  when  permitted,  462,  465. 
when  denied,  466. 

preparation  of,  1246. 

proof  of  claims,  when  allowed,  851. 
"AMOUNT   IN   CONTROVERSY," 

what  constitutes,  615, 
ANSWER, 

to  petition,  form  of,  etc.,  473. 
APPEALS  AND   WRITS   OF  ERROR, 

commitment  for  contempt,  review  of  order,  57. 

courts  of  bankruptcy,  from  dicision  of.  how  taken,  610. 
by  whom,  607. 
from  adjudication,  who  entitled  to  apply,  498. 


958  INDEX. 

[REFERENCES    ARE    TO    SECTIONSj 

APPEALS  AND  WRITS  OF  ERROR— Continued. 

cases  in  wliich  allowable,  603-612,  1374. 
when  not  allowable,   1610. 

from  confirmation  of  a  composition.  329. 

petition  for  review  of  decision  of,  600. 

time  for  taking,  609. 
effect  of,  612. 

findings  to  be  filed  in  case  of,  1271. 
from  what  courts,  608. 

"matter  or  amount  in  controversy,''  what  is,  615. 
method  of  allowance,  1271. 
petition  for  review  at  same  time,  611. 
review  of  order  for  stay,  etc.,  274. 
Supreme  Court,  appeals  in  general  to,  588-590. 

certiorari  may  be  sued  by,  617,  618. 

from  Circuit  Court  of  Appeals  on  certification  of  question,  594. 

from  highest  state  court,  592. 

how  taken,  etc.,  614. 

statutory  provisions  relating  to,  in  general,  590. 

when  allowable  to,  613. 
sureties  on  bonds,  effect  of  discharge  on,  415. 
time  for  taking,  1271. 
trustee  need  not  give  bond  on,  616. 
when  and  how  allowed  in  general,  593. 

APPEARANCE, 

effect  of  trustee's  in  suits  against  bankrupt,  278. 

in  bankruptcy,  mode  of,  469,  470. 
time  of,  471. 

of  bankrupt  or  creditor,   in  involuntary  proceedings,  469. 

time  for  making,  may  be  varied  by  judge,  1272. 

voluntary  by  bankrupt,  etc.,  454. 
APPELLATE    COURTS     (see    Appeals;      Circuit    Court    of    Appeals; 
Supreme  Court  of  the  United  States),  366. 

defined,  25,  1350. 

what  are,  588,  596. 
APPLICATION, 

for  discharge,  form  of,  filing,  etc.,  341,  345. 

for  examination  of  witnesses,  who  may  make,  etc..  519. 

for  stay,  form  of,  etc.,  268. 
APPOINTMENT. 

of  referee,  661. 

of  trustee  in  bankruptcy,  731-743,  1393. 
APPRAISEMENT, 

form  of  appointment  of  appraisers,  1298. 

of  bankrupt's  estate,  referee  may  authorize,  682. 

on  setting  aside  exemptions,  184. 

sale  of,  after,  682. 

to  be  made  by  three  appraisers,  1189. 


INDEX.  959 

[REFERENCES    ARE    TO    SECTIONS] 

ARBITRATION, 

submission  of  controversies  in  settling  estate,  619,  1375. 

application,  what  to  state,  1268.  , 

finding,  etc.,   621. 

selection  of  arbitrators,  620,  626. 
ARREST, 

attendance  of  for  examination,  while  under,  525. 
bankrupt  exempt  from,  when,  231,  238,  1358. 

release  of,  on  habeas  corpus,  1265. 

detention  of,  for  examination,  240,  241. 
how  released  from,  234. 
protection  against,  when  and  to  whom  given,  235. 

how  given,  when,  etc.,  236,  238. 

referee  to  give,  etc.,  1247. 
scope  of  inquiry   into  state  court  proceedings,  233. 
ASSIGNEE, 

claims  of,  under  assignment,  provable,  980. 

how  proved,  1256. 
ASSIGNMENT  (see  General  Assignment), 
act  of  bankruptcy,  64,  82,  1352. 

petition  to  be  filed  within  four  months,  84. 
bankrupt's  property,  exemptions  out  of,  187. 
claims  proved  by  assignee,  1256. 

manner  of,  845. 
given  with  intent  to  defraud,  etc.,  void,  1097. 
wages  not  entitled  to  priority  of  payment,  1043. 
ATTACHMENTS   (see  Legal  Proceedings), 

effect  of  composition  proceedings  on,  301.  324. 
effect  of  proceedings  over  creditors,  holding,  etc.,  485. 
for  contempt  for  failing  to  pay  dischargeable  debt,  procedure,  423. 
intervention  of  creditors  holding,  in  involuntary  proceedings,  937. 
title  of  trustee  to  property  held   under,  1172. 
void  if  within  four  months,  1109,  1114. 
ATTENDANCE, 

of  bankrupt  at  meetings,  etc.,  209,  210,  817,  1356. 
of  witnesses  compulsory,  518,  540. 
ATTORNEY, 

cannot  represent  bankrupt  and  creditor,  1032. 
court  to  determine  reasonableness  of  fee,  970,  971. 
creditors  may  appear  by,  470,  835. 

may  have  pleadings  verified  by.  479. 

entitled  to  payment  when  trustee  declines  to  prosecute,  1033. 
employment  of  by  trustee,  761. 
examinations  of  payments  to,  970,  971. 
fee  of.  provable,  981. 

entitled  to  priority  of  payment,  when,  1016,  1025,  1413. 
general  assignees,  payment  of  fees,  etc.,  1036. 
knowledge  of,  in  case  of  preference,  964. 


9G0  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

ATTORNEY— Continued. 

lien  of,  for  fee,  when,  1035. 

proceedings  to  be  conducted  by  member  of  bar,  1239. 

commenced  by,  when  not,  36. 
proof  of  claim  may  be  made  by.  848. 

may  be  acknowledged  before,  when  a  notary,  849. 

form  of,  when  made  by,  1321. 
receiver's,  payment  of  fee,  1037. 
referee  not  to  act  as,  if  interested,  700,  1388. 
trustee  acting  as.  entitled  to  fee,  1040. 
trustee's,  selected  at  first  meeting,  737. 
vote  for  trustees,  when,  742. 

ATTORNEY     GENERAL, 

statistics  to  be  reported  annually  to  Congress,  808,  1402. 
referees  and  officers  to  furnish  to,  809. 

AUCTIONEER, 

fee  of,  entitled  to  priority  of  payment,  1023. 

B 

BAIL, 

bankrupt  may  give,  to  attend  examination,  240. 

BANK, 

adjudication  of.  as  bankrupt,   when,   108,  112. 
debts  of,  provable,  when,  982. 
depositors  entitled  to  priority  of  payment,  1047. 
claims  based  on  checks  or  orders,  1048. 
designation  of,  for  deposits  of  money,  etc.,  972,  1410. 
National,  etc.,  cannot  be  adjudged  bankrupt.  108. 
private,  may  be  adjudged  involuntary  bankrupt,  108,  112. 
set-off.  when  allowed,  1131. 
title  of  trustee  to  funds  in,  1180,  1215. 
BANKRUPT. 

acts  of  bankruptcy  by,  64,  1352. 

admission  of  willingness  to  be  adjudged,  64,  83. 

appeal  from  order  adjudicating  or  refusing  to  adjudicate,  603-605. 

arrest,  exempt  from,  when,  231,  238,  1358. 

liability  to,  when,  239. 
attendance  at  creditors'  meetings,  817. 
attorney's  fee,  in  involuntary  cases,  priority  of  payment,  1030. 

voluntary  cases,  1031. 
attorney  for,  cannot  represent  creditor,  1032. 
books  of  account  to  be  produced  as  evidence,  etc.,  546. 
burden  of  proof  on  denying  insolvency,  90,  1352. 
business  of,  may  be  conducted,  26,  46,  1351. 
co-debtor's  liability  not  affected  by  discharge,  411,  1365. 
consent  of,  will  not  give  jurisdiction  in  case  of  involuntary  peti- 
tion, etc.,  925. 


\ 


INDEX.  961 

[REFERENCES    ARE    TO    SECTIONS] 

BANKRUPT— Continued. 

contempt,  jurisdiction  of  court  over  offenses  of,  54,  63. 

before  referee.  712,  716,  1390. 

defense  to  order  of  commitment,  63. 

imprisonment  not  for  debt,  62. 

pardon  of  offense,  66. 
death  or  insanity  of,  effect  of,  226-228,  1357. 

right  of  dower  on  husband's  bankruptcy,  230. 
debts  of,  provable,  977,  1005,  1412. 

not  released  from  discharge,  418,  448,  1366. 
defined,  25,  1350. 
denial  of  bankruptcy  by,  1291. 

•detention  of,  for  purpose  of  examination,  240,  241,  1358. 
discharge,  when  to  file  application  for,  341,  345,  1363. 

covenants  not  affected  by,  427. 

examination  for  purpose  of  revoking,  408. 

need  not  plead  to  specification  in  opposition,  350. 

refused  when,  346. 
dividends  on  estate  of,  1054,  1068,  1414. 

in  case  of  adjudication  abroad,  1066. 

unclaimed,  to  be  returned  to  bankrupt,  etc.,  1072. 
duties  of.  209,  225,  1356. 

on  presentation  of  false  claim,  213. 
estate  of.  not  to  be  administered  by  state  courts,  251. 

embezzlement  of  by  trustee,  etc.,  632. 

may  be  closed  or  reopened,  50. 
examination  of.  submission  to,  209,  1356. 

a  competent  witness,  531. 

admissibility  of  evidence  of,  532. 

answer  compulsory,  529. 

attendance  of  imprisoned,  525. 

effect  of  incomplete,  534. 

notice  to  be  given  of,  896.  898,  1407. 

second  examination,   533. 

time  and  manner  of,  526,  527. 

of  wife,  333. 

when  not  subject  of.  530. 
exemptions  to  be  claimed,  183. 

amount  of.  179-208.  1355. 

head  of  family,  who  is,  195.  • 

homestead,  right  to.  etc.,  190-193. 

title  to,  remains  in,  185. 

does  not  pass  to  trustee,  1146,  1160. 

when  entitled  to  priority,  1039. 

where  property  worth  more  than  statutory  allowance.  190. 
extradition  of,  when,  242,  244,  1359. 

jurisdiction  of  court  over,  26,  1351. 
form  of  adjudication  as.   1297. 

of  examination  of,  and  witness,  1314. 

6i 


962  INDEX. 

[REFERENCES    ARE    TO    SECTIONSl 

BANKRUPT— Continued. 

of  order  of  examination,  1313. 

of  discharge,  1345. 

of  petition  for  discharge,  1343. 

of  specification  of  objections  to  discharge,  1344. 

that  debtor  is  not,  1296. 
Imprisoned,  produced  upon  habeas  corpus,  1265. 
incriminating  evidence,  need  not  give,  523. 
involuntary,  who  may  become,  108,  129.  1353. 

admission  of  insolvency  by  corporation,  114. 

against  whom  filed,  915. 

appearance  and  plea  to  involuntary,  467,  469. 

determination  of  character  of  proceedings,  110. 

service  of  petition,  449,  453. 
jurisdiction  of  court  over  and  estate,  226,  1351. 
offense  of,  636,  640. 

by  advice  of  counsel,  639. 

receiving  property  from,  640. 
order  confirming  composition,  evidence  of  title,  563. 
orders  to  comply  with,  211. 
partners,  adjudication  of,  130,  1354. 

who  may  be  adjudged  involuntary,  135. 

who  may  file  voluntary  petition,  137. 
payments  and  surrenders  by,  223. 
petition,  who  may  file  a  voluntary,  912. 

against  whom  involuntary,  may  be  filed,  912-914,  1408. 

form  of,  1274. 
preference  given  by,  when,  946,  960,  1409. 

when  voidable,  961-967. 
proceedings  may  be  conducted  by  in  person,  1239. 

proof  of  claim  due  to,  from  another  bankrupt,  892. 
protection  from  arrest  received  from  referee,  1247 
protest,    waived,    224. 

punishment  for  failing  to  file  schedule,  1244 
receivers  to  be  appointed  to  take  charge  of  an  estate,  45. 
reimbursement  of  expenses  advanced,  1245. 
residence  or  domicile  necessary  to  jurisdiction,  26,  1351. 
sale  and  appraisal  of  property,  1189,  1194. 
schedule  of  property  to  be  filed,  preparation,  etc.,  209,  214-222. 

to  be  filed  by  creditors  when,  1244. 

what  to  be   included,  215,  217. 
seizure  of  property  on  filing  petition,  etc.,  92. 

bond  to  be  given  by  creditors,  etc.,  92. 

costs  on  dismissal  of  petition,  95. 

provisional  to  prevent  deterioration,  etc.,  1140,  1145. 
suits  affecting,  when  stayed,  245,  260,  1360. 

brought  by,  to  be  prosecuted  by  trustee,  etc.,  281-283. 

plea  of  adjudication  or  discharge,  279. 

trustee  to  defend  against,  275. 


INDEX.  96^ 

[REFERENCES    ARE    TO    SECTIONS] 

BANKRUPT— Continued. 

terms  of  composition  may  be  offered  by,  287,  303,  1361. 
title  to  property  vests  in  trustee,  1146,  1419. 
title  revests  in,  on  confirming  composition,  1221. 
transfers  of  property  made  by,  trustee  may  avoid,  1204. 
trustee  in  interest  of,  not  to  be  approved,  734. 

not  liable  for  acts  of,  788. 

title  of  property  of,  to  be  reported,  769. 

to  make  conveyance  of  estate,  1200. 
voluntary  appearance  by,  454. 
voluntary,  who  may  become,  96,  107,  1353. 

BANKRUPTCY, 

Act  of  1867,  p.  898. 

Act  of  1898  took  effect  when,  1223.  1420. 

acts  of,  64,  1352. 

acts  of,  in  case  of  partnership,  145. 

adjudication  operates  in  rem,  etc.,  173. 

effect  of,  etc.,  250. 
amendments  of  1903    take  effect  when,  1233,  1423. 
courts  of,  26,  1351. 
defined,  25,  1350. 
dissolves  partnership.  134. 
effect  on  state  insolvency  proceedings.  1227. 
statistics  to  be  furnished  Congress,   808. 

BANKRUPTCY    LAWS    (see  Bankruptcy), 
advantages,  9,  10. 
cause  for  repealing  former,  7. 
constitutionality,  22. 
distinguished  from  insolvency  law,  14. 
effect  on  common  law  assignments,  1226. 
exclusive  of  state  law,  16-18. 
history  of,  1-24. 
pending  state  insolvency  proceedings  not  affected,  1227. 

when  proceedings  under  paramount,  1228. 
power  of  Congress  to  enact.  21. 
power  of  state  to  enact,  15. 

supersedes  prior  acquired  jurisdiction  of  state  courts,  1225. 
time  amendments  take  effect.  1233.  1423. 
time  of  taking  effect,  1223,  1420. 

BILLS  AND  NOTES   (see  Negotiable  Instruments). 

BOARD  OP  DIRECTORS, 

of  corporations,  punishment  of,  26,  1351. 

BONA  FIDE, 

liens  of,  for  present  consideration,  valid,  1088. 

purchasers,  lien  of  when  valid,  1097. 

title  of  purchasers,  in  case  of  bankruptcy.  1218. 


964  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

BOND, 

depositories,  to  give,   972,   1410. 

effect  of  discharge  of  principal,  etc.,  415,  416,  424. 

copy  of  order  approving  trustee,  evidence  of  title,  559,  560. 

form  of,  for  petitioning  creditors,  1294. 

of,  to  marshal,  1295. 

of  trustees.  1311. 

of  order  approving  trustees,  1311. 

of  referees.   1302. 
given  on  seizing  bankrupt's  property,  92,  1140. 
limitation  of  suits  of  referees  and  trustees,  792,  793. 
referees'  and  trustees',  779,  794. 

amount  to  be  fixed,  781. 

corporations  as,  785. 

failure  to  give,  time  of  giving,  etc.,  790,  791. 

filing  of,  787. 

joint  and  several.   789. 

sureties,  value  of  property,  number  of,  etc..  782-784. 
title  of  trustee  to,  1185. 

trustee  not  to  give,  on  taking  appeals,  etc.,  616. 
trustees  not  liable  for  bankrupt's  acts.  788. 

BOOKS, 

cases  of  referees,  manner  of  keeping,  filing,  etc.,  721-727,  1391. 

BOOKS    OF   ACCOUNT, 

discharge  refused  on  failure  to  keep.  346,  363. 

concealment,  etc..  of,  366. 

in  contemplation  of  bankruptcy,  after  passage  of  law,  364. 

intent  to  conceal  financial  condition,  1365. 
improper,  368. 
proper,  367. 
to  be  surrendered  and  used  as  evidence,  546. 

BURDEN  OF  PROOF, 

in  answer  to  order  to  show  cause,  etc.,  486. 
in  case  of  act  of  bankruptcy,  81. 
specifications  in  opposition  to  discharge,  351. 
upon  bankrupt  to  show  solvency,  86,  90. 

BUSINESS, 

bankrupts',  may  be  conducted  by  receiver,  etc.,  26,  46,  1351. 

compensation  for,  26,  1351. 
partnership,  settlement,  where  all  not  adjudicated,  177. 

BUSINESS,  PLACE  OF  (see  Domicile), 
necessary  for  jurisdiction,  26.  1351. 

C 

CASES, 

method  of  keeping  records,  etc..  721-727. 

reference  of,  to  referee,  etc.,  564. 

reinstated  on  setting  aside  composition.  330,  1362. 


INDEX.  965 

[REFERENCES   ARE   TO    SECTIONS] 

CASES— Continued. 

transfer  of,  566,  656,  657. 

jurisdiction  of  court  over,  26,  1351. 
CERTIFICATION, 

form  of  certificate  by  referee  to  judge,  1342. 

of  questions  to  Supreme  Court  by  Circuit  Court  of  Appeals,  594. 
on  certiorari,  etc.,  595,  617,  618. 
by  justice  of  Supreme  Court,  613. 

of  records  to  court  by  referee,  686,  695,  696. 
CERTIORARI, 

Supreme  Court  may  issue  writs  of,  595,  617,  618. 
CHATTEL  MORTGAGES, 

giving  of,  an  act  of  bankruptcy,  when,  74. 

invalid  for  want  of  record.  1079. 

lien  of,  when  valid,  1091. 

title  of  trustee  to,  in  case  of  bankruptcy,  1174. 
CHECKS, 

claims  based  on,  when  entitled   to   priority  of  payment,  1048. 

disbursements  of  trustee  to  be  by,  752,  1264. 

CHILDREN, 

allowances  to,  when,  226,  230. 

claims  for  support  of  minor,  etc.,  effect  of  discharge  on,  437. 

CHINESE, 

adjudication  of  bankrupt,  101. 

CHOSES  IN  ACTION, 

title  of  trustee  to,  1156. 

CIRCUIT  COURT, 

jurisdiction  of.  in  law  and  equity,  568,  569,  1372. 

concurrent  over  offenses.  586,  587,  1372. 
jury  trial  in  bankruptcy  matters,  when  allowed,  505.  506.  1368. 

CIRCUIT  COURTS  OF  APPEALS. 

appeals  to,  when  and  how  allowed,  593,  1271. 

from  bankruptcy  courts,  when  may  be  taken,  603-612,  1374. 

classes  of  cases.  605. 

who  may  appeal.  607. 

time  for  taking,  609. 

how  taken,  610. 

from  whose  decisions,  608. 
appeals  from,  to  Supreme  Court  of  the  United  States,  classes  of 
cases,  613,  1374. 

on  certificate  of  justice  of  the  Supreme  Court,  617. 

on  certiorari,  etc.,  595.  617. 
appellate  courts,  588-600. 

certifications  of  appeals  to  Supreme  Court.  594. 
jurisdiction  over  appeals  from  courts  of  bankruptcy,  596.  597. 

when  and  how  allowed.  596-598. 


9GG  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

CIRCUIT  COURTS  OF  APPEALS— Continued. 

what  may  not  be  reviewed,  599. 

petition  for  review,   600. 
who  may  present,  601. 

finality  of  decision,  602. 
review  of  decision  by  Supreme  Court  on  certiorari,  595. 
trustee  not  to  give  bond  on  appeals,  616. 
CITIZENSHIP, 

not  a  necessary  qualification  to  appointment  as  trustee.  747. 
not  requisite  to  jurisdiction  in  bankruptcy,  111. 
CLAIMS  (see  Debts;    Proof  of  Claims;    Secured  Claims), 
adverse,  determining  existence  of,  585. 
against  United  States,  title  of  trustee  to,  1220. 
allowance  or  rejection  of,  when,  818,  861,  862. 

appeal  from  judgment  allowing  or  rejecting  of  $500  or  over,  603. 
613,  1374. 

to  Supreme  Court  from  Circuit  Court  of  Appeals  in  claims  of 
$2,000,  613. 
arbitration  of  controversies  affecting,  etc.,  619. 
assigned,  proof  of,  1256. 
bankrupt  to  examine  correctness  of,  209,  1356. 

to  report  false,  209,  213.  1356. 
barred  by  Statute  of  Limitations,  provability  of,  995, 
commission  of  referee,   on  secured,   707. 
compounding  of,  when  allowed,  etc.,  628,  1263. 

petition,  what  to  state,  1268. 
contingent,  proof  of,  1256. 

counted  in  determining  number  and  amount  in  petition,  918,  922. 
counting  for  purpose  of  voting,  827,  1405. 
discharge  does  not  affect,  when,  418-448,  1366. 

effect  of,   when  not  scheduled,  418,  446. 
dividends,  declaration  and  payment,  1044,  1068. 
fee  of  referee  for  filing  proof,  702,  704. 
form  of  list  of,  etc.,  1326. 

of  order  reducing,  1324. 

of  order  expunging,  1325. 

of  proof,  by  partnership,  1320. 

of  proof,  by  agent  or  attorney,  1321. 

of  proof,  when  due  corporation,  1319. 

of  proof  of  secured,  1318. 

of  proof  of  unsecured,  1317. 
instrument  in  writing,  proof  of,  when  founded  on,  857. 
jurisdiction  of  court  of  bankruptcy  over,  26,  1351. 
liquidation  of.  1004. 

marshalling  of  assets  in  case  of  proof,  etc.,  867. 
no  lien  when  not  recorded,  1073. 

notice  of  depositions,  in  opposition  to  allowance,  555. 
objections  to  allowance  of,  hearing,  etc.,  868-872. 

effect  on  election,  834. 


INDEX.  967 

[references  are  to  sections] 
CLAIMS— Continued. 

payment  of,  where  composition  set  aside,  1052. 
penalty  for  presenting  for  proof,  when  false,  636. 
postponement  of,  as  affecting  election,  etc.,  833. 
preferred,  counted  in  determining  number,  922. 
priority  of  payment,  when  entitled  to,  1006,  1053,  1413. 

referee's  commission  on,  708. 
proof  and  allowance  distinct,  840. 
proof  of,  effect  of,  etc.,  428,  839-895. 

after  dividend,  effect  of,  1064. 

partnership,  against  individual  estate,  173-175. 

provisions  with  reference  to,  839-895,  1406. 
provable,  classes  of,  977-1005,  1412. 

not  enforceable,  in  collateral  proceedings,  etc.,  53. 
proved,  to  be  filed  allowed,  etc.,  859-861,  1259. 
reconsideration  of  allowed,  when,  etc.,  888,  889. 

time  for  asking,  890. 

recovery  of  dividends,  891. 
re-examination,  petition  for,  1256. 
schedule,  effect  of  including  in,  219. 

effect  of  omission  from,  220. 
secured,  when  permitted  to  vote,  836. 

suits   based   on,   from   which    discharged   would   be   released,   stay 
of,  245. 

distinction  between  those  discharged  and  not,  246. 
unliquidated,   provable,  etc.,  1005. 
value  of  securities  to  be  determined,  etc.,  879-884. 
voting  of,  when  deemed  present  for  purpose  of,  833. 
CLERKS    OF    COURT, 

bankruptcy  indexes  to  be  kept  by,  1229. 
bonds  to  be  filed  with,  787. 
certificates  of  search,  1229,  1421. 
clerk  defined,  25,  1351. 
compensation  of,  800.  1401. 

to  be  in  full,  1270. 
docket  to  be  kept.  1236. 
duty  of,  in  general,  475. 

deliver  papers  to  referees,  795. 

pay  fees,  795,  797. 

to  account  for.  collect  fees,  etc.,  795-1400. 
indemnity  for  expenses,  1245. 
order  of  reference,  contents.  493. 
papers  to  be  indorsed  with  time  of  filing,  1236. 
petitions  to  be  referred  to  referee.  490,  1367. 
referees'  fee  to  be  paid  by,  795. 
referees'  records  to  be  filed  with,  726. 
wages  entitled  to  priority,  1016,  1042. 
CLOSING  ESTATES, 
by  trustees,  26.  1351. 


968  INDEX. 

[REFERENCES    ARE   TO    SECTIONSj 

CO-DEBTORS, 

liability  not  affected  by  discharge,  411,  1365. 
not  affected  by  bankrupt's  composition,  323 

COLLATERAL  ATTACK, 

of  decisions  of  bankruptcy  court,  42, 
of  discharge,  not  permissible,  398. 

COLLATERAL  PROCEEDINGS, 
effect  of  discharge  on,  386,  387. 

COLLATERALS, 

trustee's  title  to  property  held  as.  1213. 

when  property  in  possession  as,  may  be  used  as  set-off,  1132. 

COMMENCEMENT  OF  PROCEEDINGS, 
defined,  25. 
from  what  to  date,  44. 

COMMERCIAL    PAPER    (see  Negotiable  Instrument). 

COMMITMENT    (see  also   Contempt), 
for  contempt,  review  of  order  of,  57. 

COMMUNICATIONS, 

privileged,  as  evidence,  547. 

COMPANY, 

unincorporated,  may  become  voluntary  bankrupt.  108. 

COMPENSATION    (see  Fees), 

limitation  on  amount  of,  referees'  and  trustees',  1231.  1422. 

of  clerks,  800,  1401. 

of  marshals  and  deputies,  802-806,  1401. 

of  receivers.  807. 

of  receivers   and  trustees  for  transacting  bankrupt's  business.  26, 

1351. 
of  referees.  702-711.  1389. 

in  pauper  cases.  706. 
of  stenographers,  674. 
of  trustees,  771-776,  1397. 

when  withheld    776. 
of  witnesses,  542. 
of  witnesses  in  bankruptcy  proceedings,  522.  ^ 

bankrupt,   523. 

when  imprisoned,  525. 

bankrupt's  wife,  535. 

trustee  or  assignee,  537. 

COMPOSITIONS. 

bankrupt  may  offer  terms  of,  287,  1361. 
acts  in  bar  of.  307-313. 
attachment  will  be  dissolved  by,  324. 
best  interest  of  creditors,  310. 


INDEX.  969 

[references  are  to  sections] 
COMPOSITIONS— Continued. 

confirmation,  acts  in  bar  of,  311. 

fraud  and  omission  preventing,  313. 
good  faith  necessary,  312. 

appeal  from  order,  329. 

application  for,  when  made,  292,  293. 

dismissal  of  proceedings,  318. 

distribution  of  consideration,  316,  317,  1361. 

effect  of,  319. 

as  a  discharge,  320. 

on  after  litigation.  322. 

on  bankrupt's  co-debtors,  323. 

hearing   of,   etc.,    304,   305,    1362. 

objections  to,  308. 

order  of,  conclusive,  328. 

revests  title  in  bankrupt,  325. 
consideration,  nature  of,  296. 

amount  of,  297. 

deposit  of,  298. 
copy  of  order  confirming,  etc.,  evidence  of  jurisdiction,  etc.,  561,  563. 

evidence  of  title,  315. 
court  to  confirm  or  reject,  etc.,  26,  1351. 

duty  with  reference  to,  309. 
failure  to  perform,  effect  of,  299. 
fee  of  trustee  in  case  of.  771,  1397. 
form  of  order  of  distribution,  1348. 

of  petition  for  meeting,  1346. 

of  application  for  confirmation,  1347. 

of  order  confirming,  1348. 
jurisdiction  of  referee  with  reference  to,  674,  678. 
litigating  creditors,  rights  in  meetings,  301. 
meetings,  power  of  referee  at,  306. 
minority  creditors,  rights  of,  294. 
notice  of  hearings  of  application,  896,  899,   1407. 
offer  before  trustee's  appointment.  302. 
partnership,  in  case  of,  149. 
petition  for,  what  to  state,  etc..  289. 
procedure  in  calling  meetings,  288. 
relation  of,  schedule  to,  222. 
secured  creditors,  rights,  in  case  of,  300. 

liens  and  attachments.  301. 
set  aside,  when,  330,  1362. 

disposition  of  property,  1052,  1053. 

effect  of,  339. 

grounds  for,  334. 

jury  trial  in  case  of,  337. 

note  falling  due  pending,  338. 

notice  of  application,  336. 


9Y0  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

COMPOSITIONS— Continued. 

order,  evidence  of  jurisdiction,  340. 

title  of  trustee  to  revest  on,  1052. 
specification  to  be  filed  in  opposition,  1267. 
statement  or  schedule  in  case  of,  290. 
terms  of,  to  be  complied  with,  321. 
title  of  trustee  to  property,  on  setting  aside,  1202. 
title  revests  in  bankrupt  on  confirmation,  1221. 
voting  at  meetings,  295. 
waiver  of  benefits  unless  pleaded,  326. 
COMPOUNDING    CLAIMS, 
when  permitted,  628,  1263. 

COMPROMISE. 

application  for,  when  granted,  etc.,  626,  627. 

to  whom  addressed.  622,  623. 
notice  to  be  given  of  proposed,  896,  1407. 
settlement  of  controversies  by,  625-627,  1376. 
compounding  of  claims,  628. 
by  method  not  authorized,  629. 
COMPUTATION, 

of  time,  how  made,  651. 
CONCEAL, 

defined,  25,  1350. 
CONCEALMENT, 

act  of  bankruptcy,  when,  64,  70,  1352. 
books  of  account,  bar  to  discharge,  346,  366,  1363. 
bankrupt's  property,  fraudulent  conveyance  as  showing,  353. 
exemption  in  case  of,  186. 
ground  for  refusing  discharge,  346,  358. 
on.  advice  of  counsel,  359. 
CONDITIONAL    SALES, 

invalid  for  want  of  record,  1080. 
CONFIRMATION, 

of  compositions,  when  application  for,  may  be  filed,  292. 
hearings  upon,  307. 
acts  in  bar  of,  310-313. 
distribution  of  consideration,  etc.,  316. 
objections  to,  308. 
operates  as  discharge,  etc.,  393. 
CONFLICT, 

between  law,  forms  and  orders,  procedure  in  case  of,  647. 
CONFUSION    OF    GOODS, 

title  to  trustee  in  case  of,  1159. 
CONSENT, 

of  bankrupt  to  filing  petition  against,  when  insufficient,  etc.,  925. 
of  corporation,  to  adjudication,  121. 
■when  necessary  to  give  jurisdiction,  578. 


INDEX.  971 

[references  are  to  sections] 
CONSIDERATION, 

composition  proceedings,  nature,  amount,  etc.,  296-298. 
distribution  of,  on  confirmation,  316,  317. 

in  proof  of  claims,  to  be  stated,  847. 
CONSTITUTIONAL, 

bankruptcy  law,  22,  23. 

exemption  laws,  180. 

not  affected  because  certain  persons  excluded,  99. 

provision  of  law  avoiding  liens,  1111. 
CONSTITUTIONALITY, 

state  law  impairing  the  obligation  of  contracts,  20. 
CONSULAR    OFFICERS, 

may  administer  oaths,  512,  1369. 
CONTEMPLATION    OF   BANKRUPTCY, 

defined,  364. 
CONTEMPT, 

attachment  for  failing  to  pay  dischargeable  debt,  release  of,  423. 

classes  of,  58. 

committed  before  referees,  punishment,  26,  1351. 

court  to  enforce  orders,  etc.,  26,  1351. 

jurisdiction  over  offense  of,  26,  1351. 
for  failure  to  obey  orders,  54. 

jury  trial  not  permitted  in  case  of,  511, 

nature  of  offense,  59. 

pardon  of,  60. 

punishment  for,  nature  of,  61. 

defense  to  order  of  commitment,  63. 
not  imprisonment  for  debt,  62. 

referees  to  certify  fact  to  court,  etc.,  712-720,  1390. 
judge  to  punish,  36,  720. 

review  of  order  of  commitment,  57. 

stay  of  proceedings  for,  257. 

witness  guilty  of,  when,  etc.,  55. 
CONTINGENT. 

claims,  proof  of,  846,  1256. 
CONTINGENT    REMAINDERS, 

title  of,  trustee  to,  1184. 
CONTRACTS. 

conditional  sale,  when  invalid  for  want  of  record,  1080. 

debts  founded  on,  provable,  977,  984. 

executory,  when  unaffected  by  discharge,  427. 

impairing  obligations  of,  by  states.  20. 
by  the  United  States,   23. 

rights  of  action  based  on,  pass  to  trustee,  1146,  1419. 

title  of  trustee  to  bankrupts.  1157. 
CONTRACT    TO   MARRY, 

when  claim  for  breach  of,  provable,  992. 


972  INDEX. 

[references  are  to  sections] 
CONTROVERSIES, 

arising  in  bankruptcy  proceedings,  appellate  courts  for,  588. 
settlement  by  arbitration,  619. 
by  compromise,  625,  1376. 
CONTUMACY, 

ground  for  refusing  discharge,  346,  372. 
CONVEYANCES    (see   Transfers) 

COPIES, 

of  proceedings,  etc.,  when  evidence,  557-563. 

COPYRIGHTS, 

title  of  trustee  to.  1177. 

CORPORATIONS, 

adjudication  of,  as  involuntary  bankrupts  when,  113. 

consent  order  of  adjudication,  121. 

failure  to  allege  class,  120. 

printers  and  publishers,  119. 

trader,  mercantile,  railroads,  etc.,  115-118. 
admission  of  inability  to  pay  debts,  etc.,  when  act  of  bankruptcy,  83. 
cannot  become  voluntary  bankrupt,  96,  102,  1353. 
counting  of  stockholders  in  petition  against,  etc.,  919. 
defined,  25,  1350. 
discharge  of,  in  bankruptcy,  342. 

effect  on  stockholders'  liability,  109,  443. 

not  to  affect  director's  liability,  417. 
form  of  proof  of  debt  due  to,  1319. 
jurisdiction  of  court  of  bankruptcy  over,  38. 
liability  of  stockholder's  provable  in  bankruptcy,  1001. 
proof  to  be  made  by  treasurer,  1256. 
punishment  of  officers  by  courts  of  bankruptcy,  1351. 
residence,  etc.,  of,  30. 
sureties  on  trustees'  and  referees'  bond,  785. 

sole  surety,  786. 
trustees'  rights  with  reference  to  liability  of  stockholders,  1216. 
verification  of  pleadings,  in  case  of,  478. 
voluntary  bankrupt  cannot  become,  102. 
word  "person"  to  include,  25,  1350. 

COSTS  (see  also  Compensation;    Fees), 

allowance  on  dismissal  of    petition,  for  seizure  of  property,  92-95. 

conducting  estates  temporarily  amount  of,  26,  1351. 

contested  adjudications,  1269. 

discharge  not  to  be  refused  for  failure  to  pay,  etc.,  376. 

not  to  affect  when,  425. 
fall  with  liens  void  under  the  law,  1122. 
in  case  of  objections  to  claims,  872 
may  be  allowed  as  set-offs,  1139. 

en  dismissal   of  involuntary  petition  where  property  seized,  etc., 
94,  95. 


INDEX.  973 

[REFERENCES    ARE    TO    SECTIONS] 

COSTS— Continued. 

payable  from  exemptions,  etc.,  206. 
priority  of  payment  when,  1016,  1022. 
provable  when,  977,  985,  1412. 
taxation  of  by  court,  26,  1351. 
by  referee,  685. 

COUNSEL   (see  Attorney), 

examination  of  payments  to,  970. 

fee  of  entitled  to  priority  of  payment,  1016,  1025. 

oath  may  be  administered  by,  when,  516. 

offense  committed  by  bankrupt  while  acting  on  advice  of,  639. 

omission  to  scheduled  property  on  advice  of,  359. 

right  of  witnesses  to.  541. 

COUNTER-CLAIMS    (see    Set-Off), 
when  allowed,  1125-1139.  1417. 

COUNTY, 

proof  of  debts  by,  when  due  as  penalty,  forfeiture,  etc.,  887. 
taxes  due  not  released  by  discharge,  418,  1366. 

entitled  to  priority  of  payment,  1006,  1014,  1413. 
COURTS  (see  Court  of  Bankruptcy), 

acts  of  state  court  when  binding  upon,  etc.,  584. 

appellate,  defined,  25,  1350. 

defined,  25.  1350. 

jurisdiction  of  circuit,  563,  1372. 

practice  and  procedure  to  be  followed,  1272. 

COURTS    OF   BANKRUPTCY, 

accounts  for  expenses  to  be  approved,  etc.,  974,  1411. 
adjudication  to  be  made  by,  etc.,  482-498. 
appellate  jurisdiction  from  decisions  of,  588. 

method  of  allowing  appeal,  1271. 

findings  to  be  filed,  1271. 

petition  for  review,  600. 

what  may  not  be  reviewed,  599. 
who  may  present,  601. 
arrest,  grant  to  bankrupt  of  exemption  from,  231. 

application  for  release,  etc.,  234. 

may  issue  warrant  detaining  bankrupt  for  purpose  of  examina- 
tion, 240. 

writ  of  ne  exeat,  etc..  241. 
attorney  to  be  member  of  bar,  1239. 

attorney's  fees,  determination  of  reasonableness  by.  970,  971. 
certificates  of  search  to  be  furnished,  1229,  1421. 
comparison  of  jurisdiction  between  Acts  of  1867  and  1878.  570. 
composition,  application  for  confirmation  of,  may  be  filed,  292,  1361. 
confirmation  of  sales  by,  1198. 
contempt,  power  to  punish  defense,  etc.,  54-63. 

before  referees,  720. 


974  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

COURTS  OF  BANKRUPTCY— Continued. 

decisions  cannot  be  collaterally  attacked,  42. 
defined,  25,  1350. 

depositories  to  be  designated  by,  972,  1410. 
discharge,  application  for  to  be  filed  with,  341,  1363. 

granted,  unless  fraud  shown,  375. 

refusal  to  grant  not  discretionary,  381. 
examination  of  witnesses  may  be  ordered,  etc.,  518,  540. 
exemptions,  jurisdiction  over  allowance  of,  181. 
index  to  be  kept  by  clerk,  1229,  1421. 
judges,  qualification,  duties,  etc.,  29. 
jurisdiction  in  general,  26,  36,  1351. 

a  law  in  equity,  26,  37. 

decisions  prior  to  Bardcs  v.  Bank.  576.  577. 

different  construction  under  Act  of  1898.  573. 

to  recover  conveyances,  etc.,  in  fraud,  1097. 

over  suit  to  recover  preference,  571.  961,  1409. 

over  suits  between  trustee  and  adverse  claimant,  etc.,  571,  572. 
jury  trials  in,  when  allowed,  500-511,  1368. 

issue  may  be  determined  without.  482. 
meetings,  time  to  be  fixed  by,  811,  1404. 

newspapers  to  be  designated  by  for  publishing  notices,  630.  1377. 
offenses,  jurisdiction  over  punishment,  632. 

concurrent  when,  586,  1372. 
orders  of,  power  to  issue,  53. 
property  conveyed  may  be  reached  by  summary  proceedings,  1101. 

to  be  sold  subject  to  approval  of.  1189-1192. 
referees,  to  be  appointed  by,  661,  1383. 
rules  governing,  etc.,  645. 
rulings  of  referee  to  be  reviewed  by,  695,  696. 

hypothetical  questions,  697. 
seizure  of  bankrupt's  property  may  be  ordered  by,  1140-1145.  1418. 
stay  of  suits,  jurisdiction  over,  248. 

against  bankrupt  when  granted,  245-260,   1360. 
suits  by  creditor  when  permitted,  267. 
Supreme  Court  decision  of  Bardes  v.  Bank.  575. 
terms  of,  always  open,  26,  28,  1351. 
transfer  of  cases  from  one  court  to  another,  656. 

what  petitions  stayed,  658. 
trustee  to  be  appointed  by  on  failure  of  creditors,  731,  738,  1393. 

approval  or  disapproval  of  choice.  739. 

bond  to  be  fixed  by.  781. 

to  be  removed  by,  when,  744. 
what  are,  26,  1351. 

writ  of  habeas  corpus  may  be  issued  by,  1265. 
COVENANTS, 

of  bankrupt  when  unaffected  by  discharge,  427. 
CURTESY. 

title  of  husband's  interest  by,  on  bankruptcy,  1165. 


INDEX.  975 

[REFERENCES    ARE    TO    SECTIONS] 

CREDITORS, 

agent  or  attorney  may  appear  and  plead  to  involuntary  petition 

for,  469,  470. 
attorney  of,  entitled  to  priority  of  payment,  1033. 

cannot  represent  bankrupt,  1032. 

may  vote  for,  742. 
bankrupt  to  attend  meetings,  209,  1356. 
claims  of  secured,  proof  of,  etc.,  864. 
composition  may  be  offered  to,  etc.,  287,  1361. 
composition  meetings,  who  entitled  to  participate  in,  etc.,  293. 

rights  of  minority,  294. 

voting  at  meetings,  295. 
cost  of  recovering  property,  payment  of,  1019. 
debts  of,  entitled  to  priority,  1006,  1053,  1413. 

not  affected  by  discharge,  418-448,  1366. 
defined.  25,  1350. 
dividends,  declaration  of  payment  to,  1054-1067,  1414. 

recovery  on  reconsideration  of  claim,  891. 

rights  to  collect  limited,  1068. 

when  unclaimed,  disposition,  etc.,  1069-1072. 
evasions  by,  bankrupt  to  inform  trustee  of,  etc.,  209. 

of  proof  of  false  claim  by,  209,  213. 
filing  fees  paid  by,  entitled  to  priority  of  payment,  1016,  1021. 
firm,  to  elect  trustee,  150. 
form  of  petition,  1288. 

of  bond  of  petitioning.  1294. 
included  in  petition  of  what  date  and  kind.  918,  919. 
intervention  in  petition,  when,  etc..  935-939. 

time  of,  940. 
liens  obtained  through  suits  within  four  months  void.  1115. 
may  fix  amount  of  trustee's  bond,  781. 
may  manage  his  own  interests,  1239. 

may  oppose  discharge  notwithstanding  proof  of  claim,  854. 
may  plead  to  involuntary  petition.  467,  471. 
meetings,  time  and  place  of,  811-826,  1404. 

trustee  to  submit  statements  to,  752. 
final  statements,  752. 
notices  to,  when  to  be  given,  896-911,  1407. 

publication  of,  908. 

where  insuflScient  number  join  in  petition,  931. 
participating  in  act  of  bankruptcy  not  counted,  923. 
payment  of  claims,  where  composition  set  aside,  etc.,  1052,  1413. 
petitioning  in  involuntary  cases,  priority  of  attorney's  fees,  1029. 
proof  of  claim  to  be  made  by,  etc.,  839,  895. 

effect  of,  428. 

waiver  of  certain  rights,  etc.,  426. 
referee  to  examine  lists  of,  686,  691. 

to  give  notice  to,  686,  689. 


976  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

CREDITORS— Continued. 

relatives  and  employees  not  counted  in  computing  number.  933. 
schedule  of.  who  to  be  included  in  bankrupts',  216. 

filing  of,  where  bankrupt  is  not  found.  1244. 
secured,  includes  whom,  25,  1350. 

priority,  etc.,  counted  in  determining  number,  etc.,  921. 
title  to  insurance  policy  when  for  benefit  of,  1169. 
to  be  appointed  by  trustee,  731-743,  1393. 

does  not  represent  holder  of  liens.  1076. 

subrogated  to  rights  of.  in  enforcing  liens,  1082-1086*. 

to  enforce  rights  as  against  liens,  etc.,  1082,  1416. 

representative  of.  etc.,  764. 
voting  at  meetings  of,  827-838.  1405. 

powers  of,  829. 

proof  as  to  voter's  qualifications,  830. 

individual  and  partnership,  831. 

may  act  by  attorneys.  835. 

rights  of,  when  secured,  836. 

what  claims  are  present,  832. 
witness  in  bankruptcy  proceedings,  518,  538,  1370 
CREDITS, 

effect  of  giving,  after  preference,  968. 

property  obtained  on  false  statements,   grounds  for  refusing  dis- 
charge, 346.  370. 
what  are  mutual.  1126. 
when  used  as  set-off,  1125-1139 
CRIMES  (see  Offenses), 

bankruptcy  not  evidence  of,  4. 
CRIMINAL    CONVERSATION, 

claim  for,  not  released  by  discharge,  418,  437. 

when  provable.  992. 

CROP, 

growing,  exemptions  in  case  of.  194. 

D 
DAMAGES, 

effect  of  discharge  on  unliquidated.  445. 

on  dismissal  of  petition  for  seizure  of  bankrupt's  property,  92. 
DATE    OF    BANKRUPTCY, 

defined,  25,  1350. 

DAYS  (see  Time), 

method  of  computing  time,  651,  655,  1380. 

fraction  of,  655. 
DEATH. 

of  bankrupt,  effect  of.  226,  228.  1357. 

of  partner,  effect  of.  141. 
disposition  of  assets,  171. 

of  trustee,  effect  of,  750,  751,  1395. 


INDEX.  977 

[REFERENCES    ARE    TO    SECTIONS] 

DB  BENE  ESSE,  DEPOSITIONS, 
when  testimony  so  taken,  552. 

DEBTS  (see  Claims), 

admitting  inability  to  pay,  act  of  bankruptcy,  83. 
amount  necessary  in  involuntary  bankruptcy,  108 
appeal  from  judgment  allowing  or  rejecting  of  $500  or  over,  603- 

612,  1374. 
attachment  for  failure  to  pay,   dischargeable,  423. 
character  of,  determination  of,  432. 
defined,  25,  1350. 
discharge  of  bankrupt,  effect  on  confirming  compositiqn,  319. 

of  husband,  effect  of,  on  wife's,  388. 

new  promise,  391. 
form  of  list  of.  1304. 
liquidation  of,  1004,  1005. 
merger  of  in  judgment,  994. 
not  affected  by  discharge,  418-448,   1366. 

alimony  and  like  obligations,  418,  422. 

bonds,  424. 

costs,  425. 

covenants,  427. 

criminal  conversation,   418,  437. 

executory  contracts,  427. 

fiduciary,  418,  429. 

fraudulently  created,  418,  434. 

governmental  debts,  418,  421. 

liens,  440. 

malicious  injury  to  person  or  property,  418,  436. 

limitation,  barred  by  statute  of,  441. 

not  provable,  418. 

rent,  442. 

seduction,  437. 

stockholders,  statutory  liability,  etc.,  443. 

support,  418,  437. 

sureties,  444. 

taxes,  418,  420. 

to  effectuate  valid  liens,  438. 

unliquidated  damages.  445. 

unproved  and  unscheduled  claims,   446. 

wife's  debts,  448. 
payment  of  partnership,  etc.,  157. 

on  setting  aside  composition  or  discharge,  1052. 
person  owing  may  become  voluntary  bankrupt,  96,  1353. 
petition  to  be  based  on,  provable,  913. 
priority  of  payment  of,  1006.  1053,  1413. 

attorney  or  counsel,  1016.  1025. 
must  be  reasonable,  1026. 
court  to  determine  reasonableneiis,  1027. 

62 


978  INDEX. 

[REFERENCES    ARE   TO    SECTIONS] 

DEBTS— Continued, 

for  services  actually  rendered,  1028. 

petitioning  creditors  in  involuntary  cases,  1029. 

for  assignee,  1036. 

for  bankrupt  in  involuntary  case,  1030. 
voluntary  cases,  1031. 

for  creditors  where  trustee  declines  to  prosecute,  1033. 
auctioneer's  fees,  1023. 

care  and  preservation  of  property,  1017.  1018. 
checks  or  orders,  1048. 
claims  of  bank  depositors,  1047. 
costs  of  administration,  1022. 
cost  of  recovering  property  by  creditor,  1019. 
filing  fees  in  involuntary  cases,  1021. 
incumbered  property,  1009. 
judgments,  1049. 
labor  liens,  1045. 
mortgages,  payment  of.  1050, 
order  of  payment,  1008, 
order  of,  where  lack  of  funds,  1010. 
receiver's  attorney,  when,  etc.,  1037. 
rent,  when,  1020. 
rent  prior  to  petition,  1046. 
taxes  due  state,  county,  etc.,  1006,  1014. 
trustee  acting  as  attorney,  etc.,  1040. 
trustees'  attorney,  1034. 
United  States,  claims  due,  1006,  1013, 
wages,  1041. 

assigned  or  in  judgment,  1043. 

priority  under  state  laws,  1044. 
waiver  of,  1051. 

witness  fees  and  mileage,  1024, 
provable,  alimony,  979, 
attorney's  fee,  981, 
bank,  982, 

commercial  paper,  983, 
contract  based  upon,  977,  984, 
contracts,  express  or  implied,  984, 
costs,  977,  985,  1412. 
endorser's  liability,  986, 
fee  of  assignee  and  receiver,  980, 
fine,  993, 
firm,  provable  against  individual  estate,  etc,  157,  167. 

not  provable,  165, 
fixed  liability,  977,  978, 
fraud,  992, 

fraud  or  preference  as  affecting  provability,  1003. 
husband  and  wife.  988, 
insurance  premium,  etc,  989. 


INDEX.  97SJ 

[REFERENCES   ARE    TO    SECTIONS] 

DEBTS— Continued. 

interest,  990. 

joint  obligations,  991. 

judgments,  etc.,  977,  992,  994. 

mortgage,  996. 

open  accounts,  977,  997. 

rent,  999. 

seduction,  etc.,  992. 

Statute  of  Limitations,  995. 

stockholder's  liability,  etc.,  1001. 

surety,  guarantor,  etc.,  987. 

test  of,  978. 

tort,  judgment  in,  992. 

United  States,  State  claims  due,  1002. 
punishment  for  contempt,  not  imprisonment  for,  62. 
set-off  allowed  when,  1125,  1126,  1417. 
,      which  may  be  proved,  977-1003,  1412. 

unliquidated,  1004. 

DEFALCATION, 

debts  created  by  officer,  etc.,  not  affected  by  discharge,  418,  435. 1366. 

DEFINITIONS, 

a  person  against  whom  a  petition  has  been  filed,  25. 

adjudication,  25. 

appellate  courts,  25. 

bankrupt,  25. 

bankruptcy,  25. 

clerk,  25. 

commencement  of  proceedings,  25. 

conceal.  25. 

corporations,  25. 

court,  25. 

courts  of  bankruptcy,  25. 

creditor,  25. 

date  of  bankruptcy,  25. 

debt,  25. 

discharge,  25. 

document,  25. 

holiday,  25. 

insolvent,  25. 

judge,  25. 

oath,  25. 

officer,  25. 

persons,  25. 

petition,  25. 

referee,  25. 

secured  creditor,  25 

states,  25. 

time  of  bankruptcy,  25. 


980  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

DEFINITIONS— Continued, 
transfer.  25. 
trustee,  25. 
wage-earner,  25. 
words  importing  masculine  gender,  25. 

plural  number,  25. 

singular  number,  25. 

DEFRAUDING    CREDITORS. 

when  act  of  bankruptcy,  64,  70.  1352. 

DELAYING    CREDITORS. 

when  acts  of  bankruptcy,  64,  1352. 

DEMURRER. 

may  be  filed  to  petition,  472. 

DEPOSIT. 

of  consideration  on  application  to  confirm  compositions,  298. 

DEPOSITIONS   (see  Evidence;    Proof  of  Claims), 
irregularities  in,  553. 
notice  of  taking,  555. 
rule  governing  taking  of,  550-554,  1317. 
when  taken,  de  bene  esse,  552. 

DEPOSITOR, 

in  bank,  when  claims  of.  entitled  to  priority  of  payment,  1047. 
set-off  in  case  of,  when  allowed,  1131. 

DEPOSITORIES, 

court  to  designate,  972.  1410. 

deposits  and  disbursements,  973. 
to  give  bonds,  etc.,  787,  972,  1410. 
trustee  to  deposit  in.  designated.  752,  757,  1396. 

to  disburse  money  by  check,  etc.,  752,  757,  973,  1264,  1396. 

DEPUTY    MARSHALS, 
fees  of.  804.  805. 

DESTRUCTION. 

fraudulent,  of  property,  bar  to  discharge,  346,  358. 

DETENTION, 

of  bankrupt  for  examination,  240,  241. 

DIPLOMATIC    OFFICERS, 

may  administer  oaths,  512,  1369. 

DIRECTORS. 

bankruptcy  of  corporation,  not  to  release,  109,  417. 

DISABILITY. 

of  referee,  who  to  act  in  absence  of.  729,  1392. 

DISBURSEMENTS. 

of  money  in  bank,  how  made,  etc.,  752.  757.  973,  1264. 


INDEX.  981 

[REFERENCES    ARE    TO    SECTIONS] 

DISCHARGE    (see  Debts), 
acts  not  barring,  377-379. 
adjournment  of  hearing  on  application,  345. 
appeal  from  order,  granting  or  denying,  603-605. 
application,  form  of,  343. 

who  may  make,  341,  342,  1363. 
bankrupt  to  attend  hearings  on  application  for,  209. 
books  of  account,  failure  to  keep  bars  discharge,  363-365. 

concealment  of,  bars  discharge,  346,  366,  1363. 

when  not  properly  kept,  operates  as  a  bar,  346,  368. 
buying  off  opposition  to,  355. 
certificates  of  search  to  be  furnished.  1229. 
collateral  attack  forbidden,  398. 
composition,  confirmation,  operates  as,  393. 
court  will  not  look  for  fraud  or  irregularity,  375. 
debts  not  affected  by,  418-444,  1366, 
definition  of,  25,  1350. 
effect  of,  386. 

on  collateral  proceedings,  387. 

of  husband  on  wife's  debts,  388. 

proof  of  claim,  426. 

on  liability  of  co-debtors,  etc.,  414-417,  1365. 

time  and  place  of  determining,  389. 
evidence  in  opposition  to,  544. 

inadmissible  without  specifications,  354. 
failure  to  oppose  equivalent  to  consent,  380. 
failure  to  pay  costs,  not  ground  for  refusing,  376. 
false  oath  operates  as  a  bar,  361. 
foreign,  effect  of^  431. 
form  of  bankrupts,  1345. 

of  bankrupt's  petition  for,  1343. 

of  specifications  of  objections,  1343. 
form  of  action,  as  affected  by,  433. 
fraudulent  conveyance  as  showing  concealment,  353. 
general  assignment  not  bar  to,  379. 
granting  of,  not  discretionary,  381. 
ground  for  refusing.  346-374,  1363. 

must  have  arisen  since  enactment  of  law,  357. 
impeachment  of.  369. 
jurisdiction  of  court  over,  26,  1351. 

to  revoke,  397. 
liability  of,  co-debtor  not  affected  by.  411. 

directors  not  affected.  109,  417. 

endorsers  not  affected.  413. 

partners  not  affected.  414. 

sureties  not  affected,  411.  416. 
notices  to  be  given  of  hearings  upon  applications,  896,  900,  1407. 
omissions  without  fraud,  not  a  bar,  358. 


982  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

DISCHARGE— Continued. 

of  non-dischargeable  debts,  360. 

on  advice  of  counsel,  effect  of,  359. 
opposition  to,  by  creditor,  notwithstanding  proof  of  claim,  854. 
order  granting,  evidence  of  court's  jurisdiction,  etc.,  561.  562. 
partnership,  when  granted,  147,  373. 

of  member  of  firm,  374.  •" 

personal  to  bankrupt,  390. 
petition  for  what  to  state,  1267. 
plea  of,  must  be  made  as  a  release,  273,  383. 

when  without  effect,  384. 
proper  books  of  account,  in  case  of,  367. 
referee  to  rule  on  evidence  in  opposition  to,  352. 

jurisdiction  with  reference  to.  674,   678. 
refused  because  of  prior  discharge,  346,  371. 
rehearing  application  for,  392 
replication  to  plea  of,  385. 
revocation  of,  when,  396.  1364. 

disposition  of  property  on,  1052. 

effect  of,  409. 

examination  of  bankrupt  for  purpose  of,  408. 

grounds  for,  402. 

grounds  for  refusing,  403. 

how  application  made,  404. 

notice  to  be  given.  406. 

reference  to  ascertain  facts,  405. 

what  constitutes  laches,  401. 

who  may  apply,  400. 

within  a  year,  399. 
specification  of  objections.  348,  1267. 

bankrupt  need  not  plead  to,  350. 

burden  of  proof.  351. 

time  of  filing,  349. 
time  for  making  application,  344. 

title  of  property  revests  in  trustee  on  setting  aside,  1202. 
who  entitled  to,  342. 
who  may  oppose,  347. 

DISMISSAL. 

on  failure  to  plead.  488,  1367. 
petition  by  creditor  when,  487,  943. 
proceedings  on  confirmation  of  composition,  318. 
notice  to  be  given  of  proposed,  896.  906,  1407. 

DISSOLUTION. 

adjudication  of  firm,  operates  as,  134. 

DISTRICTS, 

of  referees,  661. 

proof  of  claim  due  as  penalty,  etc..  887. 

taxes  due  not  released  by  discharge,  418,  1366, 


INDEX.  983 

[REFERENCES    ARE    TO    SECTIONS] 

DISTRICT  COURTS   (see  Courts  of  Bankruptcy), 

made  courts  of  bankruptcy,  26,  1351. 
DISTRICT    OF    COLUMBIA, 

Supreme  Court  a  court  of  bankruptcy,  26,  351. 
appeals  from,  588,  1373. 

DIVIDENDS, 

declaration  and  payment,  1054-1062,  1414. 

claimant's  right  to  collect,  limited,  1068. 

received  in  foreign  bankruptcy  proceedings,  1066. 

time  of  declaring.  1063. 

when  received,  unaffected  by  subsequently  allowed  claims,  1064. 
form  of  list  of,  1326. 

notice  of,  1327. 
interest  allowed,  when,  1061. 
notice  of  declaration  and  payment,  896,  903. 
recovery  of,  on  reconsideration  of  allowed  claim,  891. 
referee's  duty  with  reference  to  declaration  of,  etc.,  686,  688. 
suspension  of  payment,  when,  1060. 
trustee  to  pay,  752,  758. 
unclaimed,  disposition  of,  1069-1072,  1415. 

DOCKETS. 

open  to  inspection,  1229. 
DOCUMENTS, 

defined,  25,  1350. 

offense  of  destroying  by  trustee,  etc.,  632. 
referee  may  require  production,  674. 
title  of  trustee  to,  1146. 

DOMICILE, 

alien,  35. 

allegation  of,  33. 

burden  of  proof,  34. 

different  from  residence,  31. 

length  required,  26,  32,  1351. 

necessary  for  jurisdiction,  26,  30. 

to  determine  amount  of  bankrupt's  exemption,  179,  181. 
DORMANT    PARTNER, 

liability  of,  in  proceedings  in  bankruptcy  against  firm,  140. 
DOWER, 

allowance  to  wife,  when,  226,  230.  1357. 

rights  to,  not  affected  by  bankruptcy  of  husband,  1166. 

DUTIES  (see  Bankrupt). 

of  bankrupt.  209-225,  1356. 

E 

EJECTMENT, 

stay  of  proceedings  in,  against  bankrupt's  trustee,  etc..  259. 
ELECTION  (see  Voting). 


<)84  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

EMBEZZLEMENT, 

debts  created  by,  while  acting  as  officer,  etc.,  418.  435,  1366. 

offense  of,  by  trustee,  632. 
EMPLOYEES, 

counting  of,  on  filing  petition,  933. 

ENDORSERS, 

adjudication  as  bankrupt,  126. 

liability  on  notes  due  after  adjudication  of,  not  affected,  303. 

when  debt  of,  provable,  986. 

EQUITY, 

jurisdiction  of  courts  of  bankruptcy  in,  26.  37,  568,  1372. 
rules  of  practice  in,  to  be  followed,  1272. 

ESTATES   (see  also  Property), 

arbitration  of  controversies  arising  in  settlement.  619,  1375. 

appraisal,  etc..  682. 

closing  and  reopening  of,  jurisdiction  over.  26,  50,  1351. 

composition,  title  to  bankrupts'  revests  on  confirmation  of,  325. 

compromise  of  controversies.  625. 

concealment  by  bankrupt,  etc.,  64,  636.  637.  1352. 

as  grounds  for  opposing  discharge,  358. 
on  advice  of  counsel,  359. 
conveyance  by  bankrupt  when  abroad,  209. 
costs  of  preserving  entitled  to  priority  of  payment,  1016,  1022. 
courts  to  collect  and  distribute.  26,  1351. 
debts  provable  against,  977.  1005. 
discovery  of,  after  expiration  of  year,  410. 
dividends,  declaration  and  payment  of,  1054,  1068,  1414. 
effect  of  trustee's,  failure  to  assume  bankrupts',  1209. 
embezzlement  by  trustee,  632. 
exemptions  allowed  bankrupt.  179. 

in  case  of  concealment  or  fraudulent  transfers,  186. 

in  case  of  property  assigned,  187. 

where  mortgaged  or  transferred,  192. 
expenses  of  administration,  report  and  approval  of.  974,  976. 
fraudulent  concealment,  etc..  ground  for  refusing  discharge,  346. 

conveyance,  as  showing  concealment,  353. 

conveyance  as  bar  to  discharge,  358. 
incumbered,  sale,  subject  to,  1194. 

sale,  free  of.  1195. 
joint,  title  to  property  in  case  of  bankruptcy,  1164. 
jurisdiction  of  court  over,  26,  1351. 

closing  of,  26,  1351. 

court  may  reopen,  26.  1531. 
liens  against,  when  proceedings  to  enforce  valid,  stayed.  253. 
money  of,  to  be  deposited  in  bank,  etc.,  972,  973. 
onerous  and  unprofitable  need  not  be  taken  by  trustee.  1150. 
partnership,  administration  of,  in  bankruptcy.  150. 

where  all  not  adjudged,  177. 


INDEX.  985 

[REFERENCES    ARE    TO    SECTIONS] 

ESTATES— Continued. 

marshalling  of,  157,  173. 
method  of  distribution  in  case  of,  157,  158. 
receiver  or  marshal  appointed  to  preserve,  45. 
compensation  for,  26,  1351. 
appointed  to  preserve,  26,  1351. 
receiving  property  from  bankrupt  an  offense,  640. 
referee  to  furnish  information  concerning,  686.  693. 

to  authorize  taking  or  releasing  of  bankrupt's,  674,  681. 
appraisal,  etc.,  682. 
right  to  prove  not  dependent  on  existence  of  assets,  856, 
sales  to  be  by  auction,  etc.,  1253. 
schedule  of  bankrupt,  what  to  include,  216,  220. 
seizure  of  bankrupts'  to  prevent  deterioration  of,  1140,  1418. 

on  filing  of  petition,  92. 
state  courts  not  to  administer  bankrupts,  251. 
surrender  of,  by  bankrupt  required,  223. 
trustee  may  avoid  transfers  by  bankrupt,  1204. 
to  account  for  interest  received,  752. 
to  file  copy  of  decree  where  property  located,  769. 
to  collect  and  to  reduce  to  money,  etc.,  752,  760. 
deposit  of  money  collected,  etc.,  752,  757. 
furnish  information  concerning.  752,  756 
to  make  report  to  court,  etc.,  752,  1396. 
to  make  conveyance  of  bankrupt's,  1200. 
ESTOPPEL, 

creditors  participating  in  actual  bankruptcy  not  to  be  counted,  923. 
person  conniving  in  act  of  bankruptcy  cannot  allege,  66. 
EXAMINATIONS  (see  Evidence). 
EXCHANGE, 

of  property  creating  a  preference,  951. 
EXECUTION, 

liens  created  within  four  months  void,  1116, 
EXECUTOR, 

adjudicated  a  bankrupt,  122 
EXECUTORY    CONTRACTS, 

when  unaffected  by  discharge,  427. 
EXEMPTION   (see  Arrest), 

from  arrest,  of  bankrupt,  231-238. 
EXEMPTIONS, 

allowed  bankrupt,  179-208,  1355. 

claim  for,  to  be  made  in  schedule,  183,  209. 

constitutionality  of  law,  180. 

costs  payable  from,  206. 

determination  of,  by  court,  26,  1351. 

form  of  trustee's  report  of,  1333. 

growing  crops,  when  allowed,  194. 


986  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

EXEMPTIONS— Continued. 

head  of  family,  who  deemed,  195. 
homestead,  right  to,  190. 

abandonment  of,  191. 

out  of  property,  mortgaged  or  transferred,  192. 
Indian  allotments,  204. 
insurance  policies,  when,  207. 
jurisdiction  over,  181. 
omission  from  schedule,  effect  of,  183. 
partnership,  in  case  of,  200. 

individual  out  of  firm  assets,  201. 
pension  money,  205. 

personal  property,  allowance  out  of,  198. 
property  fraudulently  transferred,  when  allowed,  186. 

assigned,  when  allowed,  187. 

incapable  of  partition,  sale  of,  203. 
purchase  price  not  paid,  effect  of.  188. 
reallotment  of,  197. 

sale  of,  and  disposition  of  proceeds.  203. 
setting  apart  when  subject  to  lien,  193. 
state  laws,  rule  governing  construction,  208. 
successive  allowance  of,  199. 
taxes  on,  payment  of,  202. 
title  to,  does  not  pass  to  trustee,  1146,  1160. 
trustee's  duty  with  reference  to,  184. 

title  to,  185. 

to  set  aside,  184,  752,  759,  1396. 
waiver  of,  by  bankrupt,  189. 
wife's  right  to,  196. 
EXHIBITS, 

originals,  to  become  a  part  of  deposition,  554. 

EXPENSES, 

administering  estate,  approval,  etc.,  974. 

accounts  of,  976. 
clerks,  not  covered  by  fee,  1270. 

indemnity  to  be  furnished  before  incurred,  1245. 
method  of  payment  in  case  of  partnership,  155. 
referees,  allowance  of,  705. 
when  tendered  bankrupt  for  attendance,  209. 
EXTORTION, 

of  property  for  forbearing  to  act,  etc.,  636. 
EXTRADITION, 

of  bankrupts,  jurisdiction  of  court  over,  26,  1351. 
when  allowed,  242.  1359. 
procedure  in  case  of,  244. 
EVIDENCE, 

application  for  taking,  how  made,  520. 

bankrupt  may  be  examined  for  revoking  discharge,  408. 


INDEX.  987 

[REFERENCES    ARE    TO    SECTIONS] 

EVIDENCE— Continued. 

nature  of  examination,  etc.,  523. 

attendance  of  imprisoned.  525. 

answers  compulsory,  529. 

competency  of,  etc.,  531. 

manner  and  subject  of,  527,  528. 

notice  and  summons,  524. 

time  of  examination,  526. 

when  not  subject  of,  530. 

admissibility  of  examination,  532. 

failure  to  give,  ground  for  refusing  discharge,  346,  372. 

may  be  detained  for  purpose  of  giving,  240,  241,  1358. 

not  competent  in  criminal  proceedings,  etc.,  209. 

to  give,  on  denying  insolvency,  90,  91. 

to  give  at  creditor's  meetings,  etc.,  209. 

when  not  required  to  attend,  209. 
bankrupt's  wife,  when  examined,  535. 

subject  of  examination,  536. 
books  of  account  as,  546. 

burden  of  proof  on  denying  insolvency,  86-91. 
certified  copies  of  records,  as,  557,  558. 
contempt  of  witness  for  refusing  to  give,  712,  717,  1390. 
court's  jurisdiction,  copy  of  order  of  composition  or  discharge,  561. 
depositions,  rules  governing  taking,  550-554. 

when  taken  de  bene  esse,  552. 

notice  of.   etc.,  555. 
effect  of  incomplete,  534. 

fee  and  compensation,  542. 
examination,  notice  of,  524,  896,  898. 

of  bankrupt,  form  of  order  for,  1314. 

order  of,  may  be  issued  in  lieu  of  summons,  520. 

right  to  counsel,  541. 

scope  of,  etc.,  521,  1257. 

subject  of,  528,  536. 

refusal  to  be  sworn,  testify,  etc.,  540. 

when  and  how  application  made,  520. 

trustee  may  testify,  537. 

who  may  make  application,  519. 
exhibits  as,  554. 
fraud,  etc.,  545. 
opposition  to  discharge,  544. 
preservation,  when  given  before  referee,  686. 
privileged  communications.  547. 
proof  must  agree  with  allegations,  543. 
referee  to  take  and  preserve,  etc.,  686,  698. 

to  conduct  examinations,  etc.,  674,  679,  1387. 

powers  and  duties  of,  with  reference  to  taking,  548. 

to  employ  stenographers  for  reporting,  684. 

weight  given  records  of,  etc..  722. 


988  INDEX. 

[REFERKNCES    ARE    TO    SECTIONS] 

EVIDENCE— Continued. 

revenue  law  establishes  rule  of,  27.  549. 
second  examination,  533. 

effect  of,  incomplete,  534. 
specification  in  opposition  to  discharge,  burden  of  proof.  351. 
filing  of,  preliminary  to  introduction  of.  354. 
referee  to  rule  on,  352. 

time  for  taking  may  be  varied  by  judge,  1272. 
trustee,  examination  of,  537. 
trustee's  title,  order  approving  bond  of.  559,  560. 

confirming  composition.  561,  563. 
witnesses  in  general.  538. 

compulsory  attendance  of,  518-540,  1370. 

P 
FACTS, 

issues  of,  to  be  triable  by  jury,  etc.,  509. 

FALSE  OATH, 

when  ground  for  refusing  discharge,  361. 

FALSE  PRETENSES, 

obtaining  property  by.  not  released  by  discharge,  418,  434.  1366. 

FALSE  REPRESENTATION. 

obtaining  property  by.  not  released  by  discharge,  418,  434,  1366. 
FALSE  STATEMENTS, 

property  obtained  on,  ground  for  refusing  discharge,  346,  370. 

FARMERS, 

adjudication  of,  as  bankrupts.  103.  123. 
may  become  voluntary  bankrupt,  103. 

FEES, 

attorney's,  provable,  891. 

reasonableness  of.  to  be  determined  by  court.  970.  971. 

when  entitled  to  priority  of  payment,  1016.  1025. 
auctioneer,  entitled  to  priority.  1023. 
clerk  to  collect,  account  for,  etc.,  795.  797,  1400. 

in  case  of  inability  or  pauper  aflfidavit,  798. 

to  collect  for  trustee,  referee,  etc.,  795,  797. 

what  to  cover,  801. 
fall  with  liens  void  under  the  law.  1122. 
filing,  in  involuntary  cases,  etc.,  entitled  to  priority  of  payment, 

1016,  1021. 
for  certificates  of  search  by  clerks,  1229. 
for  filing  copy  decree  of  adjudication,  etc.,  769. 
marshal's  and  deputies'.  802-806,  1401. 

disposition  of.  806. 
referee's,  702-711,  1389. 

on  secured  claims,  707. 

where  case  transferred.  710. 

when  reference  revoked,  711. 


INDEX.  989 

[REFERENCES    ARE    TO    SECTIONS] 

FEES — Continued. 

trustee  to  pay  for  filing  record  of  adjudication,  769. 
witnesses',  etc.,  542. 

to  be  tendered  when  subpoenaed,  713,  1390. 
priority  of  payment,  when  entitled  to,  1016,  1024. 
FIDUCIARY. 

debts  created  by  fraud  while  acting  in  such  capacity,  418,  435,  1366. 

FILING  FEE. 

entitled  to  priority  of  payment,  etc.,  1016,  1021. 
FINDINGS  (see  also  Referees), 

of  referees,  consideration  of,  by  court,  26,  1351. 
FINE, 

for  acting  as  referee  when  interested,  etc.,  641. 

when  a  provable  claim,  993. 
FIRE  INSURANCE, 

effect  of  bankruptcy  on  policy  of,  1170. 
FIRM  (see  Partners). 
FORECLOSURE, 

when  suits  to  sell  under,  will  not  be  stayed,  262. 
FOREIGN  BANKRUPTCY. 

discharge,  effect  of  on  domestic  debts,  431. 

ground  for  adjudication,  26.  1351. 

payment  of  dividends  in  case  of,  1066. 
FOREIGN  COUNTRIES. 

bankrupt  to  execute  conveyances  of  property  in,  209,  1356. 

FORFEITURES, 

proof  of  debt  due  government  as,   887. 

FORMS, 

of  application  for  discharge,  343. 

of  application  for  stay.  268. 

promulgation  by  Supreme  Court.  645,  1379. 

conflict  with  law  and  orders,  647. 

prescribed,  when  deficient,  648. 

prescribed  to  be  followed,  1272. 

No.  1.     Debtor's  petition,  1274. 

Schedule  A,  1275. 

Schedule  B,  1280. 

Summary  of  debts  and  assets,  1286. 

2.  Partnership  petition,  1287 

3.  Creditors'  petition.  1288. 

4.  Order  to  show  cause  upon  creditors'  petition,  1289. 

5.  Subpoena  to  alleged  bankrupt,  1290. 

6.  Denial  of  bankruptcy,  1291 

7.  Order  for  jury  trial,  1292. 

8.  Special  warrant  to  marshal,  1293. 

9.  Bond  of  petitioning  creditor,  1294. 
10.     Bond  to  marshal,  1295. 


<J9U  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

FORMS— Continued. 

No.  11.  Adjudication  that  debtor  is  not  bankrupt,  1296. 

12.  Adjudication  of  bankruptcy,  1297. 

13.  Appointment,  oath,  and  report  of  appraisers,  1298. 

14.  Order  of  reference,  1299. 

15.  Order  of  reference  in  judge's  absence,  1300. 

16.  Referee's  oath  of  office,  1301. 

17.  Bond  of  referee,  1302. 

18.  Notice  of  first  meeting  of  creditors,  1303. 

19.  List  of  debts  proved  at  first  meeting,  1304. 

20.  General  letter  of  attorney  in  fact,  1305. 

21.  Special  letter  of  attorney  in  fact,  1306. 

22.  Appointment  of  trustee  by  creditors,  1307. 

23.  Appointment  of  trustees  by  referee.  1308. 

24.  Notice  to  trustee  of  his  appointment,  1309. 

25.  Bond  of  trustee,  1310. 

26.  Order  approving  trustee's  bond,  1311. 

27.  Order  that  no  trustee  be  appointed,  1312. 

28.  Order  for  examination  of  bankrupt,  1313. 

29.  Examination  of  bankrupt  or  witness,  1314. 

30.  Summons  to  witness,  1315. 

Return  of  summons  to  witness,  1316. 

31.  Proof  of  unsecured  debt,  1317 

32.  Proof  of  secured  debt,  1318. 

33.  Proof  of  debt  due  corporation,  1319. 

34.  Proof  of  debt  by  partnership,  1320. 

35.  Proof  of  debt  by  agent  or  attorney,  1321. 

36.  Proof  of  secured  debt  by  agent,  1322. 

37.  Afl[idavit  of  lost  bill^or  note,  1323. 

38.  Order  reducing  claim,  1324. 

39.  Order  expunging  claim.  1325. 

40.  List  of  claims  and  dividends,  1326. 

41.  Notice  of  dividend,  1327. 

42.  Petition  and  order  for  sale  by  auction  of  real  estate,  1328. 

43.  Petition  and  order  for  redemption  of  property  from  lien, 

1329. 

44.  Petition  and  order  for  sale  subject  to  lien,  1330. 

45.  Petition  and  order  for  private  sale,  1331. 

46.  Petition  and  order  for  sale  of  perishable  property,  1332. 

47.  Trustee's  report  of  exempted  property,  1333. 

48.  Trustee's  return  of  no  assets,  1334. 

49.  Account  of  trustee,  1335. 

50.  Oath  to  final  account  of  trustee,  1336. 

51.  Order  allowing  account  and  discharging  trustee,  1337. 

52.  Petition  for  removal  of  trustee.  1338. 

53.  Notice  of  petition  for  removal  of  trustee,  1339. 

54.  Order  for  removal  of  trustee.  1340. 

55.  Order  for  choice  of  new  trustee,  1341. 

56.  Certificate  by  referee  to  judge,  1342. 


INDEX.  991 

[REFERENCES    ARE    TO    SECTIONS] 

FORMS — Continued. 

No.  57.    Bankrupt's  petition  for  discharge.  1343. 

58.  Specification  of  grounds  of  opposition  to  discharge,  1344. 

59.  Discharge  of  bankrupt,  1345. 

60.  Petition  for  meeting  to  consider  composition,  1346. 

61.  Application  for  confirmation  of  composition,  1347. 

62.  Order  confirming  composition,  1348. 

63.  Order  of  distribution  on  composition,  1349. 
FRACTION, 

of  a  day,  when  considered,  655. 
FRAUD, 

as  affecting  provability  of  claim,  1003. 
composition,  preventing  confirmation  of,  307,  313. 

debts  created  by,  bound   by  confirmation  of,   314. 

to  be  set  aside  in  case  of.  330,  340,  1362. 
conveyances  as  showing  concealment  of  assets,  353. 

when  not  bar  to  discharge,  378. 

when  act  of  bankruptcy,  64,  1352. 
debts  created  by,  not  released,  418,  435. 
discharge,  when  ground  for  revoking,  etc.,  396,  403,  1364. 

effect  of,  on  debts  created  by,  etc.,  434. 

court  will  not  look  for,  on  application  for,  375. 
evidence  in  case  of,  etc.,  545. 
exemptions  of  bankrupt   in   case  of  concealment,   transfers,  etc., 

186. 
fiduciary,  debts  created  by  while  acting  as,  etc.,  418.  429,  1366. 
liabilities  for  obtaining  property  by,  not  released,  418,  434. 
stay  of  suits  in  state  court,  where  decree  procured  by,  254. 
title  to  property  transferred  in,  passes  to  trustee,  1147,  1419. 

obtained  through  remains  in  vendor,  1158. 
transfers,    liens   of,   when   void,    1104. 

evidence  of  intent  in  case  of,  1107. 

G 

GENERAL  ASSIGNMENT, 

act  of  bankruptcy.  64,  82,  1352. 

petition  to   be   filed   within  four  months,   84. 
assignee,  claim  of,  when  provable  in  bankruptcy,  980. 

attorney  not   entitled  to  priority.   1036. 
cost  for  caring  for  property  in  case  of,  1018. 
effect  of  bankruptcy  on,   1097,  1100. 

solvency  not  defense  to  petition  based  on,  82. 
suit    in    state    court    for    administration    of    estate    under,    to    be 

stayed,  255. 
title  to  property  affected  by.  1162. 
will  not  bar  a  discharge,  379. 
GENDER, 

masculine,  what  to  comprehend,  25,  1350. 


992  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

GENERAL  ORDERS, 

promulgation  by  Supreme  Court,  645.  1379. 
to  be  followed,  646. 

conflict  between  law.  forms  and  orders,  647. 
forms  deficient,  648. 
effect  of  delay  in  promulgation.  649. 
ules  of  procedure,  650. 

GOOD   FAITH, 

required  on  applications  for  confirmation  of  composition,  312. 
of  creditors  on  filing  petition,  926. 
GROWING    CROPS, 

exemption  in  case  of,  194. 

title   of   trustee  to,   1181. 
GUARANTOR, 

not  affected  by  bankrupt's  discharge,  411,  1365. 

when  debt  of,  provable,  987. 

H 
HABEAS  CORPUS, 

for  review  of  order  committing  for  contempt.  57. 

release  of  bankrupt  from  arrest,  etc..  234.  1265. 

writ  may  be  used  when  imprisoned  for  offenses,  644. 
HEARINGS, 

on  application  for  discharge.  346. 
HINDER,  DELAY  OR  DEFRAUD, 

conveyances,   etc.,  made  with  purpose  of,  acts  of  bankruptcy,   64, 
1352. 
HISTORY, 

of  bankruptcy  laws,   1-24. 
HOLIDAY. 

defined,  25.   1350. 

what   is,   652. 
HOMESTEAD, 

right  of  bankrupt  to,   190. 
abandonment.   191. 
reallotment  of,   etc.,   197. 
wife's  right  to,  196. 
HUSBAND, 

effect  of   discharge  on   wife's   debts,   388. 

title  to  property  of  wife  on  bankruptcy  of,  1163. 

when  debts  of  wife  provable  against,  988. 
HYPOTHETICAL  QUESTIONS. 

not  to  be  certified   by   referee,  697. 

I 

IMPEACHMENT, 

of  discharge,  grounds  of,  369. 


INDEX.  993 

[REFERENCES    ARE    TO    SECTIONS] 

IMPRISONMENT   FOR  DEBT, 

punishment  for  contempt  not  considered  as,  62. 
INABILITY, 

to  pay  debts,  admission  an  act  of  bankruptcy,  64,  83,  1352. 
INCUMBERED    PROPERTY    (see   Liens), 

sale  of,  1194. 

free  of  liens,  1195. 
INCUMBRANCES, 

within  four  months,  void  except  as  to  purchasers  in  good  faith, 
1097,  1416. 
INDEXES, 

clerks  to  keep  of  bankruptcy  cases,  1229,  1421. 
INDIANS, 

exemptions  in  case  of  allotments,   etc.,  204. 

may  be  adjudicated  bankrupt,  104. 
INDIAN   TERRITORY, 

courts  of,  made  court  of  bankruptcy,  26,  1351. 
INDICTMENT, 

for  offenses,  to  be  found  in  one  year,  etc.,  642,  643. 
INDORSER  (see  Endorser). 

INFANTS, 

adjudication  of  bankrupt,   105,  125. 
time  for  proving  claims  by,   894. 

INFORMA  PAUPERIS, 

payment  of  fees  in  case  suit  so  commenced,  795,  798. 

INFORMATION, 

concerning  estates,   referee   to   furnish,   686,   693. 
trustee  to  furnish,  752,  756. 
INHERITANCE, 

title  of  trustee  to  property  acquired,  1183. 
INJUNCTION, 

referee  may   grant,  etc.,  683. 
reference  to,  by  court,  678. 
INJURIES, 

wilful  and  malicious  not  released  by  discharge,  418,  436,  1366. 

IN   REM, 

adjudication  of  bankruptcy  so  operates,  250. 

INSANE, 

bankrupt,  effect  on  proceedings,  226,  229,  1357. 

time  for  proving  claims   in  case  of,  894. 

partner,    effect   on   others,    141. 
INSOLVENCY, 

admission  of,  by  corporation  for  purpose  of  adjudication,  114. 

compared   with   bankruptcy  law,   14. 

definition  of,  25,  588. 

63 


994  INDEX, 

[REFERENCES    ARE    TO    SECTIONS] 

INSOLVENCY— Continued, 
determination  of,   67. 

existence  of  in  case  of  a  partnership,  68,  146. 
impairing    the   obligation    of   contracts,   20. 
jury  trial  allowed  on  question  of,  500,  1368. 
necessary  to  a  preference,  946. 
power  of  states  to  enact  laws  on,  15. 
to  amend,   etc.,   16. 
limit  to,  17. 
testimony  on  denial  of,  on  filing  petition.  90.  91. 
proceedings  under  state  laws,  when  not  affected  by  Act  of  1898, 
1227 
INSOLVENT. 

definition  of,   25.  588,  1350. 
transfers   while,  act  of  bankruptcy,   64,   1352. 
when  partnership   is,  68,   146. 
INSPECTION, 

dockets,   etc.,   open  to,    1229. 
INSTRUMENT. 

writing,  proof  of  claim  founded  on,  857,  858. 
withdrawal  of.  858. 
when  be  stamped,  858. 
INSURANCE. 

claim  for.  provable,  etc.,  989. 

when  not  exempt,  207. 

title  to  policies  when  payable  to  wife,  1167. 

in   which   bankrupt  has  any   interest,  1168. 
with  cash  surrender  value,  1168. 
when  for  creditors'  benefit,  1169. 
fire  policies,  effect  on,  1170. 
pass  to  trustee  when,  1146.  1167-1169. 
INTENT, 

evidence  of  fraudulent,  in  case  of  liens  created  by  conveyances, 

etc.,  1107. 
failure  to  keep  books  of  account  with  purpose  of  concealment,  365. 
not  necessary  to  constitute  preference.  956. 
when  a  necessary  element  to  act  of  bankruptcy,  81. 
allegation  and  proof.  81. 

INTEREST, 

may  be  allowed  on  claims  in  paying  dividends,  etc.,  1061. 

trustee  to  collect  and  pay  over  to  estate,  752,  1396. 

when   provable,  990. 
INTERLINEATIONS, 

petitions,  etc.,  not  to  contain,   1240. 
INTERVENTION. 

by  creditors  in  involuntary  proceedings,  935. 
time  of,  936. 


INDEX.  995 

[REFERENCES    ARE    TO    SECTIONS] 

INTERVENTION— Continued. 

on  respondent's  default  on  petitioner's  failure  to  prosecute,  941. 

manner  of.  942. 
INVENTORY, 

trustee  to  prepare,  754. 
INVOLUNTARY   BANKRUPTCY, 

bankrupt  entitled  to  attorney's  fee,  1030. 

filing  fee  entitled  to  priority  of  payment,  1016,  1021. 

liens  obtained  through  legal  proceedings,  when  void,  1113. 

notice  to  be  given  of  proposed  dismissal,  943. 

to  creditors  not  joined  in,  931. 
petition,  who  may  file,  108,  915,  1353. 

against  whom  to  be  filed,  108-129. 

determination  of  character  of  proceedings,  110. 

form  of,   1288. 

service  of,   449-453,   1367. 
petitioning  creditors  entitled  to  attorney's  fee,  1029. 
schedule  to  be  prepared   by  creditors,  when,  1244. 

J 

JOINT  DEBTS, 

practice  in  case  of  set-offs,   1130. 

title  to.  in  case  of  bankruptcy,  1164. 
JOINT    OBLIGATIONS, 

provability  of,   991. 
JUDGE, 

defined,  25,  1350. 

qualifications,  duty  and  conduct,  29. 

to  preside  at  creditor's  meetings,   etc.,  816. 
JUDGMENTS    (see  Suits), 

act  of  bankruptcy,  when,  78. 

by  confession,  within  four  months  void,  1086. 

classes  of,  which  may  be  proved,  992. 

costs,   enforcement  when   for,   26,   1351. 

debt  evidenced  by,  provable,  etc.,  977,  992,  994 

effect  of  bankruptcy  on  lien  of,   1109,  1116. 

effect  of  discharge  on,  438,   439. 

invalid  for  want  of  record,  etc.,  1081. 

preference  from  procuring  or  suffering,  946-952. 

priority  of  payments,  when  entitled  to,  1049. 

state  courts,  not  to  be  annuled  or  corrected  by  federal  court,  39. 

stay  of  proceedings  on,  etc.,  256. 

when  based  on  claim  for  alimony,  264. 

title  to  property  held  under,  1172, 
JURISDICTION. 

appellate   courts,   588-602. 

Circuit  Courts  in  law  and  equity,  568,  569. 


996  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

JURISDICTION— Continued. 

Circuit  Courts  of  Appeals,  in  bankruptcy  cases,  596-598. 

what  cannot  be  reviewed,  599. 
concurrent  over  offenses,  586. 
consent  necessary  to  give,  etc.,  578. 
courts  of  bankruptcy,  26.  1351. 

under  Act  of  1903,  572. 

in  law  and  equity,  26,  37. 

length  of  residence,  etc.,  necessary  to,  26-35,  135. 

over   allowance   of   exemptions.   181. 

over  application  for  discharge,  341. 

to  revoke  a  discharge,  397. 

over  partners,   152,   1354. 

to  stay  proceedings,  etc.,  248. 

unspecified  powers,  26,  1351. 
District  Courts,  different  constructions  under  Act  of  1878,  573. 
referees.  674-685,  1387. 
state  courts,  of  suits  of  trustee,  580,  581. 

when   without,  582. 
suits  of  trustee,  where  brought,  571-585,  1372. 
Supreme  Court  of  the  United  States,  590,  613-618. 
summary   proceedings,   when  property  may   be  reached   by,  1101. 
want  of,  to  be  raised,  43. 

JURY, 

composition  set  aside,  trial  in  case  of,  337. 
decision  of  issue  with  or  without.  482. 
rule  governing  submission   to,   500-511,   1368. 
trial  when  not  in  attendance  in  district  court,  505. 
form  of  order  for.  1292. 

K 

KEEPER, 

fees  of  marshal  when  acting  as,  805. 

L 
LABOR, 

lien,  when  valid  in  case  of  bankruptcy,  1094. 
when  not  stayed,  263. 
hen  entitled   to   priority  of  payment,   1042-1045. 

LACHES, 

what  constitutes  undue  on  applications  to  revoke  discharge,  401. 

LANDLORD    (see  also  Rent), 

lien  of,   in   case  of  bankruptcy  for  rent,   1093. 

stay   of  ejectment  proceedings  brought  against  trustee,   etc.,  259. 

title  to  lease  on  bankruptcy  of  tenant,  etc.,  1171. 
LAWS  (see  Bankruptcy  Law), 

from  what  time,  take  effect,  655. 

rule  governing  construction  of  state.  208. 


INDEX.  997 

[references  are  to  sections^ 
LEASE  (see  also  Landlord), 

title  to  lease  on  tenant's  bankruptcy,  1171. 
LEGACIES. 

title  of  trustee  to,  when  for  bankrupt's  benefit,  1183. 
LEGAL  PROCEEDINGS  (see  Suits). 
LETTER  OF  ATTORNEY   IN  FACT, 
form  of,  1305. 
special,   1306. 
LEVIES, 

when  void,   1109. 
LICENSES. 

title  of  trustee  to,  1182. 
LIENS, 

attachments,  when   void,  1114. 

attorney  for  creditor,  when  entitled  to,  1035. 

bona  fide,  valid,  1088. 

chattel  mortgages,  1091. 
landlord's,  1093. 

material  men  and  mechanic's.   1094. 
mortgage,  1090. 

enforcement  of  mortgagee's  rights,  1092, 
priority   in   payment  of,    1096. 
recognized  in  general,  1095. 
comparison  of  Acts  of  1867  and  1898,  1110. 
conflict  between  subdivisions  "c"  and  "f,"  1112. 
constitutionality  of  provision  avoiding  liens,  1111. 
costs  and  disbursements  when  rendered  void,  1122. 
creditors  counted  in  determining  number,  etc.,  921. 

represented  by  trustee,  1084. 
creditors'  suits  void,  when,  1115. 
discharge  of,  trustee  to  give  notice,  1124. 
effect  of  discharge  on,  440. 

of  composition  proceedings  on,  301. 
execution  void,  when,  1116. 

exemptions  out  of  property,  when  subject  to,  193. 
form  of  petition  and  order  for  redemption,  1329. 

for  sale,  subject  to.  1330. 
judgment,  void,  when,  1116. 

labor,  when  entitled  to  priority  of  payment,  1045. 
legal  proceedings  creating,  when  void,  1086. 

subdivision  "f"  supersedes  subdivision  "c,"  1087. 
avoided  by  either  voluntary  or  involuntary  proceedings,  1113. 
mechanic's,  enforcement  of,  not  stayed,  263. 
payment  of  debts  in  case  of  incumbered  property,  1009. 
property  subject  to,  passes  to  trustee,  1149. 
sales  of  property  subject  to,  1194. 
free  of,  1195. 
effect  of,  1196. 


l)i)S  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

LIENS— Continued. 

status  fixed  by  filing  petition,  1121. 

statutory,  void,  when,  1117. 

stay  of,  proceedings  to  enforce,  when,  253. 

suits  to  foreclose  will  not  be  stayed,  etc.,  262. 

time  within  which  void,  1118. 

transfers  within  four  months,  when  void.  1097-1108. 

trustee  does  not  represent  claimants,  1076. 

proper  party  to  attack,  1085. 

represents  judgment  creditors,  when,  1084 

to  enforce  creditor's  rights,  when,  1082, 

trustee  takes  subject  to,  1075. 

chattel  mortgages,  1079. 

conditional  sales,  1080. 

judgments,  1081. 

what  claims  meant,  1077,  1078. 
unrecorded,  void,  when,  1073. 
valid,  when,  1119. 

enforcement  of,  1120. 
LIMITATIONS  (see  Time), 

claims  barred  by,  not  provable,  etc.,  441,  995. 

cannot  be  used  as  set-off,  1138. 
discharge,  revokable  within  a  year,  399. 

effect  of  new  promise  on  debts  released  by,  etc.,  39L 
time  for  bringing  suits  by  or  against  trustee,  284. 

when  may  be  pleaded,  286. 

LIQUIDATION, 

of  claims,  when  permitted,  1004. 
LUNATICS, 

adjudication  as  bankrupt,  106,  127. 

M 
MAILS. 

use  of,  penalty  envelopes  by  referee,  663. 

MAINTENANCE, 

claim  for,  not  released  by  discharge,  418,  437. 
MALICIOUS  INJURIES, 

liability  for,  not  released  by  discharge,  418,  436,  1366. 
MANUFACTURING  CORPORATION, 

may  become  involuntary  bankrupt,  108. 
MARRIED  WOMEN, 

adjudication  of.  as  bankrupt,  107,  128. 

bankrupt's  wife,  dower  of.  226,  230,  1357. 
may  testify,  518,  535,  1370. 
debts  of.  provable,  988. 

claim  of,  may  be  used  as  set-off,  1133. 

debts  of,  when  unaffected  by  husband's  discharge,  etc.,  448. 


INDEX.  999 

[REFERENCES    ARE    TO    SECTIONS] 

MARRIED  WOMEN— Continued. 

exemptions  allowed  to,  when,  196. 

insurance  payable  to,  not  affected  by  husband's  bankruptcy,  1167. 

title  to  property  of  husband  on  bankruptcy  of  wife,  1163. 
MARSHAL, 

account  of  expenses  to  be  returned,  1254. 

conduct  of  bankrupt's  business  by.  26,  1351.    ■ 
compensation  for,  26,  1351. 

fee  of.  in  bankruptcy  proceedings,  802-806. 
of  deputies,  804,  805. 

form  of  bond  to,  1295. 

form  of  special  warrant  to,  1293. 

indemnity  for  expenses  may  be  required,  1245. 

may  seize  bankrupt's  property,  when,  1140. 

rendition  of  accounts,  etc.,  976. 

take  charge  of  bankrupt's  property,  26,  1351. 
MARSHALLING  OF  ASSETS, 

in  case  of  partnership,  173. 

proof  of  claim  where  several  funds  available,  867. 
MASCULINE  GENDER, 

words  importing,  how  construed,  25.  • 

MATERIAL  MEN, 

debts  of,  entitled  to  priority  of  payment,  1045. 

lien  of,  valid,  when,  1094. 
"MATTER  IN  CONTROVERSY," 

what  constitutes,  615. 
MECHANIC'S  LIEN, 

effect  of  bankruptcy  proceedings  in  case  of.  1094. 

enforcement,  when  not  stayed.  263. 

entitled  to  priority  of  payment,  when,  1042-1045. 
MEETINGS, 

bankrupt  to  attend,  817. 

toi  submit  to  examination,  etc.,  209,  210,  1356. 
when  not  required  to  attend,  209. 

business  at,  815,  818. 

called,  final,  etc.,  823,  824. 

composition,  creditors  to  receive  offer  of,  etc.,  288. 
for  confirmation  of,  etc.,  293. 
power  of  referee  over,  306. 
form  of  petition  for,  1346. 

application  for  confirmation,  1347. 
order  confirming,  1348. 

duties  of  creditors  at,  820. 

form  of  notice  of  first,  1303. 

notice  to  be  given  to  creditors  of,  896,  901. 

referee  or  judge  to  preside,  687,  816. 

special,  may  bo  called,  when,  1260. 


1000  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

MEETINGS— Continued. 

subsequent  to  first,  821. 

subsequent,  unnecessary  where  no  trustee,  1250. 

time  and  place  of,  811-826. 

first,  adjournment  of,  etc.,  813,  814. 

trustee  to  be  chosen  at  first,  731,  736,  1393. 

to  lay  before  final,  statements  of  administration,  etc.,  752. 

voting  at.  right  of  creditors  to,  etc.,  827-838,  1405. 
MEMBERSHIP, 

title  of  trustee  to,  1182. 
MERCANTILE,    . 

defined,  116. 
MERCANTILE  PURSUITS, 

corporation  engaged  in,  may  become  bankrupt,  108,  116. 
MERGER, 

court  will  look  to  substance  of  debt  and  not  form  of  action,  432. 

of  claims  after  judgment,  etc.,  994. 

MILEAGE. 

of  witness,  entitled  to  priority  of  payment,  etc.,  1016,  1024. 
to  be  tendered  with  subpcena,  etc.,  713. 

MINING, 

corporation,  may  become  bankrupt,  108,  117. 

MINORITY, 

of  creditors,  rights  of.  at  composition  meetings,  etc.,  294. 

MISAPPROPRIATION, 

debts  created  by  officer,  not  affected  by  discharge,  etc.,  418,  435,  1366. 

MONEY, 

payment  of,  creating  a  preference,  953. 
to  be  drawn  by  check,  etc.,  973,  1264. 
trustee  to  deposit  in  depositories,  752,  757. 

MORTGAGE, 

act  of  bankruptcy,  when,  75. 

chattel,  invalid  for  want  of  record,  1079. 

lien  of,  valid,  when,  1091. 

when  act  of  bankruptcy.  74. 
claim  of  mortgagee  provable,  '996. 

enforcement  of  mortgagee's  rights  in  case  of  bankruptcy,  1092. 
exemptions,  allowance  of,  in  case  of,  192. 
foreclosure,  when  suits  to  will  not  be  stayed,  262. 
lien  of,  when  valid.  1090. 
priority  of  payment,  when  entitled  to,  1050. 
title  to  property,  in  case  of.  1173. 
title  to  rent  in  case  of  mortgagor's  bankruptcy,  1175. 

MULTIFARIOUSNESS, 

when  petition  such,  460. 


INDEX.  lUUl 

[REFERENCES    ARE    TO    SECTIONS] 

MUNICIPALITY, 

proof  of  debts  by,  when  due  as  penalty,  forfeiture,  887. 

taxes  due  to,  entitled  to  priority  of  payment,  1006,  1014,  1413. 
not  released  by  discharge,  418,  1366. 
MUTUAL  CREDITS, 

what  are,  1126. 
MUTUAL  DEBTS, 

what  are,  1126. 

N 
NATIONAL  BANKS, 

cannot  be  adjudged  bankrupts,  108,  112. 
NE  EXEAT, 

writ  of,  when  issuable,  etc.,  241 
NEGOTIABLE  INSTRUMENTS, 

endorser's  liability,  occurring  after  adjudication  not  affected,  303. 

form  of  affidavit  of,  whea  lost,  1323. 

protest,  right  of  bankrupt  to  waive,  224. 

provable,  when,  983. 

title  of  trustee  to,  1179. 
NEW  PROMISE, 

to  pay,  effect  on  debts  released  by  discharge,  etc.,  391. 
NEWSPAPERS, 

designation  of  by  court  of  bankruptcy,  630,  1377. 
NOMINAL  PARTNERS, 

effect  of  bankruptcy  on,  140. 
NON-RESIDENT, 

when  court  has  jurisdiction  over,  35. 
NOTICE, 

act  of  bankruptcy,  from  what  date,  84,  85. 

addresses  to  be  furnished  referee,  etc.,  1256L 

compromises  proposed,  896. 

creditors  to  receive,  unless  waived,  896. 

depositions  to  be  taken,  filing,  etc.,  555,  556. 

discharge,  hearings  upon  application  for,  896,  900,  1407. 
failure  to  oppose  after,  equivalent  to  consent,  380. 
revocation  of,  406. 

dismissal  of  petition  by  petitioner,  896,  906,  1407. 

examinations,  896,  898,  1407. 

failure  to  schedule  debts,  not  released;  418,  446. 

final  accounts  of  trustees,  etc.,  896,  904. 

form  for  first  meeting,  1303. 

hearing  of  application  for  setting  aside  compositions,  336. 

meetings  of  creditors,  896,  901. 

newspapers,  designation  of.  for  publishing,  630,  631,  1377. 

not  required,  when,  907. 

provisions  as  to.  mandatory,  897. 

publication  of,  908. 
failure  of,  909. 


1002  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

NOTICE— Continued. 

referee  to  give  to  creditors,  686,  689,  910,  1388. 

referee  to  give  trustee,  of  appointment,  1251. 

sales  of  property  to  be  given,  896,  902. 

service  to  be  made  upon  whom.  897. 
may  be  upon  attorney,  1239. 

special  meeting,  1260. 

transfer  of  property,  effect  of  on  lien  of,  1108. 
NUMBER, 

of  creditors,  counting  for  purpose  of  voting,  827. 

words  importing  plural,  how  construed,  25,  1350. 
singular,  how  construed,  25. 

O 

OATHS, 

affirmations  in  lieu  of,  517,  1369. 

counsel  may  administer,  when,  516. 

definition  of,  25,  1350. 

false,  an  offense,  etc.,  638. 

false,  making  of,  by  bankrupt,  636,  638. 

effect  of,  to  schedules,  221. 

ground  for  refusing  discharge,  361. 
form  of,  515. 

of  referees,  1301. 
of  office  referee's,  671,  1385. 
pleadings  to  be  verified,  476-481,  1367. 
proof  of  claim,  who  may  administer  oath  to,  849. 

who  to  make,  1256. 
referee  may  administer,  674,  680.  1387. 
who  may  administer,  in  general,  512-517,  1369. 
OBJECTION, 

to  allowance  of  claims,  early  hearing  of,  etc.,  868. 

who  may  make,  effect,  etc.,  869. 

proof  and  costs  in  case  of,  871.  872. 
to  confirmation  of  composition.  308. 
to  discharge,  specification  of,  348. 

time  of  filing,  etc.,  349. 
OFFENSES, 

Circuit  Court  has  concurrent  jurisdiction  over,  586,  587. 
contempt,  nature  of.  59. 

committed  before  referee,  how  punished.  712-720. 
false  oath  by  bankrupt  to  schedule,  221. 

discharge  to  be  refused  on  commission  of,  346. 
Indictment  to  be  within  a  year.  642. 
jurisdiction  of  courts  of  bankruptcy  over,  26,  1351. 
of  bankrupt  and  others,  concealing  property,  etc.,  636,  637. 

making  false  oath  or  account,  etc.,  636.  638. 

receiving  money  from,  636.  640. 

extorting  money  for  forbearing  to  act,  etc.,  636. 


INDEX.  1003 

[REFERENCES    ARE    TO    SECTIONS] 

OFFENSES— Continued. 

acting  on  advice  of  counsel,  639. 

when  not  criminally  liable  for  evidence,  209,  1356. 
of  corporations  and  their  officers,  26,  1351. 
of  creditors,  bankrupt  to  inform  trustee  of,  209,  213. 

proving  false  claim,  etc.,  209,  213.  636. 
of  referee,  641. 

of  trustee,  misappropriating  property,  etc.,  632-635,  1378. 
of  witness,  refusing  to  be  sworn  or  testify,  etc.,  540. 
orders,  failure  to  obey,  54. 
punishment  for  failure  to  obey  orders  of  court  of  bankruptcy,  53-63. 

pardon  of,  60. 

not  imprisonment  for  debt,  62. 

defense  to  order,  63. 
trial  of  by  jury,  507-510,  1368. 
writ  of  habeas  corpus  granted,  when,  644. 
OFFICE, 

bankruptcy  matters,  creation  of  trustee  and  referee,  659,  1382. 
tenure  of  referee's,  666. 
OFFICERS, 

debts  created  by  fraud,  etc.,  not  affected  by  discharge,  418,  435,  1366. 
defined,  25,  1350. 

discharge  of,  effect  of  liability  on  bond,  416. 
reports  to  be  made  to  attorney  general,  809. 
OMISSION, 

assets  from  schedule  as  grounds  for  refusing  discharge,  358. 

of  non-dischargeable  debts,  effect  of,  360. 
of  claims  from  schedules,  effect  of,  220. 
OPPOSITION  (see  Discharge), 

to  discharge,  effect  of  buying  off,  355. 
ORDERS, 

bankrupt  to  comply  with,  209,  211,  1356. 

claims  based  on,  when  entitled  to  priority  of  payment,  1048. 

confirming  composition,  granting  discharge,  etc.,  56. 

approving  trustee's  bond,  evidence  of  title.  559. 

courts  of  bankruptcy  to  make  and  enforce,  26.  1351. 

form  of,  show  cause  upon  creditor's  petition,  1289. 

punishment  for  failure  to  obey,  53-63. 

referees',  what  to  recite,  etc.,  699. 

refusal  to  obey,  grounds  for  denying  discharge,  346,  372. 

Supreme  Court  to  promulgate,  645-650. 

what  to  recite,  1258. 

P 

PAPERS, 

bankrupt  to  execute  and  deliver,  209,  1356. 
clerk  to  deliver  to  referee,  etc..  795. 
custody  of,  799. 


1004  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

PAPERS— Continued. 

endorsement  of  by  attorney,  etc.,  before  filing,  1239. 

of  time  of  filing,  etc.,  1237. 
referee  to  obtain  from  court,  686. 

to  return  when  requested,  686. 
trustee's,  open  to  inspection,  etc.,  777,  1398. 
where  filed,  etc.,  1255. 
PARDON, 

of  punishment  for  contempt,  60. 
PARTIES, 

additional,  when  brought  in,  47. 

may  intervene  in  petition,  935-942. 
Interested,  may  appeal  from  decision  of  Bankruptcy  Court.  607. 
may  oppose  discharge,  346-347. 
substitution  of,  allowed,  26,  1351. 

trustee  necessary,  in  suits  concerning  bankrupt's  property,  275. 
PARTNERS  (see  Partnership). 
PARTNERSHIP, 

absence  of  firm  assets  and  solvent  partner,  effect,  159. 
acts  of  bankruptcy  by,  145. 
accounts  of  property  of,  154. 
adjudication  of,  as  bankrupt.  130,  1354. 

during  what  period,  133. 

operates  as  a  dissolution,  134. 
administration  of  estates,  150. 

assets,  assumption  of  debts  and,  by  one  member,  160. 
business,  settlement  of,  where  all  not  adjudicated,  177. 
compositions  by,  149. 
dealings  between  partners,  effect  of,  148. 
death  or  insanity  of  member,  effect  of,  141. 

disposition  of  estate  in  case  of.  171. 
debts,  what  are  firm,  162. 

what  are  joint  and  individual,  163. 

firm,  provable  against  individual  estate,  164. 
effect  of,  166. 
when  not  provable,  165. 
determination  of  existence  of,  131,  132. 
discharge,  when  granted,  147.  373. 

of  member  of  firm,  374. 

of  firm,  effect  on  liability  of  member,  414. 
exemptions,  firm  and  individual,  200,  201. 
expenses,  payment  of,  155. 
firm  property,  what  is,  169. 

trustee's  right  to,  172. 
form  of  petition,  1287. 

of  proof  of  debt  by,  1320. 

of  petition  against.  459. 
hearing  of  petitions  where  more  than  one  filed,  1241. 


INDEX.  1005 

[REFERENCES    ARE    TO    SECTIONS] 

PARTNERSHIP— Continued. 

individual  debts  not  allowable  out  of  firm  assets,  161. 

individual  property,  168. 

insolvent,  when,  68,  146. 

intervention  in  involuntary  proceedings,  939. 

involuntary  bankrupt,  who  may  be  adjudged,  135. 

who  may  not  be,  136. 
joint  estate,  converted  into  separate,  etc.,  170. 
jurisdiction  over  one  partner,  152. 

of  petition,  where  several  filed,  153. 
marshaling  of  assets,  173. 

claims  between  the  estates,  174. 

where  one  is  member  of  two  firms,  175. 

claim  of  partner  against  bankrupt  partner,  176. 
nominal  or  secret  partners,  effect  of  proceedings  on,  140. 
nonjoining  member  may  contest  adjudication,  1243. 
petition,  in  case  of,  130-149,  1354. 

averments  of,  144. 

filed  by  individual,  138. 

filed  by  member  against  firm,  139. 
proof  of  claims  in  case  of,  1256. 
proof  of  debt  due,  form,  etc.,  1256. 

requirements  of,  848. 
relation  of,  exists  when,  131. 

determination  of  existence  of,  132. 
solvent  partner's  liability,  effect  of  payment,  167. 
solvent,  proceedings  against,  142. 

in  case  of  defunct  firms  and  retired  partner,  143. 
title  of  property  of,  in  case  of  bankruptcy,  1176. 
transfer  of  firm  property  from  one  member  to  another,  etc.,  when 

not  an  act  of  bankruptcy,  72. 
trustee,  choice  of,  150,  151. 

voluntary  bankrupts,  who  may  file  petition,  137. 
voting  by  individual  and  firm  creditors,  831. 

PATENTS, 

title  of  trustee  to,  1146,  1177. 

PAUPER  CASES, 

payment  of  fees  in  case  of,  795,  798. 
of  referee  in,  706. 

PAWN  (see  Pledge). 
PAYMENTS, 

by  bankrupt  after  filing  petitions  forbidden,  etc.,  223. 

of  dividends,  1054-1068. 

moneys  deposited  to  credit  of  estate,  how,  1264. 

when  a  preference,  953. 
PENALTIES. 
-,        proof  of  debt  due  government  as.  887. 


1006  INDEX. 

[REFERENCES   ARE    TO    SECTIONS] 

PENALTY  ENVELOPES, 
use  of.  by  referees,  663. 

PENSIONS, 

money  due  as,  exempt  to  bankrupt,  205. 
PERISHABLE  PROPERTY. 

form  of  petition  for  sale  of,  1332. 

may  be  sold  without  notice,  902,  1253. 
PERSON, 

defined,  25,  1350. 

PERSONAL^  PROPERTY, 

exemptions  in  case  of,  198. 

PETITIONS, 

abbreviations  in,  to  be  avoided,  etc.,  1240. 
adjudication  upon,  effect,  etc.,  494,  495. 

appeal  from,  498. 

or  dismissal  on  failure  to  plead,  488,  489. 

when  set  aside,  497. 

when  not  set  aside,  496. 
allegation  of,  458. 
amendments  of,  when  allowed,  etc.,  462-465. 

denied,  when,  466. 

effect  of,  on  pending,  1233,  1423. 

to  cover  earlier  acts  of  bankruptcy,  1241. 
"a  person  against  whom"  filed,  includes  voluntary  petition,  25,  1350, 
appearance  and  plea  to,  467,  471. 
averments  of,  in  case  of  a  partnership,  144. 
based  on  provable  debts,  913. 
based  upon  act  of  bankruptcy,  when  to  be  filed,  84,  85. 

from  when  to  date,  84,  85. 
certificate  of  search  to  be  furnished,  1229. 
claims  counted  to  make  number  and  amount,  920. 
creditors  estopped  from  filing,  when,  923. 
corporation,  allegation  of  class,  120. 
composition,  filing  of,  etc.,  289. 
consent  to  adjudication  insufficient,  925. 
consolidation  when  several  filed,  etc.,  1242. 
creditors  may  intervene,  935. 

time  and  manner  of  intervention,  936. 
creditors  of  what  date  and  kind  included,  918,  919. 
defenses  to,  etc.,  to  be  set  forth,  475. 
defined,  25,  1350. 
demurrer  lies  to,  when,  472. 
discharge,  what  to  state,  1267. 
dismissal  of,  allowed,  when,  487-489. 
by  petitioner,  notice  of,  etc.,  943,  944. 

notice  of  proposed,  896,  906. 

on  failing  to  pay  fee  when  able,  1270. 


INDEX.  1007 

[REFERENCES    ARE    TO    SECTIONSi 

PETITIONS— Continued. 

duplicates  to  be  filed.  927,  1408. 
fee  paid  on  filing,  702. 

In  case  of  transfer  or  revocation  of  reference,  710,  711,  1389. 

not  required  in  pauper  cases,  795,   798. 
filed,  when,  461. 
filing  to  be  voluntary,  914, 
form  of,  456,  1287. 

of  debtors,  1274. 

of  involuntary,  1288. 

of  order  to  show  "cause  upon  creditors,  1289. 
insufficiency  of,  waived,  etc.,  503. 
intervention  in  on  failure  to  prosecute,  etc.,  941. 
involuntary,  may  be  filed  by  whom,  915. 

costs  on  dismissal  of,  94. 

notice  to  creditors  not  joined,  931. 

computing  member  to  join,  933. 

joinder  of  creditors  in,  935. 

who  may  file.  912,  1408. 
multifarious,  when,  460. 

notice  to  creditors  where  insufficient  number  joined,  931. 
order  of  reference   to  name   date  for   bankrupt  to   appear  before 

referee,  493. 
partnership,  general  form,  etc.,  459. 

nonjoining  member  may  contest,  etc.,  1243. 
plea  or  answer  to,  form  of,  etc.,  473. 
preferred  creditors  counted  in  determining  number,  922. 

may  file  petition,  922. 
preparation  of,  928. 
proceedings  where  filed  in  different  districts,  1241. 

priority  of  hearing,  etc.,  1242. 
referee  to  adjudicate  or  dismiss,  674-677. 

may  consider,  674-677. 

reference  to,  490-493,  564. 

reference  from  one  referee  to  another,  566,  567. 
residence,  etc.,  to  be  alleged,  33. 
review  of  decision  of  Court  of  Bankruptcy,  600. 

who  may  present,  601. 

application  for,  may  be  made  at  same  time  as  application  for 
appeal,  611. 
secured  priority  and  lien  creditors  counted  in  determining  number, 

etc.,  921. 
seizure  of  property  to  prevent  deterioration,  1142. 

affidavit  in  support  of,  1143. 
service  of,  452,  453. 
solvency  a  defense,  when.  86-88. 

stay  in  case  more  than  one  filed,  transfer,  etc.,  258,  658. 
time  of  filing  in  duplicate,  929. 


1008  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

PETITIONS— Continued. 

to  be  filed  within  four  months,  84,  85,  1352. 
transfer  of,  when  more  than  one  filed,  656. 
verification  of,  476-478. 

by  agent  or  attorney,  479, 

defect  in,  cure  of,  480. 

waiver  of,  481. 
voluntary,  who  may  file,  96,  1353. 

adjudication  or  dismissal  by  judge,  491. 
when  may  be  filed  under  Act  of  1898,  1223,  1420. 
withdrawal  of  creditor,  945. 

PLACE, 

creditor's  meetings,  where  held,  811. 
PLACE  OF  BUSINESS, 

necessary  to  give  court  jurisdiction,  30. 
PLEADING  AND  PRACTICE, 

confirmation  of  composition  must  be  pleaded,  326. 
contempts  before  referee,  procedure,  718. 
corporations,  petition  to  allege  class  of,  120. 

consent  to  adjudication.  121. 
determination  of  issue  without  jury,  482. 
ground  for  stay,  to  be  pleaded.  273. 
in  bankruptcy  proceedings,  449-499. 

In  suits  against  bankrupt,  discharge  or  adjudication  to  be  pleaded, 
273. 
o£  discharge,  effect  of,  383,  384. 
judge  may  vary  time  for  return  of  process,  etc.,  1272. 
length  of  residence  or  domicile  must  be  alleged,  33. 

burden  of  proof,  34. 
partnership  proceedings,  averments  of  petition,  144. 
petition,  etc.,  in  case  of  applications  for  composition,  289. 

for  review  of  decision  of  bankruptcy  court,  600. 
plea  of  creditor  or  bankrupt,  to  involuntary  petition,  473. 
seizure  of  bankrupt's  property  on  filing  petition,  92. 
verification  of,  476-481. 
PLEDGE, 

effect  of  bankruptcy  proceedings  upon  lien  of,  1102. 
title  to  property  in  case  of.  1173. 
when  not  an  act  of  bankruptcy,  76. 
POLICIES  (see  Insurance  Policies), 

pass  to  trustee,  when,  1146,  1167-1169. 
POSTPONEMENT, 

of  action  on  proof  of  claim,  effect  of,  850. 
as  affecting  elections,  etc.,  833. 
POWER  OF  ATTORNEY, 
form  of^  in  fact,  1305. 
special  letter,  1306. 


INDEX.  1009 

[REFERENCES    ARE    TO    SECTIONS] 

POWERS, 

exercisable  by  bankrupt,  pass  to  trustee,  1146,  1184,  1419. 
unspecified,  of  courts  of  bankruptcy,  26,  1351. 
PRACTICE  (see  Pleading  and  Practice). 
PREFERENCE, 

act  of   bankruptcy,   when,   64,   69,   1352. 

through  legal  proceedings,  64,  78,  1352. 
cannot  be  surrendered  to  referee,  694. 
creditors  only  can  be  preferred,   959. 
deemed  to  have  been  given,  when,  946,  947.  1409. 
depends  upon  the  class  of  creditors,  etc.,  955. 
effect  upon  provability,  1003. 
exchange  of  property,  when,  951. 
immaterial  whether  voluntary  or  involuntary,  957. 
intent  to  commit,  not  necessary,  956. 
judgments  deemed  to  be  such,  when,  949,  952. 
jurisdiction  of  court  over  suit  to  recover,  571,  961. 
new  credit  given  after  receipt  of,  may  be  used  as  set-off,  etc.,  968. 
payment  of  money,  when  deemed  to  be,  953. 
petition  to  be  filed  within  four  months  of,  84. 

stay  of  creditors  disposing  property  received  under  fraudulent,  260. 
stoppage  in  transitu,  does  not  create,  954. 
surrender  to  be  made  of  before  allowance  of  claims,  873,  1406. 

what  must  be  surrendered,   874. 

prior  to  amendment,  Carson  v.  Trust  Co.,  875. 

involuntary  surrender,  876. 

if  given  within  four  months,  877. 

surrender  in  case  of  new  credit,  878. 
time  within  which  to  be  given,  946,  960,  1409. 

where  record  withheld,  960. 
to  attorneys,  examination  of,  970,  971. 
transfer  of  property,  when,  950. 
voidable,  constituents  of,  962. 
voidable,  when,  961-967. 

reasonable  cause  to  believe,  963. 

actions   affecting,   967. 

knowledge  of  agent  or  attorney,  964. 

transactions  out  of  usual  course,  965. 

not  necessarily  void,  966. 
PREFERRED  CREDITORS, 

counting  of  on  filing  involuntary  petitions,  922. 
PRINTER, 

adjudication  of  as  bankrupt,  119. 
PRINTING, 

corporation  engaged  in,  may  become  bankrupt,  108. 
PRIORITY  (see  Claims;    Debts), 

claims,  counting  of  on  filing  petition,  921. 
claims  entitled  to,  proof  of,  864. 

64 


1010  INDEX. 

[REPEBENCES    ARE    TO    SECTIONS] 

PRIORITY— Continued. 

debts  entitled  to  payment,  1006-1053,  1413. 

of  liens  in  case  of  bankruptcy,  1096. 

petition  alleging  earlier  act  of  bankruptcy  to  be  first  heard,  etc., 
1242. 

referee's  commission  on  claims  entitled  to,  708. 
PRIVILEGED   COMMUNICATIONS, 

when  not  admissible  as  evidence,  547. 
PRIVILEGES, 

personal,  title  of  trustee  to,  1182. 
PROCEEDINGS. 

adjudication  in  bankruptcy  operates  in  rem,  250. 

conduct  of,  1239. 

from  what  commencement  of  to  date,  44. 

notice  of  proposed  dismissal.  896,  906. 

PROCESS, 

courts  may  issue  necessary,  1238. 

service  of,  in  case  of  involuntary  petition,  449-453,  1367. 
time  for  return,  may  be  varied  by  judge,  etc.,  1272. 
to  issue  out  of  court  under  seal,  etc.,  1238. 

PROMISE, 

new,  effect  of  on  debts  released  by  discharge,  etc.,  391. 

PROOF, 

burden  of  as  to  place  of  residence,  etc.,  34. 

on  denying  insolvency,   86,   90. 
PROOF  OF  CLAIMS  (see  Claims), 
action  on,  postponed  when,  850. 
after   a   dividend,   effect  of,    1064. 
allowance  or  rejection  of,  when,  861,  862. 
amendment  of,  when  allowed,  851. 
assigned  claims,   how  made,  845. 
bankrupt  to  examine  correctness  of,  209. 
by  whom  made,  1256. 
consideration  to  be  stated,  847. 
contents  of,   1256. 
definition  of,  839,  1406. 
duties  of  referee  with  reference  to,  863. 
effect  in  general.  852. 

on   collateral   proceedings,   853. 

may  still  oppose  discharge,  854. 
effect  of  failure  of,  855. 

of  receipt  and  filing  of,  863. 
estate  of  one  bankrupt  against  another,  892. 
false  claim,    penalty   for   making,    636. 
fee  of  referee  for  filing.  702,  704,  1389. 
filing  of  claims  where,  1255. 

after  allowance,  859.  860. 


INDEX.  1011 

[REFERENCES    ARE    TO    SECTIONS] 

PROOF  OF  CLAIMS— Continued. 

form  of,  debt  by  partnership,  1320. 

by  agent  or  attorney,  1321.  * 

due  corporation,  1319. 

of  secured  debt,  1318. 

of  secured  debt  by  agent,  1322. 

of  unsecured  debt,  1317. 
instrument  in  writing,  claim  founded  on,  857,  858,  1406. 
intent  in  committing  act  of  banliruptcy,  81 
made  before  whom,  849. 
manner  of  malting.  839,  841,  1406. 
marshaling  of  assets  in  case  of,  etc.,  867. 
nature  of,  840. 
objections  to  have  early  hearing,  etc.,  868. 

who  may  make,  869. 

effect  of,  and  before  whom  made,  870 

procedure  in  case  of,  871. 

costs  in  case  of.  872. 
penalties,  forfeitures,  etc..  due  the  Government,  state,  etc.,  887. 
persons  contingently  liable,  how  made,  846. 
preferences  must  be  surrendered  when,  873,  1406. 

what  must  be  surrendered,  874. 

Carson  et  al.  v.  Trust  Co.,  decision  of,  875. 

involuntary  surrender  of,  876. 

surrender  of  within  four  months,  877. 

surrender  in  case  of  new  credit,  878. 
reconsideration  of  allowed,  etc.,  888,  889. 

recovery  of  dividend,  891. 

time  for  asking,  890. 
right  to  make,  not  dependent  on  existence  of  assets,  856. 
secured  claims,  how  made,  842. 

allowance  of.  etc.,  864,   865. 

determining  value  of  securities,  etc.,  879-883. 
secured  by  individual  undertaking,  method  of,  etc.,  885,  886. 

on  property  of  third  person,  844. 

treated  as  unsecured,  843. 
supplemental  may  be  made,  when,  851. 
time  for  making,  894.  895. 
who  to  make,  848. 

PROPERTY   (see  Estates), 

bankrupt's,  appraisal  and  sale  of,  1189-1192. 

cost  of  care  and  preservation  entitled  to  priority  of  payment,  1017, 
1019. 
for  rent,  1020. 
incumbered,   payment  of  debts  in   case  of,  1009. 
fraudulently  transferred  passes  to  trustee,  1146,  1167. 
jurisdiction  of  District  Court  over  suit  to  recover,  571-585. 
malicious  injury  to,  not  affected  by  discharge,   436. 


1013  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

PROPERTY— Continued. 

obtained  through   fraud,   ground   for  refusing  discharge,  346,  370. 

obtained  by  false  pretenses  not  affected  by  discharge,  434. 

offense  of  secreting  while  trustee,  etc.,  632. 

order  confirming  composition  evidence  of  title,  563, 

preference  from  transfers  of,  946,  950,  1409. 
from  exchange.   951. 

referee  may  take  possession,  etc.,  681. 

receiving  from  bankrupt,  when  an  offense,  636,  640. 

seizure  of,  after  filing  involuntary  petition,  1140. 

transferable,  passes  to  trustee,  1146,  1179. 

title  to,  when  obtained  through  fraud,  1158. 

title  of  trustee  to  goods  delivered  to  be  paid  for  when  sold,  1186. 
held  in  trust,  1187. 
PROTECTION. 

bankrupt  from  arrest,  when  entitled  to,  231-238,  1358. 
PROTEST, 

right  of  bankrupt  to  waive,  224. 
PROVABLE  DEBTS  (see  Claims;  Debts), 

what  are,  977-1002,  1412. 
PROXY, 

creditors  may  act  by,   835. 

when  proof  of  claim  may  be  made  by,  848. 

PUBLICATION, 

of  notices  in  bankruptcy  proceedings,  908. 
failure  to  publish,  909 
of  filing  petition,  when,  449,  453,  1367. 
PUBLISHERS, 

adjudication  of  as  bankrupt,  119. 

PUBLISHING, 
corporation  engaged  in,  may  become  bankrupt,  119 

PUNISHMENT   (see  Offenses). 

PURCHASE  PRICE, 

not  paid,  exemptions  in  case  of,  188. 

PURCHASERS, 

bona  fide  effect  of  bankruptcy  in  case  of,  1218. 
from  bankrupt's  estate,  by  referee,  penalty,  641. 

Q 

QUALIFICATIONS, 
of  referees,  668. 
of  trustees,  746-748. 

R 

RAILROAD  CORPORATIONS, 

cannot  be  adjudicated  bankrupt,  118. 


INDEX.  1013 

[REFERENCES    ARE    TO    SECTIONSj 

REAL  ESTATE  (see  Estate), 

record  to  be  made  of  adjudication,  769,  770,  1396. 
REALLOTMENT, 

of  homestead  exemptions,  etc.,  197. 
REASONABLE, 

attorney's  fee  to  be,  1026. 
"REASONABLE  CAUSE  TO  BELIEVE", 

in  case  of  preference,  when  presumed,  963. 
knowledge  of  agent  or  attorney,  964. 
transactions  out  of  usual  course  of    business,  965. 
RECEIVERS, 

appointed  by  state  courts,  not  to  be  interfered  with,  41. 
appointment  of,  act  of  bankruptcy,  64,  80,  1352. 
to  preserve  estate,  26,  45,  1351. 
may  conduct  bankrupt's  business,  26,  1351. 
compensation,  26,  1351. 
attorney  of,  entitled  to  priority  of  payment,  1037. 
fees  of,  807. 

provable,  when,  980. 
notice  to  be  given  on  appointment,  etc.,  907. 
proceedings  against  property  in  hands  of,  should  not  be  stayed, 

when,  etc.,  265. 
referee  may  appoint,  681. 
taxes  on  funds  in  hands  of,  1015. 
RECONSIDERATION, 

of  allowed  claims  for  cause,  888,  890. 
recovery  of  dividend  paid  on,  889. 
time  for  asking,  890. 
RECORD, 

admissible  as  evidence,  557,  558. 
claims  invalid  for  want  of,  when,  1073,  1416. 

referee's,  manner  of  keeping,  weight  to  be  given,  etc.,  721,   722, 
1391. 
cases  to  be  kept  in  separate  books,  724. 
to  be  returned  to  clerk's  office,  726. 
prepared  and  referred  to  judge  on  request,  686,  695,  696. 
return  to  court  files  when  closed,  etc.,  686. 
trustee's  title,  where  filed,  769. 
REDEMPTION, 

form  of  petition  and  order  for,  1329. 
REFEREE, 

absence  or  disability  of,  665. 
who  to  act,  728-730,  1392. 
accounts  to  be  kept  by,  etc.,  1261. 

rendition  of,  etc.,  976. 
acknowledgment  of  proof  of  claim  before,  etc..  1256. 
addresses  to  which  notices  are  to  be  sent,  1256. 


lOU  INDEX. 

[REFERENCES    ARiS    TO    SECTIONS] 

REFEREE — Continued. 

adjudication  may  be  made  by,  674,  676. 
appeals  not  to  be  taken  from  decisions,  608. 
appointment,  term,  district,  disabilities,  etc.,  661,  662,  1383. 
bonds  of,  779-794. 

limitation  of  suits  on,  792. 
clerical  assistance,  may  be  employed  by,  684. 
composition  meetings,  power  over,  306. 
contempts  before,  when  occurring,  712-720,  1390. 

punishment  to  be  by  court,  718,  719. 
costs  may  be  taxed  by,  685. 
defined,  25,  1350. 

depositions  taken  by,  exceptions  to  be  noted  on,  1257. 
discharge,  application  may  be  referred  to,  for  report,  etc.,  678. 

ruling  on  evidence  in  applications  for,  352. 
duties  of,  in  general,  686-701,  1388. 

imposed  by  Rules,  1247. 

with  reference  to  proof  of  claim,  863. 
examinations,  conduct  of,  1257. 

power  over,  548,  679. 
expenses  of,  how  paid,  705. 

not  to  be  incurred  until  indemnified,  etc.,  1245. 
fees  and  expenses,  702-711,  1389. 

amount  of  limited,  1231,  1270,  1422. 

clerk  to  pay,  795. 

for  filing  proof  of  claim,  702,  704,  1389. 

to  be  collected  and  paid  by  clerk  of  court.  795,  797. 

in  case  of  inability  or  pauper  aifidavit,  799, 

when  case  referred,  710. 

when  reference  revoked,  711. 
findings,  consideration  of  by  court,  26,  1351. 
fine  for  acting  when  interested,  641. 

refusing  to  permit  inspection  of  books,  etc.,  641. 
form  of  appointment  of  trustee  by,  1308. 

of  bond,  1302. 

of  certificate  to  judge,  1342. 

of  oath,  1301. 

of  order  of  reference,  1299. 

when  judge  absent,  1300. 
information  to  be  furnished  by,  686,  693,  1388. 
injunctions,  when  may  be  issued  by,  683. 
jurisdiction  in  general,  674,  685,  1387. 

limitations  of,  675. 
meetings  of  creditors,  to  preside,  816. 
notices  to  be  given  by,  686,  689,  910,  1388. 

need  not  be  given  on  appointment  of  special,  etc.,  907. 

to  trustee  of  his  appointment,  1251. 
number  of,  673,  1386. 


INDEX.  1015 

[REFERENCES    ARE    TO    SECTIONS] 

REFEREE— Continued, 
oath  of  office,  671,  1385. 

form  of,  672. 

may  be  administered  by,  512,  513. 
offense  of.  penalty,  641. 
office  of.  created,  659,  1382. 

corresponds  to  register.  660. 
orders  of,  what  to  recite,  etc.,  699. 
papers  to  be  delivered  to  clerk  of  court,  etc.,  795,  1400. 

to  be  endorsed,  with  time  of  filing,  etc.,  1237. 
petitions  may  be  dismissed,  677. 

to  be  referred  to,  by  clerk,  491,  493. 
proceedings  to  be  taken  before.  1247. 
orders  of,  what  to  recite,  etc.,  1258. 
proved  claims,  list  of,  to  be  sent  clerk,  etc.,  1259. 
qualifications  of,  668,  1384. 

computation  of  relationship,  669. 
receivers  may  be  appointed  by.  681. 
records,  manner  of  keeping,  etc.,  686,  692. 

to  be  returned  to  clerk's  office,  686. 
records  to  be  referred  to  court,  726. 

method  of  keeping,  etc.,  721,  724,  1391. 
reference  of  case  to,  564,  565,  1371. 

from  one  to  another,  566. 
review  of  order  of,  procedure,  1262. 
removal  of,  667. 

reports  to  be  made  to  Attorney  General,  809. 
review  of  orders  and  decisions  of,  26,  695,  696. 

hypothetical  questions,  697. 
sales  and  appraisals  of  property,  duties  in  connection  with,  682. 
schedules,  when  to  be  prepared  by,  686,  391. 

examination  and  amendment  of,  690. 
seizure  of  property  on  order  of,  681. 
special,  when  appointed,  728,  730,  1392. 
stay  of  proceedings,  jurisdiction  over  application,  249. 
stenographers  may  be  employed  by,  674,  684. 
subpoenas  in  blank  to  be  furnished,  etc.,  1238. 
to  collect  fees,  795.  797. 
trustee,  when  to  be  appointed  by,  738. 

accounts  to  be  audited  by,  1252. 

approval  or  disapproval  of  appointment  of,  739. 
when  not  to  act,  388,  700. 
REFERENCE, 

form  of,  order  of.  1299. 

when  judge  absent.  1300. 
of  case  to  referee,  564,  565,  1371. 

of  petitions,  changed  for  convenience  of  parties,  etc.,  566,  567. 
REHEARING, 

application  for,  in  case  of  discharge,  392. 


1016  INDEX. 

[REFKRBNCES    ARE    TO    SECTIONS! 

REJECTION, 

of  claims,  on  proof,  etc.,  862. 
RELATIONSHIP, 

computation  of,  in  case  of  referee,  etc.,  669. 

of  referee  to  bankrupt,  a  disqualification,  668,  669,  1384. 

of  trustee  to  parties,  effect  of,  748. 
RELATIVES, 

conveyance  to.  act  of  bankruptcy,  etc.,  73. 
when  void  under  the  law,  73. 

counting  of,  on  filing  petition,  933. 

definition  of.  934. 
REMAINDERS, 

title  of  trustee  to,  1184. 
REMOVAL, 

of  property,  when  act  of  bankruptcy,  64,  1352. 
grounds  for  refusing  to  discharge,  346,  358. 

of  referee  from  office,  667. 

of  trustee,  when,  744. 
proceedings  for,  745. 
effect  of,  750,  1395. 
RENT, 

effect  of  discharge  on  unaccrued,  442. 

lien  of  landlord  for,  in  case  of  bankruptcy,  etc.,  1093. 

priority  of  payment  of,  1020. 

when  prior  to  filing  petition,  1046. 

provable  debt,  when,  999. 

title  to,  on  mortgagee's  bankruptcy,  etc.,  1175. 

trustee  takes  title  to  lease  of  bankrupt,  1171. 
REPLICATION, 

may  be  filed  to  answer,  474. 
to  plea  of  discharge,  385. 
REPORT, 

Attorney  General  to  lay  annually  before  Congress,  808. 

referees,  etc.,  to  make  to  Attorney  General,  809. 

trustee  to  make,  final,  etc.,  752,  755,  1396. 
RESIDENCE, 

alien  or  nonresident.  35. 

allegation  of,  33. 

different  from  domicile,  31. 

length  required,  32. 

necessary  for  jurisdiction,  30. 

necessity  for,  on  appointment  of  trustee,  etc.,  746. 

prerequisite  to  jurisdiction,  26,  1351. 
RETIRED  PARTNER,  * 

proceedings  in  case  of,  143. 
RETURN  DAY, 

in  involuntary  bankruptcy,  449. 


INDEX.  1017 

[REFERENCES    ARE    TO    SECTIONS] 

REVENUE   LAW, 

court  of  bankruptcy  bound  by,  27. 
establishes  rule  of  evidence,  549. 

REVIEW  (see  Appeals  and  Writs  of  Error), 
of  referees,  decisions,  how  made,  26,  695. 

time  for  applying,  696. 
petition  for,  600. 

may  be  made  at  same  time  as  appeal  from  court  of  bankruptcy, 
611. 
REVOCATION, 

of  discharge,  when  granted,  grounds  of,  396-403,  1364. 

effect  of,  409. 
of  reference  of  petition,  fee  of  referee,  711. 
RIGHTS  OF  ACTION, 

based  on  contracts,  pass  to  trustee,  1146,  1419. 
RULES  (see  General  Orders), 

promulgation  by  Supreme  Court,  1235. 
RULINGS, 

of  referee,  review  of,  26,  686,  695,  696. 

S 
SALARY  (see  Fees), 

of  clerks,  etc.,  entitled  to  priority  of  payment,  1016,  1042. 

SALES, 

act  of  bankruptcy,  when,  77. 

confirmation  of,  1198. 

contract  of  conditional,  when  invalid  for  want  of  record,  1080; 

effect  of,  in  case  of  liens,  1196. 

exemptions,  disposition  of  proceeds  in  case  of,  etc.,  203. 

form  of  order  of,  1328. 

of  petition  for.  when  subject  to  lien,  1330. 

of  perishable  property.  1332. 

order  for  private,  1331. 
incumbered  property,  1194. 

free  of  liens,  1195. 
liquidation  without,  1197. 
manner  of  making,  provisions  with  reference  to,  1189-1195. 

of  perishable  property,  902,  1253. 

privately  when,  1253. 

to  be  by  public  auction,  etc.,  1253. 
notice  to  be  given  to  creditors  of  proposed,  896,  902,  1407. 
referee  may  authorize,  682. 
securities,  when  ordered,  etc.,  883. 
setting  aside,  when,  1199. 
state  court  no  power  over,  1193. 

through  legal  proceedings,  act  of  bankruptcy,  64,  1352. 
valid,  when,  1106. 


1018  INDEX. 

[REFERENCES   ARE   TO    SECTIONS] 

SCHEDULES, 

amendments  of,  preparation,  etc.,  218,  1246. 
bankrupt  to  file,  209,  222,  1356. 

claim  for  exemptions  to  be  included,  183. 
composition,  relation  of  bankrupt's,  to  proceedings  for,  222. 
creditors  to  be  included,  216. 

creditors  to  file  where  bankrupt  not  found,  1244. 
effect  of  including  claim,  219. 
false  oath  to,  221. 

omissions  from,  effect  of,  220,  418,  446. 
property  to  be  included  in,  215. 
referee  to  examine,  686.  690. 

to  prepare  on  default  of  bankrupt.  686,  691. 
statements  of,  in  composition,  290. 

SEAL, 

officer  administering  oath  to  attach,  514. 

SECRET  PARTNER, 

liability  of,  in  case  of  proceedings  against  firm,  140. 

SECRET  TRUST, 

for  bankrupt's  benefit,  title  of  trustee  to,  1178. 

SECURED  CLAIMS, 

commission  of  referee  on,  707. 
counting  of  on  filing  petition,  921, 
proof  of,  manner  of  making,  842. 

as  unsecured,  843. 

waiver  of  security,  844. 

when  secured  on  property  of  third  person,  844. 
proportion  of.  to  be  allowed,  etc..  864. 
security  must  be  on  bankrupt's  property,  882. 

sale  of.  etc.,  883. 

determination  of  value  of,  879,  880. 
what  are  not,  866. 

SECURED  CREDITORS, 
defined,  25,  1350. 

purchase  of  security  by,  effect  of,  884. 
rights  of  in  composition  proceedings,  300. 
right  to  vote,  etc.,  836. 

SECURITIES, 

determination  of  value  of,  881. 

effect  of  purchase  by  creditor,  884. 

in  possession  as  collateral,  when  used  as  set-off,  1132. 

title  of  trustee  to,  1185. 

SEDUCTION. 

claim  for,  when  provable,  992. 

not  released  by  discharge,  418,  437. 


INDEX.  1019 

[REFERENCES    ARE    TO    SECTIONS] 

SEIZURE, 

of  bankrupt's  property  on  filing  petition,  etc.,  92. 

bond  to  be  given,  by  creditors,  92. 

costs  on  dismissal  of  petition,  95. 
referee  may  authorize,  681. 
to  prevent  deterioration,  etc.,  1140,  141S. 

liability  for  unlawful,  1145. 

petition  for,  affidavit  in  support  of,  etc.,  1142. 

what  subject  of,  1144. 

SEPARATE  DEBTS, 

practice  in  case  of  set-offs,  1130. 

SERVICE, 

of  petition,  method  of,  449-453. 

SERVANTS, 

wages  entitled  to  priority.  1016. 

SET-OFF, 

in  case  of  preference,  968.  969. 
when  allowed,  1125,  1417. 

between  banker  and  depositor,  1131, 
between  estate  and  creditor.  1127. 
by  married  woman,  1133. 
new  credit  after  creation  of  preference,  968. 
joint  and  separate  debts,  1130. 
must  be  in  the  same  rights,  1128. 
mutual  debts  and  mutual  credits,  1126. 
need  not  be  of  same  nature,  1129. 
property  in  possession  of  as  collateral,  etc.,  1132. 
waiver  of,  1134. 
when  not  allowed,  1135,  1417. 

claims  barred  by  Statute  of  Limitations,  1138. 
must  be  provable,  1136. 

must  not  be  purchased  in  view  of  bankruptcy,  1137. 
taxable  costs,  1139. 
SOLVENCY, 

defense  to  act  of  bankruptcy,  when,   86-88. 
duty  of  bankrupt  on  alleging,  90,  91. 
SPECIAL  REFEREE, 

when  to  be  appointed,  728,  730,  1392. 
SPECIFICATIONS, 

in  opposition  to  confirmation  of  a  composition,  to  be  filed,  1268. 
of  objections  to  discharge,  348-352. 
STAMPS, 

when  required  under  War  revenue  law,  858. 
STATE  BANKS. 

cannot  be  adjudged  bankrupts,  108. 
STATE  COURT,  (see  Courts). 


1020  INDEX. 

[REFERENCES    ARE    TO    SECTIONS! 

STATEMENTS, 

false,  in  obtaining  property,  ground  for   refusing  discharge,   346, 
370. 
STATES, 

courts  of,  jurisdiction  over  suit  to  recover  preference,  571,  961. 
acts  of,  binding  upon  Federal  courts,  etc.,  584. 
appeals  to  Supreme  Court  when  allowed,  592.    _ 
have  no  power  over  sales  of  bankrupt's  estate,  1193. 
judgments  of.  not  to  be  annulled,  etc.,  in  court  of  bankruptcy, 

39. 
jurisdiction  over  suits  of  trustee,  571,  580,  961,  1204. 
consent  of  defendant,  578. 
over  suits  to  set  aside  liens,  1097. 
over  trustee's  suits  not  compulsory,  etc.,  583. 
not  to  administer  bankrupt's  estates,  251. 
receivers  in  charge  of  property  not  to  be  interfered  with,  41. 
when  without  jurisdiction,  582. 
debts  due  to,  when  provable,  etc.,  1002. 

due  under  laws  of,  entitled  to  priority,  when,  1016,  1044. 
defined,  25,  1350. 

insolvent  laws,  when  not  suspended,  15. 
laws  governing  allowance  of  exemptions,  179,  1355. 

rule  governing  construction  of  laws,  208. 
pending  insolvency  proceedings  not  affected  by  Act  of  1898,  1227. 
power  to  enact  bankrupt  or  insolvent  laws,  15. 
to  amend,  16. 
limit  to,  17.  18. 

impairing  the  obligation  of  contracts.  20. 
proof  of  debts  by,  when  due  as  penalty,  forfeiture,  etc.,  887. 
inquiry  into  court's  action  in  arresting  bankrupt,  233. 
taxes  due  not  released  by  discharge,  418,  1366. 
taxes  due  to,  entitled  to  priority  of  payment,  1006,  1014,  1413. 
STATISTICS, 

to  be  furnished  Congress  annually,  808. 
referees,  etc.,  to  furnish  to  Attorney  General,  809. 
STATUTE  OF  LIMITATIONS   (see  Limitations,  Statutes  of). 
STATUTES  OF  FRAUDS, 

title  to  property  conveyed,  void  under,  1161. 
STAY  (see  Suits), 

administration  of  bankrupt's  estates  by  state  courts,  251. 
application  for,  form,  service,  etc.,  268. 
where  made,  269. 
to  be  heard  by  judge,  1247. 
classes  of.  in  general,  252. 

suits  which  are  not,  261-265. 
compulsory,  voluntary  and  involuntary  proceedings,  245-247. 
contempt  proceedings,  257. 
decree  procured  by  fraud,  etc.,  254. 


INDEX  1021 

[RBFEKENCES    ARE    TO    SECTIONS] 

STAY— Continued. 

dissolved,  when.   271. 

ejectment  of  bankrupt,  proceedings  for,  259. 

foreclosure  of  mortgage,  when  not  granted,  262. 

general  assignment,  administration  of  estate  under,  255. 

grounds  for,  to  be  pleaded,  273. 

jurisdiction  over  application  for,  248. 
of  referees,  249. 

liens,  of  proceedings  to  enforce  valid,  253   • 

mechanic's  lien,  when  not  granted.  263. 

nature  of,  266. 

not  granted  in  case  of  receivers,  etc.,  265. 

petitions  where  more  than  one  filed,  258. 

proceedings  on  judgments,  when,  etc.,  256 

review  of  application  for,  274. 

suits  in  which  not  granted,  261-265. 
STENOGRAPHER, 

employment  of,  when  authorized,  684. 
STOCK  EXCHANGE, 

title  of  trustee  to  seat  in,  1182. 
STOCKHOLDERS, 

bankruptcy  of  corporation  not  to  release.  109. 

counting  of.  in  petition  against  corporation,  919. 

effect  of  discharge  on  liability  of,  443. 

liability  of,  provable  in  bankruptcy,  1001. 

trustees'  right  with  reference  to  liability  of,  1216. 
avoidance  of  liability  of,  1216. 

STOCKS, 

claims  affecting,  when  provable,  etc.,  1001. 

in  possession  as  collateral,  when  used  as  set-off,  1132. 

title  of  trustee  to.  1180,  1185. 
STOPPAGE  IN  TRANSITU, 

right  of.  in  case  of  bankruptcy,  1219. 
not  to  create  a  preference,  954. 
SUBPCENA. 

form  of,  1290. 

issue  of  by  court,  etc.,  1238. 

blanks  to  be  furnished  to  referees.  1238. 

refusal  to  obey,  a  contempt.  712.  1390. 

service  of.  in  involuntary  proceedings,  449,  1367. 

when  and  how  issued.  450,  451. 
SUBROGATION  (see  Surety), 

right  of  surety,  etc.,  to  prove  claim.  886. 

trustee  has  right  of  creditor  in  enforcing  lien.  1082. 
of  holder  of  lien.  1086. 
SUBSTITUTION. 

parties  in  bankruptcy,  allowed.  26,  1351. 


1023  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 
SUITS, 

adjudication,  etc.,  to  be  placed  by  banlirupt,  273. 
continued  after  dismissing  petition,  272. 
decree  procured  in  state  court  by  fraud,  254. 
disposition  of  property  under  fraudulent  preferences,  260. 
form  of  action,  as  affected  by  discharge,  433. 
jurisdiction  of  District  Courts  over,  571-585,  1372. 
lien  created  pursuant  to,  in  four  months,  dissolved,  1086. 
liens  obtained  through,  within  four  months  of  bankruptcy,  void, 
1109-1113,  1416. 

through  creditor's  suits,  1113. 
not  to  abate  because  of  death  or  removal  of  trustee,  750. 
on  bonds  of  trustee  and  reference,  etc..  792,  793. 
permission  to  bring,   when  allowed,   267. 
preference  through,  an  act  of  bankruptcy,  64,  78. 
recovery  of  voidable  preferences,  967. 

revival  of  right  to  bring  after  bankruptcy  proceedings,  272. 
statutory  liens  created  within  four  months  void,  1117. 
stay  of,  when  against  bankrupt,  245-260,  1360. 

when  not  granted,  261-265. 
time  when  proceedings  will  be,  270. 
time  within  which  trustee  may  bring,  1210-1212. 
to  prosecute,  when  commenced  by  bankrupt,  281,  282. 

time  for  bringing  by  or  against,  284. 

when  limitation  may  be  pleaded,  286. 
trustee  to  bring,  when,  etc.,  762. 

against  bankrupt,  to  defend,  275,  1360. 

when  and  how  to  become  a  party.  277. 
effect  of  appearance,  278. 
voidable  preference,  to  be  recovered  by.  961-967. 
when  brought  in  Circuit  Court,  568,  1372. 

SUMMONS, 

form  of,  to  witness,  1315. 

•eturn  of,  1316. 
issue  of,  by  court,  etc.,  1238. 

blanks  to  be  furnished  to  referees.  1238. 
procedure  to  obtain  attendance  of  witnesses,  524. 
SUPPORT. 

claim  for,  not  released  by  discharge,  418,  437. 
SUPREME  COURT,  D.  C, 
appeals  from,  588. 

time  for  taking,  1271. 
made  a  court  of  bankruptcy,  26,  1351. 
SUPREME    COURT    OF    THE    TERRITORIES, 

made  appellate  courts,  588. 
SUPREME  COURT.  U.  S.. 

appeal  to,  from  what  and  how,  614. 

from  Courts  of  Appeals,  when,  613-615. 


INDEX.  1023 

[REFERENCES    ARE    TO    SECTIONS] 

SUPREME  COURT,  U.  S.— Continued. 

appellate  jurisdiction,  588-594. 

certificate  of  justice  as  grounds  for  review,  613. 

certification  of  questions  from  Circuit  Court  of  Appeals  to,  594, 

certiorari  may  be  issued  by,  etc.,  595,  617,  618. 

findings  to  be  filed  in  case  of  appeals  to,  1271. 

provisions  as  to  appeals  generally,  590. 
from  highest  state  court,  592. 
when  and  how  allowed.  593. 

rules,  forms,  and  orders  to  be  promulgated  by,  645,  1235,  1274. 

time  for  taking  appeals  from  Circuit  Court  of  Appeals,  etc.,  1271. 
SURETY, 

debt  of,  provable  when,  987. 

liability  not  affected  by  bankrupt's  discharge,  etc..  411,  416,  444. 
on  bonds  of  public  officers,  416. 

on  bonds  of  referees  and  trustees,  779-794. 

proof  of  claim  by,  etc..  886. 
SURRENDER, 

to  be  made  of  preference  before  allowance  of  claims,  etc.,  873. 

T 

TAXES, 

entitled  to  priority  of  payment.  1006.  1011,  1014. 

payment  in  case  of  exempt  property,  etc.,  202. 

payment  of,  when  in  trustee's  hands,  1005. 

when  not  released  by  discharge,  418,  420,  1366. 
TENANT   (see  Landlord), 

title  to  lease  on  bankruptcy  of,  1171. 
TERMS, 

of  appellate  courts,  588. 

of  courts  of  bankruptcy,  always  open,  28. 

of  office  of  referee.  661,  666,  1383. 
TERRITORIES, 

appeals  to  Supreme  Court  in  what  cases,  603,  1374. 

banks  of,  cannot  be  adjudged  involuntary  bankrupts,  108,  112. 

district  courts  made  court  of  bankruptcy,  26,  1351. 

Supreme  Court  given  appellate  jurisdiction,  588. 
TESTIMONY  (see  Evidence). 
TILLERS  OF  THE  SOIL. 

adjudication  of,  as  bankrupt,  123. 
TIME, 

act  took  effect  from  what  date,  1223.  1420. 

amendments  of  law  take  effect,  1233,  1423. 

appeals  to  be  taken  from  court  of  bankruptcy  in  ten  days,  603,  609. 
from  Circuit  Courts  of  Appeals,  614. 
Supreme  Court,  to  be  taken  within  thirty  days.  1271. 

appearance  and  plea  to  petition,  mandatory,  471. 


1024  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

TIME — Continued. 

application  for  discharge,  when  made.  341. 

for  revoking,  399. 

for  jury  trials,  500-502. 

for  review  of  referee's  rulings,  696. 
creditors'  meetings  to  be  fixed  by  court,  811-1404. 
declaring  dividends,  1063. 

discharge  within  six  years,  bar  to  new  discharge,  346.  371,  1363. 
during  which  partnership  may  be  adjudged  bankrupt,  130.  133. 
examination  of  witnesses.  526. 
four  months  period,  transfers  void.  1097.  1099. 

in  case  of  liens  created  within,  1118. 

method  of  computing,  85,  651-655. 
fraction  of  a  day,  655. 
holidays,   652. 
instituting  suits  by  or  against  trustee,  284, 

suits  upon  referee's  bond,  792. 
upon  trustee's  bond.  793. 
intervention  of  creditors  in  petition,  allowed,  when,  936,  940. 
petition  to  be  filed  within  four  months,  84,  85. 
preferences  if  within  four  months,  946. 
prosecuting  offenses,  642. 
proving  claims,  894. 
provisions  as  to.  mandatory,  654. 

title  to  bankrupt's  property  vests  in  trustee.  1146,  1419. 
unclaimed  dividends  to  be  retained.  1069-1072. 
within  which  preference  given,  voidable.  960. 

preference  to  be  surrendered  before  allowance  of  claims,  877. 
TIME   OF    BANKRUPTCY, 
defined,  25,  1350. 

TITLE  (see  Trustee), 

bankrupt's,  revests  on  confirmation  of  composition,  325. 
copy  of  order  approving  trustee's  bond,  evidence  of,  559,  560. 

of  order  confirming  composition,  561. 
exempt  property,  trustee  does  not  take,  185,  1146,  1160. 
order  confirming  composition,  evidence  of  bankrupt's,  563. 
property  obtained  through  fraud  remains  in  vendor,  1158. 
trustees',  on  setting  aside  composition  or  discharge,  1202. 

in  case  of  confusion  of  goods,  1159. 

record  of,  to  be  made.  769,  1396. 

takes  to  bankrupt's  property,  1146,  1220.  1419. 

revests  on  setting  aside  composition  and  discharge,  1221. 
TORT, 

judgment  for,  provable  when,  etc.,  992. 

TRADEMARKS. 

title  of  trustee  to,  1177. 
TRADER. 

defined.   115. 


INDEX.  10?  5 

[REFERENCES    ARE    TO    SECTIONS] 

TRADING    CORPORATION, 

may  become  involuntary  bankrupt,  108. 

TRANSFERS, 

act  of  bankruptcy,  when,  64,  69-73,  1352. 

when  not,  71. 

to  date  from  notice  of,  etc..  70. 
avoidance  by  trustee,  when  made  by  bankrupt.  1204. 
bankrupt  to  execute  to  trustee,  when,  209. 
defined,   25,  1350. 
case  from  one  referee  to  another,  566,  567. 

from  one  court  to  another,  656. 

fee  of  referee  in  case  of.  710,  1389. 

jurisdiction  of  court  over.  26.  1351. 
fraudulent,  of  bankrupt's  property,  passes  to  trustee.  1146.  1167. 

as  showing  concealment  of  assets,  353. 

bar  to  discharge,  346,  358. 
when  not,  378. 

exemptions  in  case  of,  186. 

lien  of,  void  under  the  law.  1097,  1104. 

to  relatives,  when  void,  1103. 
lien  of  valid,  when,  1105. 

petition  to  be  filed  within  four  months  of,  84. 
preference  created  by,  946,  950,  1409. 
trustee  takes  title  to  fraudulent,  1214. 
trustee  to  make,  of  bankrupt's  estate.  1200. 
void,  except  as  to  purchasers  in  good  faith,  etc..  1097,  1416. 

under  state  statute  of  frauds,  title  to,  1161. 
when  in  foreign  country,  bankrupt  to  make,  209. 

must  be  subsequent  to  Act.  1090. 
TRANSPORTATION   COMPANIES. 

cannot  be  adjudicated  bankrupt,  118. 

TRIALS, 

contempt  not  triable  by  jury,  511. 
jury,  when  allowed,  500-510.  1368. 
offenses  by  courts  of  bankruptcy,  26,  1351. 

TRUST, 

secret,  for  bankrupt's  benefit,   title  to.  1178. 

title  of  trustee  where  property  held  in,  by  bankrupt.  1187. 

TRUSTEE, 

abandonment  of  bankrupt's  property,  effect  of,  1209. 

acceptance  or  rejection  of  office.   753. 

accounts  and  papers  of,  open  to  inspection,  777,  1398. 

to  be  audited  by  referee,  1252. 
additional,  when  appointed,  743. 
appointment  of.  731-743.  1393. 

not  to  be  made  where  no  assets,  etc..  741. 
approval  or  disapproval  of  election  by  court,  etc..  739,  1248. 
.65 


fy 


1026  INDEX. 

[REFERBNCBS    ARE    TO    SECTIONS] 

TRUSTEE — Continued. 

not  necessary  where  no  assets,  1250. 
appointment  of,  when  act  of  bankruptcy,  64,  80,  1352. 
arbitration  of  controversies  of.  619. 

application  for.  what  to  state.  1269. 
attorney  may  be  employed  by,  761. 

entitled  to  priority  of  payment,  1034. 
attorneys  may  vote  for,  742. 
avoidance  of  transfer  by  bankrupt,  when,  1204. 
bankrupt  to  aid,  209. 
bankrupt's  business  may  be  conducted,  26,  1351. 

compensation  for.  26,  1351. 
bonds  of,  780.  1399. 

not  liable  on.  for  bankrupt's  acts.  788. 

limitation  of  suits  on.  793. 

not  to  be  given  on  taking  appeals,  etc.,  616. 
claims  against  property  in  ^ands  of,  1188. 
compensation  of,  771-774,  1397. 

apportioned  where  several,   775. 

when  may  be  withheld.  776. 

to  be  in  full  except,  1270. 
composition  may  be  offered  before  appointment,  etc.,  302. 
compromise  of  controversies  by.  625.  1376. 
compounding  of  claims  by,  628. 
concurrence  of  majority  necessary,  767. 
conveyance  of  bankrupt's  estate  to  be  made  by.  1200. 
copy  of  adjudication  to  be  filed  where  real  estate  located,  769,  1396. 

fee  for,  769. 
copy  of  order  approving  bond,  evidence  of  title.  559.  560. 
court  to  discharge  on  approving  accounts,  26,  1351. 
creditors  to  act  through.  764. 

credit  to  be  given  for  payment  of  taxes,  etc.,  1006. 
death  or  removal,  effect  of,  750,  751,  1395. 
defined,  25.  1350. 

dividends  to  be  paid  by.  752,  758. 
dividend  to  be  recovered,  when,  891. 
duties  of.  in  general,  752-770,  1396. 

in  case  of  usury.  1217. 

imposed  upon  by  General  Orders.  1252. 
election  of,  at  first  meeting,  736. 

in  bankrupt's  Interest.  734. 
entitled  to  property  on  setting  aside  composition,  etc.,  1202. 
estates  to  be  collected  and  reduced  to  money.  752,  760. 
evidence  of,  in  bankruptcy  proceedings.  537. 
exemptions,  duty  with  reference  to  setting  apart.  184,  752,  759. 

title  In  case  of,  185. 
expenses,  etc..  to  be  approved,  974. 

extra  allowance  to.  etc.,  when  entitled  to  priority,  1040. 
failure  to  take  possession  of  property,  effect  cf.  1209. 


INDEX.  10->  7 

[REFERENCES    ARE    TO    SEOTIOMSl 

TRUSTEE— Continued. 

fee  of,  limited,  1231,  1422. 

for  recording  title  to  property,  769. 

to  be  collected  and  paid  by  clerk,  795.  797,  1400. 

in  case  of  pauper  affidavit.  798. 
form  of  account.  1335. 

of  appointment,  1308. 

of  appointment  by  creditors,  1307. 

of  bond  of,  1310. 

order  approving.  1311. 

of  notice  of  appointment.  1309. 

of  oath  to  final,  1336. 

of  order  discharging,  1337. 

of  order  for  choice  of  new,  1341. 

of  order  that  none  be  appointed,  1313. 

petition  for  removal  of,  1338. 
notice  of,  1339. 
order  of  removal,  1340. 

of  report  of  exemptions.   1333. 

return  of  no  assets.  1334. 
general  or  official,  not  to  be  appointed,  1249. 
grounds  of  disqualification,  749. 
has  no  judicial  power,  766. 
information  to  be  furnished  by,  752,  756. 
inventory  to  be  prepared  by,  754. 

jurisdiction  of  suits  between  adverse  claimant  and,  571-585,  1372. 
lien  claimants  not  represented  by,  1076. 
liens  of  creditors  to  be  enforced  by,  when,  1082-1084. 

proper  party  to  attack,  1085. 
money  to  be  deposited  by,  etc.,  752,  757. 

to  be  drawn  by  check,  etc.,  1264. 
neglect  to  file  report,  subject  to  removal,  etc.,  1252. 
notice  of  discharge  of  lien  to  be  given  by,  1124. 

to  be  given  of  appointment,  1251. 

to  be  given  of  filing  final  accounts  by.  896.  904. 
offense  of  misappropriating  property,  etc..  632-635,  1378. 

of  refusing  to  permit  inspection  of  books,  etc.,  641. 
office  of,  created,  659,  1382. 

corresponds  to  assignee,  660. 
official  or  general,  not  to  be  appointed,  732. 
petition  for  re-examination  of  claims,  1256. 
partnership,  firm  creditors  to  elect,  150. 

accounts  to  be  kept,  154. 
preference  may  be  avoided  by,  961,  1409. 

proof  of  claim  by,  of  one  bankrupt  estate  against  another,  892. 
property  transferred  passes  to,  except,  1097. 
qualification,  residence,  etc.,  746-748. 
recovery  of  excess  charge  by  attorneys,  etc.,  970. 
refusing  to  prosecute  suit,  creditors  may  act  by  coijnsel,  1033. 


1028  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

TRUSTEE— Continued, 
removal  of,  when,  744. 

jurisdiction  over,  26,  1351. 
represents  creditors  as  well  as  bankrupt.  1208 
rights  of  action  by,  time  of.  1210. 
securities,  duty  of  with  regard  to.  880. 
stenographers,  employment  on  application  of.  674.   684. 
subrogated  to  rights  of  creditor  in  enforcing  lien.  1082 

to  holder  of  lien.  1086. 
suits  against  bankrupt,  what  he  may  plead,  275-277. 

a  necessary  party,  280. 

to  prosecute  when  commenced   by  bankrupt.  281 

time  for  bringing  suits  by  or  against,  284 
when  limitation  may  be  pleaded,  285. 

may  be  brought  by,  when,  etc..  762. 

pending,  to  be  defended  by,  etc..  275.  1360. 

when  and  how  to  becom.e  a  party,  276,  277. 
effect  of  appearance,  278. 
taxes  on  funds  of.  1015. 

to  be  paid  by.  etc.,  1006.  1413. 
title  of  bankrupt  passes  to.  when.  1147,  1148. 

acquired  between  filing  petition  and  adjudication,  1153. 
after  adjudication,  1154. 

attached  property,  1172. 

bank,  funds  in.  1180.  1215. 

bonds,  1185. 

chattel  mortgages.  1174. 

collaterals,  1213. 

commercial  paper,  1179. 

composition  set  aside  or  discharge  revoked,  1202. 

confusion  of  goods,  1159. 

contingent  remainders.  1184. 

contracts,  1157. 

choses  in  action,  1156.  , 

based  on  contracts,  1146.  1419. 

conveyances  void  under  statute  of  frauds,  1161. 

copyrights,  1177. 

curtesy  of  husband,  1165. 

documents,  1146. 

dower  rights  on  husband's  bankruptcy.  1166. 

exemptions  do  not  pass,  185,  1146,  1160. 

extent  of,  1151. 

fire  insurance  policy,  1170. 

fraudulently  transferred  property,   1140,  1147,  1167,  1214,   1419. 

general  assignments,   1162. 

goods  delivered  to  be  paid  for  v/hen  sold,  1186. 

growing  crops,  1181. 

held  prior  to  filing  petition,  1152. 

inheritances,  1183. 


INDEX.  1029 

[references  are  to  sections] 
TRUSTEE — Continued. 

insurance  policies,  payable  to  wife,  1167. 
with  cash  surrender  value,  1168. 
where  bankrupt  has  interest,  1168. 
when  for  creditors'  benefit,  1179. 
fire  policies,  effect  on,  1170. 
pass,  when,  1146. 
joint  estates,  1164. 

judgments,  property  held  under,  1172 
leases.  1171. 
legacies,  1183. 
licenses,  1182. 

liens,  property  subject  to,  1149. 
memberships,  1182. 
mortgages,  1173. 

disposition  of  rent,  in  case  of,  1175. 
onerous  and  unprofitable,  need  not  be  taken,  1150. 
partnership,  172.  1176. 
patents,  1146.  1177. 
pledges,  1173. 

powers  exercisable  by  bankrupt,  1146.  1184.  1419. 
privileges,  personal,  1182, 
property  held  prior  to  petition.  1152. 

acquired  between  filing  and  adjudication,  1153. 
acquired  after  adjudication,  1154. 
advantage  of  vesting  on  adjudication,  1147. 
when  obtained  through  fraud,  1158. 
of  wife  on  husband's  bankruptcy,  1163 
held  in  trust,  1187. 
rights  of  action,  based  on  contracts,  1146.  1419. 
remainders,  1184. 

rent  on  mortgagor's  bankruptcy,  1175. 
secret  trust  for  bankrupt's  benefit.  1178. 
securities,  1185. 

statute  of  frauds,  conveyances  void  under,  1161. 
stock,  1180,  1185. 
stock  exchange,  seat  in,  1182. 
stockholder's  liability,  1216. 
stoppage  in  transitu,  1219. 
trademarks,  1177. 

transferable  property  passes  to,  1146,  1179. 
trust,  secret  for  bankrupt's  benefit,  1178. 
trust,  property  held  in,  1187. 
under  Act  of  1867,  1155. 
United  States,  claims  against,  1220. 
vested  remainders,  1184. 
wife's,  on  husband's  bankruptcy,  1163. 
vacancy  in  office  of,  how  filled,  740. 
voting  for.  735. 


1030  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

TRUSTEE— Continued. 

what  he  should  not  do,  765. 

when  to  be  appointed  by  judge  or  referee,  738. 

U 

UNCLAIMED  DIVIDENDS, 
disposition  of,  1069-1072, 

UNDERTAKING, 

proof  of  claim  when  secured  by  individual,  885. 

UNITED  STATES, 

debts  due  to.  provable,  etc.,  1002. 

due  as  penalty,  etc.,  proof  of.  887. 
entitled  to  priority  of  payment.  1006,  1011,  1413. 
liability  for  ignoring  priority  of  debts  of,  1012,  1013. 
taxes  not  released  by  discharge,  418.  420,  1366. 

debts  in  general  due  to.  421. 
title  of  trustee  to  claims  against,  1220. 

UNITED  STATES  COMMISSIONER. 

acknowledgment  of  proof  of  claims  before,  etc.,  1256. 

UNITED  STATES  COURTS  (see  Courts  of  Bankruptcy), 
district,  made  court  of  bankruptcy,  26,  1351. 

UNLIQUIDATED, 

damages,  effect  of  discharge  on,  445. 

USURY. 

duty  of  trustee  in  case  of,  1217. 

V 
VACANCY, 

office  of  trustee  to  be  filled,  when,  731,  740. 
VACATION, 

courts  of  bankruptcy  may  exercise  jurisdiction  during,  26,  1351. 
VENUE, 

absence  of  in  notary's  certificate,  515. 

transfer  of  cases  from  one  court  of  bankruptcy  to  another,  499, 
VERIFICATION, 

cure  of  defect  in,  480. 

pleadings,  when  required,  476-481,  1367. 
by  agent  or  attorney,  479. 
of  corporation,  478. 

proof  of  claim,  by  whom  made,  849. 

waiver  of,  481. 
VESTED  REMAINDER, 

title  of  trustee  to,  1184. 
VOIDABLE   PREFERENCE, 

what  is,  961.   1409. 


INDEX.  1031 

[RKrERENCES    ARE    TO    SECTIONS] 

VOLUNTARY  BANKRUPT, 
adjudication  of,  491-498. 

bankrupt's  attorney  entitled  to  priority,  etc.,  1031. 
filing  of  petition,  by  whom,  96-107,  1353. 

not  compulsory,  914. 
involuntary  proceedings  cannot  be  converted  into,  914. 
liens  obtained  through  legal  proceedings,  when  void,  1113. 
notice  to  be  given  of  proposed  dismissal,  943. 
who  may  file,  912. 

VOTING, 

at  composition  meetings,  etc.,  295. 
at  creditors'  meetings,  827-838,  1405. 

who  entitled,  powers  of  creditors,  etc.,  828.  829. 

proof  as  to  voter's  qualifications,  830. 

creditors',  individual  and  partnership,  831. 

postponement  of  claims  as  affecting  election,  833. 

creditors  may  act  by  attorney,  835. 

secured  creditors  having  the  right,  836. 
by  attorneys,  for  trustee,  742. 

concurrence  of  majority  of  trustees  necessary.  767. 
for  trustee,  majority  in  number  and  amount  of  creditors  to  govern, 
734,  735. 

in  case  of  vacancy,  740. 
objections  to  claim,  effect  of,  834. 
trustee  in  bankrupt's  interest  not  to  be  elected.  734. 

W 

WAGE  EARNERS, 

adjudication  as  bankrupt,  129. 
defined,  25,  1350. 

WAGES, 

where  employee  discharged,  payment  of.  etc..  1042. 
who  is  entitled  to  priority,  1016,  1041,  1413. 

earned  within  three  months.  1042. 

assigned  or  in  judgment.  1043. 

WAIVER, 

effect  of  proof  of  claim  by  creditor,  426. 

of  proving  secured  claims  as  unsecured,  844. 

of  defect  in  verification  of  pleadings,  481. 

of  exemptions  by  bankrupt,  189. 

of  privilege  of  discharge  by  bankrupt,  447. 

of  protest  by  bankrupt,  224. 

of  right  of  creditor  to  priority  of  payment,  1051. 

of  set-off,  when  presumed,  1134. 

of  want  of  jurisdiction,  when,  43. 
WARRANT. 

form  of  special  to  marshal,  1293. 


1033  INDEX. 

[REFERENCES    ARE    TO    SECTIONS] 

WARRANT  OF  ATTORNEY, 

judgment  pursuant  to,  act  of  bankruptcy,  78. 
WIFE  (see  Married  Women). 

WILL, 

bankruptcy  has  no  effect  on,  1183. 
"WILLINGNESS  TO  BE  ADJUDGED  A  BANKRUPT," 

when  admission  an  act  of  bankruptcy,  64,  1352. 

WITHDRAWAL, 

of  creditor  from  involuntary  proceeding,  when  permitted,  943,  945. 

WITNESSES, 

attendance  of,  when  cannot  be  required,  713. 
bankrupt,  competent,  531. 

wife  of,  competent.  518,  535. 
competency  of.  522. 

bankrupt,  523. 

when  imprisoned,  525. 

bankrupt's  wife,  535. 

trustee  or  assignee.  537. 

persons  in  general,  538. 
compulsory  attendance  of,  518-540,  1370. 
contempt  before  referee,  712-720,  1390. 
contempt  of,  for  refusing  to  appear  or  testify,  etc.,  717. 
fees  and  compensation  of,  542. 

entitled  to  priority  of  payment,  1016,  1024. 
form  of  order  of  examination,  1314. 

of  summons  to.  1315. 

return  of,  1316. 
jurisdiction  of  court  over  punishments  for  contempt,  55. 
may  require  attendance,  etc.,  548. 
referee  may  examine,  674,  679. 
right  to  counsel.  541. 
WOMEN  (see  Married  Women). 
WORDS  AND  PHRASES  (see  Definitions), 

definition  of  terms.  25,  1350. 
WORKMEN, 

wages  entitled  to  priority,  1016.  1042,  1413. 

WRITING, 

certain  admissions,  acts  of  bankruptcy,  64.  83. 

proof  of  claim  founded  on,  857,  858. 

property  obtained  upon  false  statements,  ground  for  refusing  dis- 
charge. 346.  370. 

when  stamped,  858. 

withdrawal  of,  858. 
WRITS  OF  ERROR  (see  Appeals  and  Writs  of  Error). 


-■'•/'- 


University  of  California  Library 

Los  Angeles 

This  book  is  DUE  on  the  last  date  stamped  below. 


O*^ 

,,■*  »*■= 


enewals 

5^  ., 


0^00114  IJ96 


S  \iZ 


k\p 


1 


''/iiBAINa-JWV 


rs: 


<UF.fiUF\/n>P/v 


Aumrr. 


-(  I J ..;  n  1   o  u  I 


.^UPJii'lv/CDr/v.  .  inc.Aiircir 


\t  rx  t  \rr,ii 


j^^t^  1  ^\j  I 


L-  Kj^jKD  D/o  ^;do  U 


yul 


>.WE-llNIVERr/,v 


5         r-VTl  _J 


•^^ 


^....^     ip 


<ril30NVS01^ 


..vlns- 


A\^- 


ii-      ul 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


} 


J^ 


IS 


iUiUVJ-iU^~ 

5F-CALIF0^ 

1 

I? 


^^ 


'J  iiJ,' 


< 

m 

30 


\ 


\^myi^    %i 


O        cc 

tTi        ire 


'^avaan-i^' 


^OF-CAIIFO% 


t?Aavaan 


§1  ir-i 


'^'<vn,MTun.jr\>'^ 


'^^.7n'u,^^c^^:#        t?Ar 


"^/^iiaAiNa-awv 


^ 


-^^i^-^' 


vji  (.nil!  u/f^v 


"^^Aavamii^ 


^<?Aavaani^ 


<ril33NVSO. 


